Taxation consultants could end up being called as witnesses against their clients as a result of the Revenue Commissioners' new policy on pursuing prosecutions, according to legal advice given to the Institute of Taxation in Ireland.

The institute has written to its 3,000 members informing them of the advice it has received from senior counsel concerning the Revenue's policy on criminal prosecution. In discussions with the Revenue, the institute has called for the publication of new guidelines "which would bring certainty to the situation for members and their clients".

The institute feels that in the wake of the McCracken tribunal and criticism of the Revenue Commissioners by politicians, tax inspectors may feel pressed to "make an example" of individuals who might otherwise have been subjected to interest and penalties, according to the president of the institute, Mr Rory Meehan.

The institute also fears that the new policy will mean taxpayers who have filed false or mistaken returns will be more reluctant to own up, as they could end up being prosecuted. Such concerns could lead to a slowing up of the whole revenue auditing process, Mr Meehan said. "Hardline cases do not warrant revision of the underlying system, which is a good one."

In its letter to its members, the institute says there are "serious legal implications for members in advising clients regarding the system of voluntary disclosure" given the revenue's policy on prosecution. The institute points out it is not objecting to the revenue policy and its use in "tax fraud cases".

Advice from senior counsel on how consultants should deal with the new situation is included with the letter.

Consultants are advised to inform clients there is always a possibility of a criminal prosecution arising from an audit, and that admissions made in the course of a voluntary disclosure could be used in evidence.

They are advised to tell clients of the "traditional" advantages of voluntary disclosure. They are also advised that there is uncertainty as to whether a taxpayer would have privilege where a consultant was called as a witness for the prosecution in a case taken against a client.

The need to make such complicated legal assessments in the course of an audit could bog down the audit process, according to Mr Meehan. "Should clients have a criminal lawyer present? Should they say nothing?"

The institute is also concerned that a consultant who advises disclosure, on the basis that a client would be treated more leniently as a result, could be sued by the client if the disclosure led to a criminal prosecution.

Mr Meehan said the institute believes the Revenue may not want to publish guidelines which would reassure consultants that normal voluntary disclosures would not lead to prosecution, as they are fearful of criticism from politicians that they are being "soft". Consultants advised by clients that they are not going to disclose unreported income should resign from such cases, Mr Meehan added.