The Revenue Commissioners was told that it did not have sufficient evidence to support a charge of facilitating tax evasion against the Swiss branch of London-headquartered multinational bank HSBC.
Since getting data from the French tax authorities in 2010 that included a large amount of information about accounts in HSBC Private Banking in Geneva with links to Ireland, the Revenue has secured more than €4.5 million in settlements.
The former chairman of the Irish tax authority, Josephine Feehily, told The Irish Times in an interview in December that the legal advice it was given at the time was that the evidence available would not support taking criminal charges against the bank. Allegations of facilitating tax evasion have been made against the Swiss bank by the French, Belgian and Argentine authorities. Ms Feehily's comments on the matter have not been published previously.
The legal advice was sought after the Irish tax authority was given a large amount of data taken from HSBC Private Banking in Geneva in 2006 and 2007 by a former employee, Hervé Falciani.
The French tax authority got access to the data and later shared it with other authorities that requested it. Included in the data is a large number of accounts held by Irish individuals and companies.
The data includes notes made by bank officials recording discussions with clients about the European savings directive, a measure introduced in 2005 and under which EU banks had to report interest payments to EU citizens to the tax authorities in the client’s jurisdiction or, in some jurisdictions, impose a withholding tax.
Withholding tax
Austria, Belgium and Luxembourg opted for the withholding tax option. Locations such as Jersey, the British Virgin Islands and the Isle of Man, as well as third countries such as Liechtenstein and Switzerland, also agreed to apply the withholding tax.
In some instances, including a small number of the Irish clients, the file notes on the European savings directive include suggestions that the money in the account will or could be moved to an offshore company or other entity.
Ms Feehily said that while Irish tax law included a provision against aiding and abetting tax evasion, the legal advice the authority received was to the effect that proving a case to the criminal level of proof would be “almost impossible”.
“The tax inspectors would almost have to be standing beside [the bank official and the client] if they were to get the level of proof required,” she said. She said she would be watching the French and other cases with great interest.
Ms Feehily said that while securing the evidence required to support a criminal charge of aiding and abetting was “very difficult, almost impossible”, the evidence that was available did help the authority when it was negotiating settlements with some account holders.
The Revenue Commissioners has recovered €4.55 million from 20 settlements since it received the data in June 2010. Three prosecutions have been secured and a fourth case is currently under criminal investigation, the tax authority said in a statement to The Irish Times. As well as the €4.55 million, a further €174,442 has been received as payments on account in two ongoing investigations.
Data on a few hundred accounts with links to Ireland, including funds operated out of here but holding money belonging to non-Irish residents, was contained in the material as were details concerning wealthy Irish people known to be tax resident outside Ireland. The French authorities have shared the data with tax authorities around the world by way of international tax treaties.
The Revenue launched 33 investigations as a direct result of receiving the data, having first undertaken “an assessment and evaluation process which indicated that no further liability arose in the State in a number of cases, and that further investigation would be required in a number of other cases,” it said.
Irish Swiss accounts
The existence of a foreign bank account is not evidence of tax evasion, the statement added. In its 2010 annual account, the Revenue said, following a request, a treaty partner had given it details of accounts held in Switzerland by Irish residents.
“Having cross-checked the information received against Revenue’s records it became clear that some individuals had already made a disclosure to Revenue under the 2004 offshore disclosure incentive,” it said. “However, a small number of individuals have been identified with undeclared funds and challenge letters have issued.”
Of the 20 settlements secured, nine were published in the quarterly tax defaulters’ lists that contain details of settlements made above certain thresholds and where the settlements are deemed not to have been voluntary.
They were described as offshore assets investigations cases, with the HSBC settlements not being described any differently to other cases that fell within that category. Four were corporate entities, according to the Revenue.
All settlements associated with the HSBC files were non-voluntary.
A spokeswoman for the Revenue said it took relevant action in any case where sufficient admissible evidence was available to bring a criminal prosecution in relation to any identified Revenue offences.
Irish accounts total interest €137million
Switzerland is by far the most popular country for Irish residents who have money on deposit in countries that agreed to apply a withholding tax as part of the EU’s European savings directive, introduced in 2005.
The directive allows for the swopping of information about bank accounts between tax authorities in the EU. Some EU member states did not initially opt to take part in the scheme, and instead imposed a withholding tax.
So too did a number of dependent territories, such as Jersey and the Isle of Man, and third countries such as Switzerland and Liechtenstein.
In the period 2009 to 2013, Switzerland paid €3.6 million to Ireland arising from withholding tax applied to accounts in Switzerland belonging to Irish resident individuals.
The total paid by the 10 jurisdictions that paid the tax was €6.7 million, with Jersey paying the second-largest amount (€1 million).
The tax paid to Ireland equals 75 per cent of the tax levied, as the taxing jurisdiction keeps 25 per cent to cover expenses.
The total tax levied in Switzerland on interest income over the period earned by Irish account holders was €4.8 million.
The tax rate is 35 per cent, so the total interest earned was €13.7 million. During the period, Swiss interest rates, which historically tend to be low, were particularly low because of the global financial crisis.
If an average rate of 1 per cent is chosen, then the amount on deposit was €274 million.
If an average interest rate of 2 per cent is chosen, then the amount on deposit in Switzerland was approximately €137 million.
The Isle of Man began swopping information on accounts, as against applying a withholding tax, in 2012, while Guernsey did so in 2013, and Belgium in 2010.
