Revenue's internal memo was `overtaken by action'

Twelve years after it was introduced, the Revenue Commissioners' internal instruction SIM 263 was "overtaken by action" with the publication of the McCracken report and the disclosure of the NIB controversy in 1998.

SIM (Superintending Inspectors Memo) 263 was introduced in 1986 and prohibited tax officials from inspecting, until further notice, declaration forms held by financial institutions for the deposit accounts of non-residents. The document has played a central role in the Public Accounts Committee's DIRT inquiry.

The inquiry was told that no further written instruction was ever issued to reverse the memo. Mr Christopher Clayton, the Revenue's chief inspector of taxes, said it was "overtaken by action".

He told the inquiry that SIM 263 had not featured strongly in his thinking. He was more concerned with fundamental reorganisation in the office. He had "many things to be thinking of from morning to night. SIM 263 wasn't exactly high on my order of priorities as a result of that".

He was answering questions during cross-examination by Mr Dermot Gleeson SC, for AIB. Mr Clayton said the then chairman of the Revenue Commissioners, Mr Cathal Mac Domhnaill, asked that declarations be inspected after he and most top management in the Revenue became aware of the NIB offshore accounts controversy in January 1998 and following the McCracken report.

Mr Gleeson had asked did "someone take it down in its folder and put a red line through it or issue a new SIM or what?" Mr Clayton said: "One doesn't so much cancel an old SIM but would make amends or decide to override it with actual operations or with another instruction".

Mr Gleeson asked if there was another SIM that said "We're back to you now at last. Here we are again 12 years later". Was there any paper that some "fiscal archaeologist would discover in 100 years' time to see where the death of SIM 263 occurred?"

Mr Clayton replied that notes of meetings in January 1998 with the Bank of Ireland, Allied Irish Banks and the Irish Bankers' Federations would show this. Later another senior tax official, Mr Sean Moriarty, rejected a suggestion that "voluntary regularisation" had the same effect as an amnesty in that no retrospective tax payments would have to be made.

Mr Moriarty, an assistant secretary for human resources in Revenue, had prepared a report in 1992 on Tax Evasion - The Role of Concealed Deposit Accounts and Other Forms of Investment.

AIB's counsel quoted from the report where Mr Moriarty had written that it could be argued Revenue should "look to the future rather than the past in focusing its programmes" and that ultimately more would be gained by devoting all energy to present and future compliance.

He also referred to his comments that "voluntary regularisation, if achieved, could have the same net result for depositors and for the Exchequer".

Mr Gleeson said the only meaning that could be taken from that was that voluntary regularisation meant no retrospective payments.

"That's what you meant to convey, that's what you did convey and that at last the mystery of what regularisation means is solved."

Mr Moriarty refused to accept that and said part of his report was about teasing out the potential impact of an amnesty. Everything was "up front" in that report, he said.