Does public opinion really matter or will the Government persevere with the traditional relaxed approach towards certain kinds of tax evasion? Less than a year ago, the State was convulsed by revelations that our major financial institutions had actively facilitated the widespread evasion of DIRT tax by wealthy individuals through the use of bogus offshore accounts and that State agencies had failed to confront the situation for many years. We were promised reform and changes were made. But it was very much a case of closing the stable door after the thoroughbreds had left.
The Dail Public Accounts Committee inquiry into DIRT evasion and the good work of the Comptroller and Auditor General, Mr John Purcell, threw important light into some dark corners. As a result, the Revenue Commissioners diverted staff to conduct DIRT audits. The bulk of that work will be completed by next month and considerable financial benefit is likely to accrue to the Exchequer as a result. Staff were also allocated to investigations involving the Ansbacher accounts and various Tribunal related matters. The upshot was a reduction in the normal policing of the revenue system.
For some months now, tax officials within the Revenue Commissioners have been complaining at various venues and through their trade union, Impact, of increasing work pressures, low morale and the likelihood of growing tax evasion. It has been claimed that the business audit area is so understaffed, that it would take 121 years to audit all of the traders registered in 1999 and that only five staff monitor the landlord sector in Dublin.
There has been some progress. Last week in the Dail, the Minister for Finance, Mr McCreevy, said he had responded positively to a request from the Revenue Commissioners for additional resources and it is understood 350 people will be employed in the near future, many in the audit area. In addition, the officers involved in the DIRT audit are expected to return to their normal duties within months.
The secretary of IMPACT's Association of Tax Inspectors, Ms Mary Farrell, last week complained there had been a deliberate policy of capping staff numbers to save on administrative costs since 1991 and that this meant that "planned, systematic and widespread tax evasion remains a feature of the Irish tax system." In particular, she singled out the corporate sector as an area where only a limited number of audits took place. The promise of extra staff was welcomed, but Ms Farrell was concerned they would not be allocated to the best effect. Her association welcomed the proposed increase in audit manpower for the PAYE sector and the self-employed and small business sector, she said. But the corporate and large business sector had grown by 60 per cent in recent years and the proposed increase in audit staff was simply inadequate.
The Minister for Finance is a man of the world. He knows that the level of tax compliance is closely linked to fear of being caught and, after that, the nature of the penalties imposed. In recent years, the level of tax compliance in Irish society has improved as legislative and administrative changes took effect. But we are still some way from the creation of a level playing pitch for all taxpayers. It is not too late for the Minister to revise the proposed staffing levels within the Revenue. Such action might save the Government some embarrassment when representatives of the Association of Tax Inspectors give evidence before the Dail Public Accounts Committee next month.