A REVENUE review of “phoenix” companies, which reopen and operate under a different name after insolvency, has been extended to examine significant tax write-offs, according to Minister for Finance Michael Noonan.
The review is expected to be complete before the end of the year, Mr Noonan said.
He was responding to recommendations contained in a report from the Public Accounts Committee.
“The victims of phoenix activity are the Revenue Commissioners, as they are the primary and often the only creditor, and the legitimate competitors of the phoenix company who are prejudiced by the resulting unfair competition,” the report said.
“The real issue or problem with a phoenix company lies with the directors who fail to learn from previous mistakes and who repeat them with the same ruinous effect and it is for this reason that Revenue monitors such entities closely.”
The committee recommended that the review of the phoenix monitoring programme be widened to examine the interactions between Revenue and those companies where there was a significant write-off of tax. The purpose would be to establish whether further measures were necessary in order to minimise the level of write-off.
Mr Noonan said he had been informed by the Revenue Commissioners that a comprehensive review of the range of oversight checks that are an integral part of the phoenix monitoring programme had recently been completed.
“That review has been extended to encompass the interactions between those companies where there was a significant write-off of tax and this extended review is significantly advanced,” the Minister added.
“It is intended that the review will be completed by the end of this year.”
The Public Accounts Committee report said it accepted that many companies became insolvent because of trading difficulties and only went into liquidation after “valiant” efforts were made by directors to maintain the entity as a going concern.
“Those directors who are involved in what is know as ‘honest failure’ and those who engage with the Revenue fall outside of the target scope of this report,” it said. It proposed that a deterrent be put in company law which would prevent “malfeasant behaviour”.
This especially related to those who used the protection of limited liability purely to avoid paying tax that they have collected from third parties, the report said.
“Many of these directors will reopen a business, normally in the same type of trade, under a different name and they become know as phoenix operators.”
