If, as Clemenceau said, war is too important a matter to be left to the generals, accountancy equally is far too important a matter, and I state this as an accountant, to be left to accountants.
Most people will remember the first report of the Dail Committee of Public Accounts, issued in December 1999, investigating the DIRT tax evasion scandal. That report lambasted a number of auditors.
As a result it was decided to set up a supreme body for the accountancy profession to which the accountancy bodies would be answerable. That body is to be called the Irish Auditing and Supervisory Authority.
The legislation is now being drafted on the lines of the Report of the Review Group on Auditing (July 2000). This important process has attracted extraordinarily little publicity. As it stands, the proposed legislation, despite everybody's best intentions, appears to be totally inadequate.
Most of the weaknesses in the draft legislation stem from the illusion that all that is needed is a tightening up of technical standards. Let us take an outstanding example of the masterminding of tax evasion, namely, the late Des Traynor.
His technical proficiency could hardly have been bettered. The only problem was that his superlative technical excellence was combined with total moral blindness. It is to the latter that the proposed legislation should be addressed, and not the former.
The well-meaning people who are engaged in the drafting do not appear to know what is actually happening on the ground in the world of tax evasion, and in particular in the world of multi millionaire tax evasion.
For example, page 211 of the Report of the Review Group on Auditing refers to the so-called Whistleblower's Section: section 172 of the Finance Act, 1995. The group appears to be unaware of the fact that this section has proved to be a virtual dead letter. Introduced by the then minister for finance, Mr Ruairi Quinn, it had been so watered down in deference to the accountancy profession as to be practically worthless.
Its outstanding weakness is that it contains no adequate punitive measure to deal with an accountant who, at a later stage, is shown to have failed to invoke the section when he should have.
The Whistleblower's Section could and should be a useful object lesson in futility: how not to draft legislation.
The cardinal weakness in the legislation now being prepared is that it proposes that certain accountancy bodies, and no others, should have the exclusive policing of the profession. This would be highly inadvisable in a small country such as Ireland where almost every walk of life is plagued by the practitioners of cronyism.
Moreover, it would be awarding a dominant position to those bodies whose inadequacies, it could be argued, have led to the present situation.
Suppose, for example, a group of dedicated accountants (and there are such people) decided to set up a new body one of whose primary purposes would be the rooting out of tax evasion wherever they encountered it, that body would be denied recognition.
The legislation should reserve the right for the IAASA at any time in the future to authorise any accountancy body whose technical standards and moral sanctions satisfy the requirements of the authority.
By the same token the authority should be permitted to reserve the right at any time to dissolve the governing council of any accountancy body within its remit, and to set up alternative structures, temporary or permanent. Without this it will effectively have no power.
Even if these issues were dealt with properly, there are also loopholes that would need to be plugged. High-level tax evasion is usually a well-planned and continuing process. It is vital that the legislation includes a provision that the authority will have the right to investigate the origins of any scheme of tax evasion, however far back in time they may be.
The alternative would be to confer a de-facto amnesty exactly equivalent to the tax amnesties of the past.
I would suggest in this regard that the first useful exercise in which the authority should engage would be to look into the accountancy and auditing aspects of the beef tribunal revelations.
One of the great weaknesses of the present system is that the Revenue cannot report a particular case of tax evasion, where a particular accountant is involved, to the relevant accountancy body because of the privacy restriction. This is absurd.
The ordinary, honest taxpayer enjoys very little privacy in respect of his tax return; the social welfare applicant enjoys even less.
The hospital patient, even when in a private ward, has very little privacy when it comes to his or her personal details. Why should privacy be used as a cloak for tax evasion?
A convenient precedent has been established here in section 18 of the Company Law Enforcement Bill, 2001, which permits a garda, or Revenue personnel, to make disclosures to the Director of Corporate Enforcement. There should be a special provision in the legislation permitting the Revenue to report an accountant not merely to his accountancy body but also to the authority itself.
Another weakness of the present system is the lack of liaison between the Companies Registration Office and the Revenue. It is possible for returns to be filed with that office showing ownership of part or all of the shares of an Irish company by a tax haven company without the Revenue ever knowing.
There would need to be close liaison in the future between the Revenue, the Companies Registration Office and the authority, and this should be spelt out in the legislation.
The presence of a representative of the Revenue on the authority guarantees nothing. I would point out that the virtual integration of the Garda and the Revenue into the Criminal Assets Bureau has provided the biggest anti-evasion success in recent years.
A great deal of lip-service is paid these days to those two vogue words: transparency and accountability. There is not much evidence of them in practice.
I would suggest that there be a provision whereby the new authority will report annually not to the Minister but to the Public Accounts Committee of the Dail, and subject itself to cross-examination by that body. This might solve the problem posed by Juvenal: Quis custodiet ipsos custodes? (Who will watch the watchers themselves)?
Above all I would suggest that any members of the public who have constructive ideas in these matters should submit them in the next few weeks to the Secretariat, Interim Board of IAASA, c/o Department of Trade, Enterprise and Employment, Ground Floor, Earlsfort Centre, Lower Hatch Street, Dublin 2.
It is time for the intrusion of some democracy on the ancient Athenian model into this field, whereby every citizen had some say in the decision-making process. The tackling of tax evasion should not be considered to be a recondite matter. Even the meanest intelligence can see that the less the tax that is paid as a result of tax evasion, especially tax evasion by the very wealthy, the more the tax that is paid by the rest of us.
We are all witnessing at the moment the precarious nature of an economy dependent to a great extent on amoral multinationals over which we have no control.
The Irish people do, however, have control, at least in theory, over one area within their jurisdiction: the auditing and accountancy field. It is time to convert theory into practice.
The drafting of this legislation provides an opportunity that may never occur again. If we fail to seize that opportunity the new authority may end as little more than a glorified ombudsman, perpetually complaining about lack of co-operation and powerless, for lack of teeth, to do anything about it.
Edward Thornley is an auditor, accountant and taxation consultant. He also has an MLitt in economics from TCD for research in Irish taxation