The investigation by the Revenue Commissioners into tax evasion through insurance products is likely to create an "uncertain backdrop" to the sector for some time, an analyst said yesterday.
Mr Eamonn Hughes of Goodbody Stockbrokers said that, unlike the DIRT inquiry into banking, the life assurance companies themselves did not seem to be an intended focus of the Revenue's latest investigation.
However, he said, "there will clearly be additional costs involved in helping with the investigation and redirection of resources internally. This could add to the sector's cost-base."
Mr Hughes also questioned whether the companies could be of much use to the Revenue as it was his understanding that the institutions only had to maintain records going back six years.
The Revenue examination is expected to cover the period from the early 1980s to date.
A danger, Mr Hughes said, was that former clients would seek to blame the institutions for advising them to take out their policies. This was a small risk but could widen if the investigation moved into "more dangerous territory for the industry".
"The whole topic is likely to create an uncertain backdrop to the industry for some time and, if the investigation widens at some future stage to the companies, it could compromise any further consolidation in the sector."
The focus of the investigation will be money that was used to buy premiums, rather than profits made from the policies.
Mr Hughes said the amounts of the potential tax-take being quoted in the media in relation to this latest Revenue investigation "look to have little foundation at this early stage".
He said it was likely that Irish Life, Bank of Ireland (Lifetime and New Ireland) and AIB (ArkLife) will be on the list of companies being contacted by the Revenue, and could be facing the costs associated with this.
On Thursday, the chairman of the Revenue Commissioners, Mr Frank Daly, announced that the new inquiry is likely to begin next year, with the focus on single premium insurance products.
Information from its offshore assets and bogus non-resident account inquiries had led the Revenue to suspect that significant tax evasion may have occurred using such products. The Revenue has also received information from persons with knowledge of the sector during the period concerned.
The new investigation is likely to involve a period during which people can come forward voluntarily, receive reduced penalties, and avoid being named publicly. An announcement is likely early next year.
Mr Daly has said he is hopeful that the insurance companies will co-operate with the Revenue but has not said exactly what co-operation he will be seeking.
