Revenue inspector concluded Michael Lowry owed over €516,000

A jury has heard that Revenue was at a loss of €5,541 when a company owned by Independent TD Michael Lowry received a payment in 2002 but only accounted for it in 2006.

Dublin Circuit Criminal Court heard that a final figure of €29,000, including penalties and fines, was deemed due by Revenue and that this was paid by Mr Lowry's company, Garuda Ltd, in 2013.

It is the State’s case that Garuda Ltd, received Stg £248,624 (€372,000) in commission from Norpe OY, a refrigeration company based in Finland, in August 2002.

It is alleged that Mr Lowry arranged for this payment to be made to a third party, residing in the Isle of Man, and therefore it didn't appear in the company accounts for that year, nor did he declare it as income.

It is further alleged that the accounts were then falsified in 2007 to reflect that the payment was received in 2006.

The jury has already seen a letter signed by Mr Lowry and addressed to Neale O’Hanlon, a partner in the accounting firm employed by Garuda.

The letter stated that while the payment from Norpe OY was paid directly to Mr Lowry, it was properly due to the company and therefore should be reflected in the 2006 accounts. It instructed Mr O’Hanlon to set the payment against the director’s loan.

Mr Lowry (64) of Glenreigh, Holycross, Co Tipperary, has pleaded not guilty at Dublin Circuit Criminal Court to four charges of filing incorrect tax returns on dates between August 2002 and August 2007 in relation to a sum of Stg £248,624 received by his company, Garuda Ltd and one charge in relation to failing to keep a proper set of accounts on dates between 28 August, 2002 and August 3, 2007.

He further pleaded not guilty on behalf of Garuda Ltd to three similar charges in relation to the company’s tax affairs and one charge of failing to keep a proper set of accounts on the same dates.

Feedback

Henry Oliver, inspector of taxes in Revenue's investigation unit, told Remy Farrell SC, prosecuting on Thursday that he determined Mr Lowry should have paid income tax in 2002 on the €372,000 received from Norpe.

He concluded that the TD owed just over €516,000 which included fines and penalties.

Mr Oliver said Garuda should also have to pay PAYE and PRSI on the €372,000 and concluded that it too then owed €510,000, again including fines and penalties.

He agreed with Michael O’Higgins SC, defending Mr Lowry, that because Garuda incorrectly returned corporation tax on the commission in 2006 rather than 2002, the company actually made an overpayment of €575.

He accepted that due to a relationship between the 2002 and 2001 accounts, the 2001 return also had to be re-considered, in calculating the loss to the State.

The witness agreed that ultimately Revenue was €5,541 “worse off” because of the failure to disclose the commission paid by Norpe and that a final figure of €29,000, including penalties and fines was deemed due by Revenue.

Mr Oliver agreed with Mr O’Higgins that he had discussed his assessment of his client and Garuda with his colleagues.

“Did the feedback you get support your position?” counsel asked.

“Yes, generally,” Mr Oliver replied.

“Has anyone ever come to you afterwards and suggested you were wrong?” Mr O’Higgins asked.

“No,” Mr Oliver replied and confirmed that he was “absolutely clear on that”.

He said he was surprised to hear that although Mr Lowry had offered to meet the inspectors to discuss his position, and nominated three potential dates for a meeting, he was never taken up on that offer.

Raising red flag

Mr Oliver told Patrick Treacy SC, defending Garuda, that it was his role “to form an opinion on the extent of tax evasion and if I’ve reasonable grounds to believe it should be passed onto the criminal side of Revenue, I would pass it over.”

He agreed with counsel that following this hand-over, “a decision is made as on whether a criminal prosecution should ensue.”

Mr Oliver then accepted a suggestion from Mr Treacy that he was “the person who raises the red flag and then you become a key witness in the case.”

He agreed that he never had experience of giving evidence in either the circuit criminal or district courts.

Mr Oliver accepted a suggestion that there was a difference between tax avoidance, “finding a legitimate way of avoiding tax” and tax evasion.

“Tax evasion is when you knowingly or wilfully give false information to Revenue which deprives the State of tax due,” Mr Treacy suggested and the witness agreed.

He accepted that the appeals commission had found that neither Mr Lowry or Garuda had an income tax or PAYE/PRSI liability on the €372,000 and had set their joint Revenue bill of €1.1 million to “a big fat zero”.

Mr Oliver agreed he had previously stated that the appeals commission made this finding on the basis that there was “a lack of evidence” to support Revenue’s determination that the €372,000 was an emolument, ie. a wage or salary.

“Who was the key witness for Revenue at the appeals commission?” asked Mr Treacy.

“There was no individual,” Mr Oliver replied.

“Not a single person from the Revenue Commissioners stood up to say it was an emolument?” Mr Treacy asked.

The witness agreed that this was the situation but added that case law was “opened to defend it as an emolument”.

He accepted that both Mr Lowry and his tax advisor never accepted the €372,000 was an emolument and both gave evidence before the appeals commission in respect of this.

The trial continues before Judge Martin Nolan and a jury of eight men and three women.