A change of attitude is needed among tax advisers and their clients, who spend too much time looking for loopholes or "unintended opportunities" in the tax system, according to the Revenue Commissioner, Mr Michael O'Grady. Cliff Taylor, Economics Editor, reports.

If this does not happen, he warned that further legislative and administrative counter-measures to attack aggressive tax avoidance schemes are inevitable.

The Revenue believes that "if corporate and social responsibility means anything, it means working within the spirit as well as the letter of our tax laws", Mr O'Grady told a tax conference in Kildare yesterday.

The Revenue would be working hard to shift attitudes in this direction, he said, by encouraging large companies and the richest individuals to adopt "co-operative frameworks" involving a commitment to avoid aggressive tax avoidance.

However, he added: "If it is wishful thinking to believe that aggressive tax avoidance can be moderated by this approach, then it seems inevitable that there will be an ongoing escalation in both legislative and administrative counter-measures."

Mr O'Grady, one of three Revenue Commissioners, said there was a need for a reasoned debate in this area. However, he said that socially responsible attitudes to tax planning "should be influenced to a much greater extent by the policy behind the law, instead of seeing tax law just as something to be tweaked and tailored to clients' interests, regardless of the underlying policy".

From the Revenue's viewpoint, he said, unacceptable tax planning undermined confidence in the tax system and its efforts to promote voluntary compliance.

He added, in notably direct comments for a Commissioner, that "what is objectionable to Revenue is an attitude that regards the tax code as fair game to be combed through for gaps or unintended effects".

Revenue's approach was to promote voluntary compliance, he told the conference, organised by KPMG accountants, but this can be badly eroded by the sight of well-off people finding artificial ways, not intended by the legislature, to avoid tax.

If avoidance continues to be a major problem, "it is inevitable that there will be some ratcheting up of both legislative and administrative counter-measures," he added.

Emphasising that he was engaging in "pure speculation", Mr O'Grady said that among the possible legislative counter-measures would be automatic disclosure to Revenue of the use of certain types of tax shelters, similar to a system enshrined in US law.

Another option would be civil penalties - and criminal sanctions - for those taking "abusive tax positions", which are judged to be schemes not likely to be a correct use of existing law.

The Revenue would also use the new Interpretation Bill 2000 - if and when it is passed into law - which would allow schemes to be challenged on the grounds that they were not intended by the original legislation.

The Revenue has written to major companies offering a co-operative approach, where the level of audit and enforcement activity will be scaled down in cases where it is satisfied that the taxpayer is not taking an aggressive attitude to tax planning.

Where this is not the case, however, the company or individual "can expect a large measure of Revenue scrutiny".