In the wake of the recent DIRT controversy, the issue of regulation of the financial sector has moved centre stage. The Government is still considering what to do about the overall supervision of the industry and the future role of the Central Bank. And now a number of specific issues concerning regulation are in the spotlight, including the way that the Revenue Commissioners go about collecting tax and the supervision of the accountancy profession.
While Government ministers were last night attempting to play down the issue, it is clear that the Revenue approach to collecting DIRT has caused considerable unease in some of the big companies in the IFSC. The Financial Services Industry Association - the main representative body for the industry - has made its views known to the Taoiseach, the Minister for Finance and to the Revenue.
At issue is how the Revenue approaches its job of policing the companies in the IFSC to ensure they pay their due taxes. The industry contends that the Revenue is now taking an unrealistically strict approach, for example threatening to levy DIRT tax on transactions where there is no underlying tax liability, if all the proper documentation is not complete. This could lead to some of the companies having to note contingent tax liabilities in their accounts.
There appears no reason why a solution cannot be found. The key focus of Revenue activity must be to collect tax which is due. Companies in the IFSC are already major contributors to the exchequer; they do not deserve special treatment on any score and, like all taxpayers, must do everything possible to keep their affairs in order. But equally the Revenue Commissioners, who appear now to be rigidly following the rule-book in the wake of the DIRT inquiry, must take a pragmatic approach in dealing with all classes of taxpayers. This does not mean "going easy" on the banks, or on any other taxpayer, but merely concentrating their fire on collecting tax which is due and on chasing evaders.
The Revenue Commissioners, coincidentally, also feature in the debate on regulation of the accountancy profession. They have submitted a detailed document to the review group on the issue established by the Tanaiste, Ms Harney, the details of which are reported in today's Irish Times. It puts forward a well-argued case for a new system under which the self-regulation of the sector would be overseen by a state-funded body, perhaps the proposed new office of the director of corporate enforcement.
Final judgement on this issue will have to await the report of the review group. But it is clear that whatever the outcome, some kind of independent regulatory structure is needed; how this should be managed and whether it should oversee or replace the current self-regulatory structure are matters which the committee must decide. The Revenue submission also points to a number of other issues on which the committee must adjudicate, including the length of appointment of auditors and on what terms auditing companies should be allowed take on other work for client companies.
These debates highlight the new focus on regulation and tax collection, in the wake of the scandals of recent years. In these areas, it is important that practice in Ireland should be up to the highest international standard. Nowhere is this more the case than in the overall regulatory regime for the financial sector, where a decision by the Government on its policy approach is now long overdue.