The Revenue Commissioners and the Coalition Government have failed to deliver. After years of huffing and puffing about implementing the tax laws without fear or favour, they have again cut their cloth to pragmatic measure. Rather than follow through on the findings of the Oireachtas DIRT inquiry and impose normal penalties on the holders of bogus non-resident accounts, they have offered to cut a deal with those who co-operate before November 15th and threatened the recalcitrant ones with publicity, heavier penalties and possible prosecution. The approach was adopted under "care and management" regulations of the Revenue Commissioners, following contact with the Minister for Finance, Mr McCreevy. The justification offered smacks of the 1988 and 1993 tax amnesties: the Exchequer would benefit from a large influx of money and a more compliant tax atmosphere would be created.
This is a pragmatic decision. It has been publicly identified as such by the Revenue chairman, Mr Dermot Quigley. He has suggested that because of the sheer size of the issue, the normal audit work of the Revenue could be totally derailed if resources had to be devoted to a full investigation of these accounts. But the existence of an estimated 50,000 bogus offshore accounts has been known for two years, time enough to recruit extra revenue staff if there was a political will to do it. It is true the Minister for Finance responded to trade union pressure last year and agreed to recruit about 350 extra staff. But this followed the capping of numbers since 1991 and rapid growth since.
The Association of Tax Inspectors has maintained that "planned, systematic and widespread tax evasion" remains a feature of the Irish tax system. Anyone who doubts it should consider the phenomenal growth of the Spanish property market, where Irish citizens have been the biggest apartment investors in recent years. Or they could look closer to home in London's docklands or in offshore tax havens. In the aftermath of the DIRT scandal, banks, building societies and other financial institutions no longer accept large amounts of money across the counter. But the money generated by the Celtic Tiger's black economy, which has been unofficially estimated at about 10 per cent of the total, has to go somewhere.
Under powers granted to the Revenue Commissioners in the 1999 Finance Act, inspectors can now demand details of accounts from those financial institutions that have already paid £173 million in penalties. Mr Quigley has said they will track down and investigate bogus off-shore account holders found by the DIRT inquiry and establish their true identities. The carrot and stick approach may bring in revenue in a fairly painless manner. But a reluctance to visit the full rigour of the law on bogus offshore account holders has more to do with massaging middle class Ireland than setting new tax standards.