The Revenue Commissioners will target specific insurance products which it believes may have been used for widespread tax evasion, in an extensive investigation that could net the Exchequer more than €1 billion. Colm Keena and Laura Slattery report.
The Revenue chairman, Mr Frank Daly, told the Dáil Committee of Public Accounts yesterday that the investigation would examine insurance policies going back to the early 1980s.
The major companies selling the insurance products during the period included Irish Life, and the insurance subsidiaries of the Bank of Ireland and AIB. The focus of the inquiry will be the money people used to buy the products, rather than profits made from the policies.
In January the Revenue will begin a new voluntary disclosure scheme. The model it will use to conduct inquiries will be similar to those used to investigate other schemes, including offshore and bogus non-resident accounts.
Those investigations netted $1.6 billion (€1.23 billion). Mr Daly told the Public Accounts Committee’s chairman, Fine Gael’s Mr Michael Noonan, that the Revenue had been examining the use of single premium insurance policies for some time. Mr Noonan said he was "convinced beyond doubt" that evasion took place using these products.
He said that from 1988 to 2001, €33 billion had been written in single premium insurance.
Later, speaking to The Irish Times, he said that if even a small percentage of this was "hot money", then an enormous amount of potential revenue could be at issue, well exceeding €1 billion.
Mr Daly said that information gleaned from its bogus non-resident accounts and offshore assets investigations, as well as from "people who knew what was going on", had led the Revenue to believe that single premium insurance, and a number of other insurance products, may have been used for significant levels of tax evasion.
He said a Revenue investigation, likely to start next year, would probably cover the period from the early 1980s to date, and would use the model developed for the offshore assets and bogus non-resident accounts investigations.
He said the latest totals for revenue raised in these investigations were, respectively, €705 million and €782 million.
The total tally from the Revenue’s various special inquiries now stands at €1.6 billion. The focus of the Revenue’s new inquiry would be the money which had been used by clients when buying the premiums. Only a small proportion of the business done by the insurance sector was at issue, but the figures involved were "very, very big".
Because the profits from the policies were taxed by the insurance companies up to early 2001, there were no tax liabilities associated with the premiums when they were paid out, and so the payments did not generate Revenue inquiries.
During yesterday’s committee hearing, Mr Daly indicated his dissatisfaction with the courts’ sentencing record in serious tax offences.
Since 1995 only two people have gone to jail for tax crimes, he told the committee. Mr Daly said the Revenue had tried to prepare cases against financial institutions and financial advisers for aiding tax evasion but had been told by the Director of
Public Prosecutions that it did not have a case. The law in the area needed to be changed, he said. On the Revenue’s inquiry into trusts held with Bank of Ireland, Jersey, Mr Daly said voluntary disclosures by 254 people had raised more than €100 million.