Dec 4, 2014
Revenue Commissioners: Chairman Josephine Feehily called and examined
Deputy John Deasy: I welcome the witnesses. The authorised officer in this case would have been a source of information for Revenue and would have assisted Revenue's investigations as a matter of course. If Revenue, as an organisation, settled with somebody, would he have known that?
Ms Josephine Feehily: No, apart from the 58 cases which we have published. We have no way of advising him of same and I referenced that fact in one of my earlier answers.
Deputy John Deasy: This is a critical issue because to a great extent, we are talking in the dark here. He would not have known because Revenue would not have divulged such information to the authorised officer at any point because, as Ms Feehily has said several times, Revenue does not divulge personal information relating to the tax affairs of any citizen. If Revenue had pursued an individual, even someone who was identified in the reports of the authorised officer, and had settled with that individual, the authorised officer would not know about that, even today, would he?
Ms Josephine Feehily: No, he would not have known unless it came into the public domain through our defaulters' list. He would have known that we were making progress with the class because we regularly published updates but not at case level.
Deputy John Deasy: So, the individual who has pursuing this issue for many years has no information with regard to how Revenue has pursued prosecutions or made settlements. If Revenue made settlements with individuals, some of whom are named in the dossier, he would not have that information.
Ms Josephine Feehily: That is correct. He would not know what we did in individual cases.
Deputy John Deasy: So we really are talking in the dark here.
Not to beat around the bush, the accusation has been made that the Revenue Commissioners and other organisations did not complete investigations into particular Ansbacher accounts appropriately or properly. Accusations have been made of political interference. As Deputy Ross said, the main accusation relates to things Revenue did not do. Were there things that Revenue could not do, under legislation?
I refer in particular to the ten-year rule mentioned by Deputy Ross which was introduced in the 1997 Taxes Consolidation Act. Did Revenue have an opinion on that? Ms Feehily said that Revenue was given special powers in 1999 which really assisted it to prosecute. When it came to the ten-year rule, did Revenue have reservations? That rule obviously prevented Revenue from pursuing some cases.
The Revenue Commissioners are the administrators of the tax code. They are not the policy makers but it is fair to say that they have views and opinions on legislation that affects the tax code and they give those views and opinions to the Department of Finance regularly. It is expected that the board of the Revenue Commissioners would have an opinion on legislation, both formally and informally. Was a view presented by Revenue to the Department of Finance on the ten-year rule?
Ms Josephine Feehily: First, I am not entirely sure, without checking, in what year that provision was introduced because the Taxes Consolidation Act was a consolidation of the tax code. Deputy Ross said it was introduced in 1992 and he is probably the best source on that, subject to checking. I would have to check the papers around the drafting of that section to see what view was expressed. That said, my strong understanding on the basis of recent explorations of this issue, is that in the common law, even if we did not have that section in place, a prosecution for an offence committed more than ten years ago in this regulatory space, as opposed to other forms of jurisprudence, would be likely to fail the justice delayed - justice denied test.
Our role in a prosecution is to prepare cases and bring them to the Director of Public Prosecutions, DPP. Certainly, engagement with the DPP would confirm the view that such a time period is an impediment, regardless of the section that is in place. I can say that based on my own discussions in Revenue in recent years because I have explored it. I would have to research and get my officials to check the papers from the year that the section was drafted to see what view Revenue may have expressed then. I was not even in the Revenue Commissioners at that time.
Deputy John Deasy: Ms Feehily made reference to the fact that when a criminal investigation would not pan out, her office turns to civil action. Does the ten-year rule apply in those circumstances too?
Ms Josephine Feehily: Yes, in fact in civil actions, the common law view would be that the time period is even shorter. We have a four-year rule, generally speaking, vis-à-vis our authority to go backwards and that is considered relatively long.
Deputy John Deasy: I ask this because for the public looking in, this is the main issue. The public want to know why Revenue cannot go back 20 or 30 years in the course of an investigation. It would be helpful if Ms Feehily spelled out why that is the case. Is it because Revenue cannot get its hands on the original documentation, some of which may date back to the 1970s? Is it because of common law and the ten-year rule under the Taxes Consolidation Act that Revenue is prevented from doing so? It would be useful if Ms Feehily spelled out the various reasons Revenue cannot pursue an investigation after a certain period of time.
Ms Josephine Feehily: When one has two huge reasons, one tends not to go looking for three, four or five more. One needs original documents and evidence first.
One needs to be able to prove a connection between these documents, the person involved and tax evasion done knowingly, willingly or negligently. There needs to be a criminal standard of proof which is beyond reasonable doubt in respect of connections of this nature. This must all be done within ten years. We are talking here about events which took place in the 1970s and 1980s. That is a real difficulty. That was codified, so to speak, in law in the form of the ten-year rule.
Those are the reasons. They are common reasons which are not confined to Revenue, they apply across processes relating to the legal system and in terms of natural justice and fairness. In general law they have been commented on several times by judges in the context of fairness, the due process to which people are entitled, in the context of how far back regulatory bodies are permitted to go and so on. If it would be helpful, I can send a note to the committee in which I will set out all of the background considerations. However, it will come down to the issues to which I refer, namely, evidence beyond reasonable doubt, original documents and the ten-year rule.
Deputy John Deasy: I return to the reason we are here, that is, the accusation that Revenue did not investigate this matter properly. I would like Ms Feehily to provide information on the special projects team that was appointed to investigate the Ansbacher accounts, the number of people who were involved and the expertise they possessed.
Ms Josephine Feehily: The team was led by a very senior and experienced principal inspector of taxes who had previously carried out many investigations. He had available to him 20 staff, including half a dozen experienced investigators and research and clerical support staff. We invested in computer technology - the file magic system - we never had before and this proved to be an incredible asset to the team in sifting through all of the documentation. As the 2000s progressed and as I mentioned to Deputy Ross, other investigations were taking place. The investigation into bogus non-resident accounts ran in parallel in 2001.
We were also dealing with matters relating to High Court orders, offshore assets and tribunals. During those years, Revenue received sanction for 300 additional staff. We increased the number of people dealing with this group of cases from 20 to 30. The number of people on the team reached 30 in 2001. We maintained that number of people working on these cases until 2005. The ratio of people to cases was extraordinarily high by Revenue or any other standards. By the time the case base reached 289, there were 30 officers involved.
There was also a structure in place for the first couple of years of the process whereby very regular meetings were held. These were led by very experienced assistant secretaries who were all qualified inspectors of taxes in their own right and one of whom was a qualified barrister. There were also regular meetings with the then chairman, at which direction, strategy and decisions were continually questioned. The matter was taken extremely seriously.
Deputy John Deasy: Ms Feehily referred to the ten-year rule being a serious impediment. Were there other impediments? The legislation underpinning the 1993 tax amnesty was introduced. Did the then board of Revenue or any senior officials give an official opinion to the Department of Finance with regard to this amnesty? Some people, including a number of academics, remain of the opinion that the tax amnesty in question was unnecessary. There were massive differences between the 1988 amnesty, which was operated on the basis that all outstanding taxes be recouped, and the 1993 amnesty, which was known as the "15% incentive amnesty".
There is a theory - I have heard it outlined on a number of occasions - that as the investigations into the Ansbacher accounts proceeded in the period 2003 to 2005, plenty of people in senior positions in Revenue had major misgivings with regard to the way in which the legislation relating to the 1993 amnesty was drafted. Some Ansbacher account holders availed of the 1993 tax amnesty and when they were pursued, they had the certificates they had obtained as a result of that and these made them immune from prosecution.
This is a really important point. Some 20 Ansbacher account holders availed of the tax amnesty and there is a suggestion that the legislation under which that amnesty was established was politically motivated. I accept that Ms Feehily cannot comment on that matter to a certain extent. However, I am going to ask her about the kinds of reservations which continued to be expressed in Revenue while the investigations to which I refer were ongoing.
Ms Josephine Feehily: To be clear and as the Deputy stated, I must be careful not to comment on the policy area. I joined Revenue at the end of 1993 as the closing date for the amnesty approached. It was common currency among senior officials in Revenue that we were not exactly excited about this matter.
Deputy John Deasy: It is fair to say Revenue does not like amnesties at all.
Ms Josephine Feehily: Exactly.
Deputy John Deasy: It particularly did not like the one to which I refer.
Ms Josephine Feehily: No, we particularly did not like it and that is well known. Without reviewing the relevant files, I cannot inform the Deputy as to whether that was ever written down in a letter. However, it is well known - information in this regard has been placed in the public domain in the past - that the then board of the Revenue Commissioners was not in favour of it. I recall there being some criticism of the then board because the amnesty yielded a lot of money.
The board had stated that it was not necessary and should not be done because there would not be very much money forthcoming. I remember that aspect of a conversation taking place after the yield emerged. Revenue was not in favour of amnesties in general and would not have liked this one at all. The committee will be aware that in the past there have been various voluntary disclosure schemes, which are incentivised.
However, the Revenue position would always be that we should get the tax. That is just a general position of revenue organisations across the globe. We do not like to walk away from tax. I do not think I am commenting on policy when I say that the general position of Revenue and similar organisations elsewhere is that we do not favour amnesties which let people off paying tax. The amnesty was a huge impediment.
Deputy John Deasy: Specifically, what were the impediments involved?
Ms Josephine Feehily: The amnesty was designed to create a brick-solid Chinese wall between everybody and the office of the chief special collector, which was specially established. The chief special collector and his staff handled all of the amnesty declarations. On foot of those declarations - they were not allowed to examine them and they had no access to the tax files of the declarants - they issued the declarants with certificates. In law, those certificates were sufficient evidence to the rest of Revenue to the effect that, at any time in the future, we could not look behind them.
A special unit was established. Those present from the Office of the Comptroller and Auditor General will recall that Revenue had to suspend its internal audit function because of the difficulty of finding officials who had never seen tax files. An assurance had to be given that such officials would never see such files in the future and this meant that their careers had to be managed. I recall this because I worked in human resources, HR, at the time. We were obliged to suspend the internal audit function in order to find people who we could state were in compliance with the law because they had never been involved - as tax inspectors within the Collector General's office or anywhere else - in cases in the past. There was a logistical dimension involved which I do remember. An impervious wall - behind which the amnesty declarations are to this day - was put in place.
To this day we have a chief special collector and if a taxpayer produces an amnesty certificate to an inspector in the context of any investigation, the inspector, once he or she has it, can verify by asking the chief special collector whether the certificate is authentic and that is all that can be done.
Deputy John Deasy: Let us stick with the 20 Ansbacher account holders who availed of the tax amnesty in 1993. While Revenue was investigating this in 2003, 2004 and 2005, the Chairman had been there for ten years. For example, Revenue was not able to trace the source of moneys, which I understand to have been a major bugbear within the Chairman's organisation.
Ms Josephine Feehily: Yes.
Deputy John Deasy: At that time, when Revenue had made its considerations regarding its difficulties with the legislation that had been drafted and had been availed of by 20 particular Ansbacher account holders, did Revenue make its displeasure known to the Department of Finance?
Ms Josephine Feehily: Yes.
Deputy John Deasy: How did Revenue do that?
Ms Josephine Feehily: We wrote to it.
Deputy John Deasy: What was the response?
Ms Josephine Feehily: We wrote in the context of looking for additional powers and we got most of what we looked for. However, as for the response with regard to the amnesty legislation, it was not revisited.
Deputy John Deasy: Was the reason given for that? Revenue obviously spelled out serious concerns with regard to particular individuals because it was precluded from pursuing them.
Ms Josephine Feehily: We spelled out concerns with regard to the process and the difficulties it created for us. I have not been able to find a reply to the letter but I know that the other powers in the letter were secured. This one was not.
Deputy John Deasy: Which one?
Ms Josephine Feehily: Revisiting the amnesty legislation.
Deputy John Deasy: Did the Chairman state there was no reply?
Ms Josephine Feehily: I have not been able to find it in the time allowed.
Deputy John Deasy: Can the Chairman remember what the Department of Finance said to Revenue?
Ms Josephine Feehily: No. I certainly cannot remember but the fact it did not happen I guess is the answer.
Deputy John Deasy: It is an important question. The Revenue Commissioners are and at the time were the administrators of the tax code. They had one hand tied behind their backs with regard to particular individuals. Revenue made its opinion clear that it was not appropriate and that the legislation underpinning all of this needed to be changed but that was ignored.
Ms Josephine Feehily: I am reviewing a piece of paper to make sure I am giving the Deputy the complete answer. Our final paragraph stated that when the Department had had an opportunity to peruse the contents of this, it probably would be appropriate to have the views of the Attorney General and that we were available to discuss it with the Department and with that office, if required. This would not be an unusual process for us.
Each year, we write submissions to the Department of Finance and then certain results are achieved. That Department does not usually write back to say it is not doing X. That is not usually the way it works. What it tends to do in a normal year, and I imagine this was no different, is that it feeds into a tax strategy group paper and then the decisions emerge from a process, rather than in an itemised reply. We would not have got a reply in respect of the answers that were positive either. It is not that kind of process. We make our submissions and make known our views, analysis gets done and a finance Bill emerges. Policy decisions get made by the Government and a finance Bill emerges. However, we did try.
Deputy John Deasy: The Chairman outlined the profile of the people who were Ansbacher account holders. Of the 20 people who availed of the tax amnesty and who were Ansbacher account holders, can she tell me what was their profile?
Ms Josephine Feehily: No.
Deputy John Deasy: That is not possible, no?
Ms Josephine Feehily: No.
Deputy John Deasy: Is that a reason-----
Ms Josephine Feehily: I do not know who they are. I cannot know who they are.
Deputy John Deasy: Okay.
Ms Josephine Feehily: They are behind a wall.
Deputy John Deasy: The Chairman knows the profile of the overall group of Ansbacher account holders but she does not know the profile.
Ms Josephine Feehily: What I have said to the Deputy earlier, because I am in danger of getting close to classes and breaking confidentiality, I referenced the profile of the cases that were published as being the most suitable source of information for the committee and the profile there was of very wealthy people, the occupation largely being company directors and the behaviour as being about sheltering wealth. I need to be safe.
Deputy John Deasy: That is fair enough and I totally appreciate that. However, I must clear up something in this regard. The inference is that of those 20 people who availed of that tax amnesty in 1993, there was political pressure or a political motive behind the drafting of the 1993 legislation. My question is whether Revenue ever expressed a concern related to that.
Ms Josephine Feehily: I doubt very much if Revenue in 1992 or 1993 would have expressed a view-----
Deputy John Deasy: I am not talking about 1993. I am talking about ten tears later as Revenue was investigating this matter.
Ms Josephine Feehily: -----about a political motivation. No. I want to narrow it and that is the Deputy's question.
Deputy John Deasy: This is clear. It is important this is said.
Ms Josephine Feehily: Revenue did not express a view nor would ever express a view about the motivation of a policy decision taken by the Government.
Deputy John Deasy: That is fair enough.
Ms Josephine Feehily: A policy decision validly taken by the Government and passed into law by the Oireachtas. Revenue would then simply operate that law. The independence works both ways. While we have our independence we have our - incidentally, in the context of the amnesty, 38,000 people availed of it. The frustration that perhaps caused us to write letters was not related to Ansbacher. The 20 people were not the issue; it was the 38,000 people and it was a bigger issue for us.
Deputy John Deasy: A lot of money was raised but the argument is that a lot more should have been raised because it was only a 15% tax. That is a view expressed by the Chairman's organisation at the time.
Ms Josephine Feehily: Yes.
Deputy John Deasy: That is fair enough.
Mr. Seamus McCarthy: Another observation that is worth making is that 145 people did settle who could have availed of the amnesty at 15% but did not.
Deputy John Deasy: I have a couple of quick questions. I refer to the two reports under discussion today and acknowledge the Chairman does not have them to hand. Can she tell me whether they identified new cases?
Ms Josephine Feehily: No, and perhaps I can explain why. We are talking about the two dossiers that Revenue received from the relevant Ministers in 2008 and 2011. The reason is I am saying they were not new cases but there were new documents. There was supporting evidence and there was validation. However, there had been highly significant engagement with the authorised officer right through the period before that.
Deputy John Deasy: That is important and let me ask the Chairman a different question. Did that new information or those new documents cause Revenue either to bring a case to a conclusion or to reopen a case?
Ms Josephine Feehily: They certainly did not cause us to reopen any cases. They would have been helpful in advancing cases because the Deputy saw the graph and we really were in settlement mode there. However, I must repeat that by then, we had secured substantial documents, definitely more numerically, than those to which the authorised officer ever had access. As we had our own sources and our own documentation, what we were getting largely was validation and supporting documentation and that always is helpful.
Deputy John Deasy: I think that is it but if I may comment, I believe the first question I asked is very important and the response that was given is critical to this entire episode and that is that if Revenue actually have settled, for arguments sake, with individuals who have been named in a particular dossier, the authorised officer would not know about it. The authorised officer would not have any details with regard to the settlement, would not know how it was pursued or whether prosecution was pursued. The authorised officer would not have that information. We are talking in the dark and it is critical that this information be made known.