Powers said to be among the toughest in the world are set to be granted to the Revenue Commissioners to help in the fight against tax evasion.

But are these new powers really necessary and is there now a need to put safeguards in place to protect innocent taxpayers from investigations generated by information given to the Revenue by vindictive rather than public-spirited informants or over zealous officials?

The measures introduced by the Minister for Finance in the Finance Bill are a direct response to recent financial scandals ranging from the operation of the Ansbacher secret offshore deposits to the AIB DIRT tax affair. Difficulties in obtaining information, particularly from financial institutions, have now resulted in proposed powers that will allow the Revenue to "go on fishing expeditions" in the financial institutions.

Even though some of the new powers can be exercised by the Revenue with the approval of only one of the three Revenue Commissioners required, Mr McCreevy does not accept that individual taxpayers may need protection from such extensive Revenue power. If "people have their affairs in order they have nothing to fear", he maintains.

The chairman of the Revenue Commissioners, Mr Dermot Quigley, considers the powers a "new weapon" in dealing with the "very serious tax evasion that has become obvious" in the last 18 months. He is adamant that they will not be used "to mount a blitz on ordinary taxpayers with a few bob in the bank".

But tax specialists tell tales of small business people and PAYE taxpayers who they maintain, even before the introduction of the latest raft of new powers, have been "hounded" and "harassed" by tax inspectors. They admit that in some cases taxpayers records may have been disorganised or inadequate. But they contend that the "attention" they received greatly exceeded that required by any possible tax liability and that in some cases the taxpayer was found to owe nothing to the Revenue.

Some accountants claim that some tax inspectors chase taxpayers for very small amounts, while people who have apparently managed to evade significant amounts of tax seem to escape the attention of the tax man. There are many stories of people whose lifestyles appear very obviously out of step with their apparent legitimate income but who never seem to have any trouble with the Revenue.

These tax practitioners contend that the Revenue already has powers which are adequate to get the information it needs. Currently, in addition to being able to audit a tax return, to enter and search a business premises (other than banks and the offices of professionals) and remove records for inspection, the Revenue can seek a High Court order to get access to the bank accounts of a named individual and any information on the bank's books regarding the financial affairs of the taxpayer.

Since 1983, the Revenue has had the power to apply to the courts for access to an individual's bank account where that person had not filed a tax return or had filed an inadequate return. In such a case the Revenue has to get court approval for the search and the account holder has to be named together with the bank branch/branches involved.

Since the 1993 Amnesty Act, the Revenue has been able to get access to this type of information by applying to the Appeals Commissioners for permission to seek the information from a bank.

Under the latest new powers proposed for the Revenue, personal bank accounts can be scrutinised by order of a Revenue Commissioner only - that is without recourse to the courts or any third party. The Revenue can get access to bank and building society accounts where it has "reasonable grounds" to believe there is information in the institution relating to the taxpayer's liability to any type of tax. And the extent of the information accessible is to be extended to include any relevant supplementary information in the bank's possession.

And the Revenue will be able to examine bank accounts held by "unidentified persons or classes of persons" and get information on non-resident bank accounts if it gets permission from the High Court or an Appeals Commissioner. This new power deals with the Revenue's current problem of being unable to access accounts where it did not know the names of the beneficiaries as in the case of the secret Ansbacher accounts.

In effect the Revenue will get unrestricted powers to examine the bank accounts of anyone it suspects of tax evasion along with the accounts of their relatives or anyone they suspect may be connected to suspected tax evaders. As one tax specialist explained "the position will be that a tax inspector can turn up virtually anytime at any bank and demand to be let loose on all the banks records. It is very draconian". Some sources believe that a constitutional challenge to these provisions would be successful on the grounds of the removal of an individual's right to privacy in business dealings with financial institutions. But other sources suggest that the climate with regard to tax matters has changed so dramatically in recent years that a challenge would be unlikely to succeed.

One lawyer commented that the extensive powers granted to the Garda under the Criminal Assets Bureau Act 1998 and the Proceeds of Crime Act 1996 were challenged on behalf of Mr John Gilligan - who is facing extradition from Britain on charges relating to the murder of Veronica Guerin - and were allowed to stand.

But given the existing powers available to the Revenue the need for the new powers of access without court approval is not fully clear. If the Revenue has prima facie evidence to suggest tax evasion, there appears to be no good reason why the requirement to obtain court approval for access to the individual's bank accounts should be removed. Where it does not have to establish a certain level of evidence there is a danger that the powers could be abused.

Where Revenue does not have the names of the account holders, the new powers appear to be warranted. But there is protection in this section as it specifies that permission from the court or an Appeals Commissioner must be sought for access to the accounts.

In practice the Revenue already has another weapon for access to taxpayers bank accounts - Form 62BD. Where an investigation is being carried out the taxpayer can be asked to sign a form which authorises the Revenue to inquire from banks whether accounts are held in the taxpayer's name. Practitioners say that in practice the Revenue often threatens to prolong an investigation indefinitely if a taxpayer is reluctant to sign the form.

On the argument that the Revenue has not used its existing powers to go after big tax evaders, one tax specialist commented that in many cases it appeared to be unsuccessful when it exercised those powers. "The Revenue has not been that successful against the bigger fish. When they went to court to get access to bank accounts they lost a number of key cases," he said.

But because these cases tend to be heard in camera, no record is available of the Revenue's successes and failures. Among the other new powers proposed are that the Revenue can instruct any third party to provide information about a taxpayer without informing that taxpayer. Exercise of this power requires no approval from anyone.

Currently information may be sought from third parties involved in business transactions with the taxpayer but the taxpayer must be informed that the information is being sought.

The danger in the new power is that if the taxpayer turns out to be compliant, the third party will be left with the impression that the taxpayer is evading tax, while the taxpayer could be unaware that this impression has been created. It could damage the standing of a business in its sector or community. Commenting on the proposed new powers, one tax specialist said: "A lot will depend on how it will be administered by the Revenue but it is not a comfortable position. In practice there are a lot of inexperienced revenue auditors who may put pressure on the Revenue Commissioners to use their powers in a non-discriminatory manner. On paper now the balance has swung dramatically in favour of the Revenue".

Financial institutions appear to be one of the main targets of the latest increase in Revenue powers. Since 1992 the Revenue, through an authorised officer, has had the power to enter and search premises for records without a warrant from the courts. But that right was not exercisable against a financial institution or professionals apparently on the grounds of the confidentiality of the relationship between those parties and their clients. All the Revenue could do in the case of financial institutions was to call for the books and records and the DIRT non-resident declarations. But the Revenue had no power to enter any financial institution to search for documents. Now the Revenue may get the power to trawl through bank accounts and records. The president of the Institute of Taxation, Mr Pat Cullen, argues that the powers of the Revenue are already extensive and what is needed now is more resources to implement these existing powers rather than more powers.

"The Revenue already holds extensive powers in relation to the gathering of information, auditing of tax returns and entering and searching premises. Many of the existing powers have not been extensively used and it must be questionable as to whether wide-ranging powers should be provided on the grounds that they will be applied only to a small number of serious cases. The legislation as proposed does not clearly go far enough in ensuring that the use of the new powers will be limited to such cases. It may well be that a better mechanism for addressing current concerns would be to provide the Revenue with greater resources for tackling evasion rather than additional powers," he argues.

Overall most tax practitioners seem to feel that, other than in the case of the banks, the new powers are not justified. The rights to enter and search and to get third-party information should have been explored to the limit, one practitioner suggested.

"These are already a fairly fundamental breach of taxpayers privacy. I wonder why these powers are considered inadequate?" he asked.