At the outset of the bad old 1980s, when tax rates were high and no one paid their dues apart from PAYE workers, there were 3,471 people working in the taxes section of the Revenue Commissioners.
By 1991, when non-resident accounts formed 20.6 per cent of the deposit base for the four associated banks (AIB, Bank of Ireland, Ulster Bank and National Irish Bank), the numbers working in the taxes section had dropped to 2,804. Last year the numbers working in the section had dropped to 2,660.
The taxes section is the part of the Revenue Commissioners charged with raising tax assessments, conducting audits and, in general, policing the system. In the five years to 1998, when the numbers working there were dropping, the economy it was monitoring and raising taxes from had grown by an estimated 40 per cent.
Other factors had changed in the meantime and no simple conclusions can be drawn from the fall in staff numbers. Self-assessment, introduced in 1988, meant staff moved from examining the documentation of compliant taxpayers to carrying out investigative work and looking into the affairs of persons and industries about which suspicions existed. Investment in new technology also greatly increased the productivity of Revenue staff. Nevertheless, as Ms Mary Farrell, an inspector of taxes and the then secretary of the tax inspectors branch of IMPACT put it in late 1998, the statistics are "interesting".
In September, when the subcommittee of the Dail Committee of Public Accounts begins its public hearings into the financial institutions and DIRT collection based on the report of the Comptroller and Auditor General, Mr John Purcell, one of its focuses will be the extent to which the situation has improved since the state of affairs we now know existed in the 1980s and early 1990s. One of the first issues to be addressed will be whether the Revenue's performance has improved since that period and what constraints, if any, it is now working under.
Revenue income has obviously shot up, with total receipts of £20.6 billion last year, but that is only to be expected in a period of economic boom and rising employment. What is obvious from Mr Purcell's report is that the Revenue was constrained in the past in what it could do about bogus non-resident accounts. The Department of Finance was frightened of scaring funds out of the State, so the Revenue was not given the powers it needed, and did not vigorously implement what powers it had. Mr Purcell, in a section of his report entitled "Limitations on Revenue Powers as regards Financial Institutions", says: "In the circumstances of the 1980s and early 1990s Revenue acted appropriately." The failure of the Revenue was a policy decision and the question now is whether Revenue has since been given the powers it needs.
That in turn raises the issue of what exactly the Government's instructions to the Revenue are these days. Presumably the Government and the Department of Finance are still faced with difficult choices concerning Revenue policy and the needs of the financial sector and the economy generally. These are "live' issues and it is very difficult to get any comment as the various sides involved prepare for the public hearings.
Earlier this year, in the wake of the McCracken tribunal report and media disclosures concerning bogus non-resident accounts in AIB, the Government gave new powers to the Revenue. On-site audits of a bank's records, including DIRT payments, which were prohibited up to March 25th of this year, are now allowed.
Revenue can also now seek samples of bank accounts declared non-resident and examine bank documentation to establish if the account-holders are genuinely non-resident. Up to March of this year, Revenue was only allowed to view the declarations of non-residency which had to be filled in when non-resident accounts were being opened, an exercise it considered futile if it could not get access other details concerning the accounts.
Also since March of this year, the Revenue can get access to the accounts of a named individual or company once the consent of a Revenue Commissioner is obtained. Permission from the High Court or an Appeals Commissioner can be given for access to the accounts of unnamed individuals. Previously High Court permission was needed for access, and then only to the accounts of a named individual. This change in the law will be used by the Revenue to try to get access to the Ansbacher deposits. The names of the deposit holders are unknown.
Tax experts say fear of the Revenue has grown significantly in recent years and tax evasion is consequently on the decrease. The introduction of self-assessment in 1988 transformed the situation, they say. There is also a feeling abroad that more prosecutions are being processed and that some day soon someone is going to be sent to jail for not paying their taxes. (Mr Purcell's report shows that as far back as 1984 the Revenue was warning the banks that someone might be prosecuted if the tax laws were broken. The tax laws were ignored and no one ever went to jail.)
But despite all the positive pronouncements in relation to the Revenue, there are still indications that widespread tax evasion may be occurring. In the year 1995 to 1996, the latest period for which such figures are available, only 12,805 self-employed individuals and couples reported gross incomes in excess of £40,000. The category includes proprietary directors and so covers people running their own professional practices, shops, pubs, farms, etc. It seems a very small number.
As part of Mr Purcell's inquiry, an examination of the British addresses associated with 214 non-resident deposit accounts was carried out. It was concluded there was a "strong possibility" that 58 - or 27 per cent - of the addresses were bogus. As of November 30th, 1998, non-resident deposits, at £3.9 billion, formed 29.2 per cent of the deposit base of the four main clearing banks - 27 per cent of £3.9 billion is approximately £1 billion.
The full text of the Comptroller and Auditor General's report can be accessed through The Irish Times on the Web (www.irishtimes.com).
