It is clear that political, governmental and Revenue interests are becoming increasingly less tolerant of tax evasion and non-compliance generally. It is thought by some commentators that the recent Revenue Commissioners' statement of practice concerning bogus non-resident accounts represents perhaps the last opportunity for taxpayers to avoid the wrath of the Revenue Commissioners and the criminal justice system.
The Revenue Commissioners divided the statement into two phases; the first being the encouragement stage which entitled holders of bogus non-resident accounts in the State between April 6th, 1986 and May 2nd, 2001 to avail of the benefits of the statement of practice if they disclosed and paid by November 15th, 2001 all previously undisclosed liabilities.
These benefits include (i) non publication of a taxpayer's name, (ii) interest and penalties on previously undeclared taxation liabilities are "capped" at 100 per cent of tax liabilities, (iii) no investigation for prosecution, and (iv) credit is available for DIRT in calculating tax on undisclosed deposit interest.
The second stage has been categorised by the Revenue Commissioners as the enforcement stage. Revenue have publicly stated their intention to individually investigate all bogus account holders who could have availed of the statement of practice but did not do so. The Revenue have indicated that they identified many persons who held bogus non-resident accounts during the course of DIRT look-back audits carried out on various financial institutions last year and are determined to prepare a complete list of all such account holders. The Revenue intend, it is believed, to make full use of the statutory powers of investigation afforded to them by the Taxes Consolidation Act, 1997 and the Finance Act, 1999. Such powers include the power to obtain information, books and records from financial institutions and third parties pursuant to court orders. Yesterday, the Revenue indicated that they intend to seek a number of High Court orders to seek such information, over the coming days. They have also indicated willingness to conduct searches pursuant to District Court search warrants where they have strong suspicions of breaches of the tax code.
It is noteworthy, however, that recent media disclosures would seem to indicate that not all bogus non-resident account holders availed of the statement of practice, preliminary figures suggesting that only approximately 3,500 declarations were received in respect of approximately 6,500 accounts.
The consequences of not having disclosed the existence of a bogus non-resident account under the statement of practice may include the following:
The Revenue have indicated that they will target such cases for investigation with a view to criminal prosecution. If convicted, such account holders could face sentences of up to eight years in prison together with possible fines, depending on whether the proceedings are brought in the District Court or Circuit Criminal Court.
The Revenue have indicated that monetary settlements of undeclared taxation liabilities will involve the full payment of interest and penalties. This could mean that the interest and penalties chargeable by the Revenue on undeclared tax could significantly exceed the cap of 100 per cent placed on interest and penalties under the statement of practice. Such settlements would, the Revenue contend, entail publication of tax settlements.
It remains to be seen how many bogus non-resident account holders who could have availed of the statement of practice did not do so. It is, however, clear that the Revenue have repeatedly stated that they intend to individually investigate all such individuals. Revenue itself will take comfort that the Department of Finance has indicated it will give the Revenue sufficient financial resources.
Eoin Cunneen is a litigation solicitor with L.K. Shields, Solicitors and can be contacted at ecunneen@lkshields.ie
