A DECISION to wrongly pursue a company for €10 million in VAT on its lease on the National Aquatic Centre “smacks of the State pursuing an individual or a company just because it could”, the chairman of the committee of public accounts has said.
A report published by the committee yesterday criticised a number of State departments and bodies in relation to their handling of the case, despite the report’s finding that the case, even if successful “would have conferred no net benefit to the State”.
The report criticises Campus Stadium Ireland Development (CSID), which pursued the case; the then department of arts, sports and tourism, which supported the CSID’s case; the Department of Finance, which advised that the CSID had no option but to pursue the VAT issue; and Revenue, on whose guidelines the CSID relied.
Committee chairman John McGuinness said that when Dublin Waterworld Ltd’s legal costs were included, the costs of the case could yet reach €1 million.
“But there was also an €11 million payout in terms of professional and executive services that were brought in by the company and their financial advisers, tax experts and so on.”
Yet, he said, the best advice received in relation to the case was free: “Use common sense, stop, be honest. And they got that advice as they went along.
“What I find most disheartening is that there appears to be no acknowledgment that mistakes were made right through the handling of this case and it should have never been pursued,” Mr McGuinness said.
He said the department of sport “should have taken a much stronger overview of this case and called a halt”, adding that “its job was to protect the taxpayer and it failed in that”.
Following the development of the National Aquatic Centre in 2002, Campus Stadium Ireland Development pursued Dublin Waterworld for €10.25 million in VAT on the capitalised value of the 30-year lease.
Dublin Waterworld disputed the charge and the case was the subject of court and arbitration proceedings until the Supreme Court ruled in 2010 that, under the Finance Act, the operator was not liable to pay the VAT and should not have been charged.
Despite being advised against it by the Comptroller and Auditor General in 2004, CSID continued to pursue the case.
Noting the report’s finding that the CSID had not shared critical information with Dublin Waterworld that would have weakened the basis for paying VAT on the 30-year lease, Mr McGuinness said: “CSID failed by not sharing the report of the Valuation Office with Dublin Waterworld. Its highly paid advisers should have forewarned that its VAT strategy was flawed.
“The department of arts and tourism failed; it should have cried stop. Revenue were careless in its approach – it should have got off the fence much earlier.
“The Department of Finance gave advice which went against common sense and did not take into account the Finance Act of 2002 and the Attorney General allowed itself to be sidelined after giving common sense advice in 2004.”
On foot of yesterday’s report findings, the committee advised that the State should only get involved in litigation where a successful outcome was necessary to either prevent the State from being exposed to unnecessary costs or where it conferred a significant benefit on the State.
Dublin Waterworld welcomed the report, saying the Government, specifically Minister for Transport, Tourism and Sport Leo Varadkar, should hold Campus Stadium Ireland Development’s board and highly paid advisers to account “for their wanton waste of taxpayers’ money”.
PAC REPORT MAIN FINDINGS
* Campus Stadium Ireland Development (CSID), with the support of the Department of Arts, Sports and Tourism, pursued a VAT charge against the company that had the lease on the National Aquatic Centre between 2002 and 2010, even though it was aware that a successful outcome would not have derived a benefit for the State.
* CSID relied on Revenue guidelines to interpret VAT law, even though it retained the services of VAT experts. The Revenue guidelines were faulty.
* The Department of Arts, Sport and Tourism relied on oral advice from the Department of Finance to support the ongoing attempt by CSID to recover VAT.
* Opportunities to settle the issue were available from 2002 onwards, the report notes, “yet the Department of Arts Sports and Tourism, CSID, the Department of Finance and the Revenue all failed in their responsibilities to the State in not taking advantage of such opportunities on a VAT issue that should never have been pursued”.