The Public Accounts Committee (PAC) of the Dail has been instrumental, with the help of the Comptroller and Auditor General, Mr John Purcell, in ensuring that £63.3 million has already been paid to the Revenue Commissioners in final DIRT settlements by five financial institutions. Discussions with AIB are ongoing, following a trawl of its books for bogus non-resident accounts by the Revenue. Further millions may be collected from the thousands of individuals who evaded income tax for years and hid the money in bogus off-shore accounts with the connivance of financial institutions.
In view of such widespread tax fraud, it is hardly surprising that members of the PAC should be astonished that only eight convictions for tax offences were secured by the Revenue in a period of 39 months, up to last June. Committee members appear determined to ensure that the traditional culture of non-prosecution and settlement within the Revenue will change. The chairman, Mr Jim Mitchell, said that jailing must become an issue in order to ensure tax compliance. Following earlier complaints from the PAC, an official review of Revenue structures and practices was published last week. It accepted the need for change in corporate governance and management structures. But its recommendations for change, while welcome, did not go far enough.
In particular, its rejection of proposals for the establishment of a Revenue Court, with specialist tax and accounting expertise to deal with serious cases, should be reconsidered. Greater transparency in the appointment of Appeals Commissioners and in their decision-making processes would also help to bolster public confidence. On a positive note, the proposal to appoint three new non-executive directors to the existing three-person board will open up the organisation to outside influences. But best business practice would suggest that the roles of Revenue chairman and chief executive should be kept separate.
The Government review group accepted that radical restructuring was urgently required. In particular, it recognised that Revenue could make better use of information technology for audit and investigation. But recognising what should be done and actually doing it are very different things. In spite of successive tax scandals, the Association of Inspectors of Taxes made a submission to the PAC, last June, complaining of inadequate ongoing supervision of tax compliance by the corporate sector. The level of audit coverage had, they said, halved between 1995 and 1999.
Since then, extra staff have been recruited to key positions in the Revenue. This is part of a broader, but rather grudging, reform programme. The office of the Director of Public Prosecutions recently employed two officials to deal specifically with tax fraud offences. And the Attorney General, Mr Michael McDowell, along with the DPP, Mr James Hamilton, are expected to attend before the PAC later this month to advise on legal procedures that could lead to a greater number of prosecutions. The Revenue Commissioners are due to report on their success in pursuing DIRT liabilities by November 1st. But the Revenue and the Government must realise that public opinion now favours a tougher approach to tax evasion, including the penalty of imprisonment for serious offenders.