The Revenue Commissioners have received just 11 reports of potentially abusive tax-avoidance schemes since Ireland made it mandatory in early 2011 for transactions giving "aggressive" tax advantages to be disclosed to authorities.
The disclosure by Minister for Finance Paschal Donohoe in response to a recent parliamentary question (PQ) from Sinn Féin has prompted the party's Matt Carthy, an MEP, to criticise the reporting regime.
“The 2011 regulation was already ridden with loopholes and exemptions, including so-called benign transactions such as a company acquiring intangible assets in order to qualify for capital allowances, and the restructuring of a corporate group,” said Mr Carthy. “This means classic and widely-used tax avoidance schemes such as inversions and transfers of intangible assets such as intellectual property are not covered by the regime.”
In addition, the Government introduced rule amendments in 2015 exempting 25 further types of transactions from disclosure, including many carried out by ultra-tax-efficient special purpose vehicles, known as section 110 companies, and trusts.
“These exemptions make the mandatory disclosure regime a joke,” said Mr Carthy. “The extremely low number of reported schemes raises questions about the poor effectiveness of the mandatory disclosure scheme, which EU legislators should take note of in formulating an EU-wide mandatory disclosure regime.”
Onus on promoters
The 2011 rules put the onus on promoters such as tax advisers, banks and lawyers and, in certain cases, users of transactions giving rise to a tax advantage to disclose the details to Revenue within a relatively tight timeframe. Then minister for finance Michael Noonan said at the time that the rules were aimed at "the small minority of advisers with the propensity to devise and market aggressive avoidance schemes", rather than the "vast majority of tax advisers giving routine day-to-day tax advice to clients".
Of the 11 reported cases, four relate to employee benefit trusts, three to “various artificial loss schemes”, two to share transactions and two to assets and liabilities of a partnership being transferred to a limited company, Mr Donohoe said in is PQ response, dated last month. Revenue was furnished with the names of 494 individual taxpayers by the tax-scheme promoters.
“While a taxpayer may be listed on a client list this, in itself, is not evidence that the taxpayer actually participated in and implemented the tax scheme disclosed,” Mr Donohoe said, adding that each case was subsequently looked into.
“In addition, where appropriate, Revenue has recommended amendments to the legislation being exploited,” he said.
A spokeswoman for Revenue was not in a position to comment on Monday as its offices were closed due to Hurricane Ophelia.
Meanwhile, the European Commission unveiled proposals in June to tackle "aggressive tax planning", which would entail "intermediaries" who design and promote cross-border tax-avoiding schemes for clients having to face strict reporting requirements from 2019.
