Statement by Mr Frank Daly, Chairman of the Revenue Commissioners to the Public Accounts Committee, 21st July 2005.
Chairman, I have a very short opening statement today.
The Committee will recall that I wrote to you last April to announce that we were formally initiating the investigation into the use by individuals of single premium life assurance products for the purposes of tax evasion. In my letter I also outlined the general approach we were taking.
By way of background I might remind the Committee of what prompted us to look at this area of tax evasion.
Based on intelligence gathered from a number of sources, including the Bogus Non-Resident Accounts Investigation and Offshore Assets Group investigation clear indications emerged of the use of these insurance products for the purposes of tax evasion. We formed a strong view that a considerable number of individuals had funded such investments using untaxed income or gains not previously disclosed to Revenue and that this practice had continued over many years.
In February 2004 it was reported in the media that Revenue were carrying out inquiries into the use of these products. At the PAC hearing on 18th November 2004 the matter was raised by you Chairman and I confirmed that our research was well under way. Also, in November 2004 Revenue met with the representative body for the life assurance industry as well as with representatives of a number of life assurance companies with a view to progressing the enquiries. As a part of this preliminary work Revenue requested statistical information from individual life assurance companies for the period from 1980 to date and ascertained that about 700,000 policies of this type were taken out in this period.
We decided to advance this inquiry in two stages using a similar model to that which was successfully used in the Bogus Non-Resident Account and Offshore Assets investigations.
In the first stage (the Voluntary Disclosure stage) taxpayers, who invested undisclosed and undeclared funds in life assurance products were given until the 23rd May 2005 to give notice to Revenue of their intention to make a disclosure. This part of the disclosure stage has now been successfully completed and about 10,000 persons have notified Revenue that they may have tax issues. Those who have such tax issues and who opted for the voluntary disclosure route have until tomorrow, 22 July 2005, to pay their outstanding liabilities. I should add that a further 2,000 persons wrote to Revenue during the voluntary disclosure period to say that while they did purchase such products, they have no outstanding tax issues in relation to them.
In the second stage (the Follow Up Investigation stage) which effectively commenced immediately after the May deadline had passed, Revenue has now commenced the business of identifying all those who used such products for tax evasion but did not make voluntary disclosures. As part of this process Revenue has already contacted and met with representatives of a number of life assurance companies in relation to the new sampling powers provided in the Finance Act 2005. The remaining companies will be contacted in due course. At all times the Irish Insurance Federation has given assurances to the Revenue representatives that the industry will fully co-operate with the Revenue investigation as the law requires and this has been the experience to date.
As would be expected Chairman, the bulk of the payments due under stage one will probably not come into Revenue until tomorrow but I can inform the Committee that as of this morning €106m has been paid by 1972 taxpayers as part of this Voluntary Disclosure phase.
It is not possible right now to estimate what the ultimate yield will be from this Voluntary Disclosure phase of this investigation - this will only become clear in the next week or so. Still less, is it possible to estimate the yield that will result from the second phase of this investigation as we deal with those who have liabilities but did not avail of voluntary disclosure.
That Chairman brings the Committee up to date on the single premium life assurance products investigation.
As I'm here perhaps I can also update you on the latest developments in the other major investigations that we have been conducting and in which the Committee has taken an interest.
Firstly some figures:
Ansbacher: €49.8m NIB/CM €54.0m Tribunals: €34.8m DIRT: Financial Institutions: €225.0m Voluntary Disclosure Scheme 2001: €227.0m Investigations since 2001: €362.2m €814.2m Offshore Assets Investigation: €747.2m Total (excluding Insurance Products investigation): €1.700 billion Total (including Insurance Products investigation to date): €1.806 billion
This total represents an increase of €197m since I last reported on our special investigations to the Committee.
Finally Chairman I would like to inform the Committee that whereas the BNR investigation is now 98% complete, the work on the follow through phase of the Offshore Assets investigation (identifying those who did not avail of the voluntary disclosure phase) is now well under way.
We have to date obtained 3 High Court orders against financial institutions relating to transfers to and from their offshore subsidiaries. The information in relation to one of these orders is currently being provided to Revenue and in relation to the other two is being collated by the financial institutions concerned and will shortly be passed to Revenue. Further applications to the High Court are being prepared and a number are at an advanced stage and may be heard before the current term ends. It is Revenue's firm intention to seek a High Court order against all Irish financial institutions which had or have an offshore affiliate.
Thank you Chairman