EVER since the shady world of Cayman Island bank accounts was exposed by the Moriarty tribunal’s investigation into high powered tax evaders the Revenue has demanded extra powers and staff. Now they have been given both.
No longer content to simply bag easy pickings, the Revenue net is closing on the bigger fish. In the post-Ansbacher environment the officials have hauled in €700m from offshore evasion schemes and bogus non-resident accounts. But there are plenty more catches still out there.
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Charlie McCreevy, the finance minister, has given the Revenue substantial weapons in recent years. He has created 300 posts to beef up its prosecution unit and has authorised a raft of new powers, including access to personal bank accounts.
Now the Revenue boasts a special unit that focuses on high net-worth individuals and big corporations. Companies with a turnover of more than €130m and all financial institutions, as well as individuals with a net worth greater than €50m, are dealt with by this division. Although its new powers will enable the tax men to catch the super-wealthy tax evaders, there’s no identikit picture of the archetype fraudster pinned up in the Revenue office.
“It’s not as if we are targeting wealthy individuals because we think they need to be monitored,” the Revenue said. “It’s the activity itself we’re interested in, and making sure we’re alert to what’s happening in the economy.”
The Revenue understands the sensitive nature of its latest investigation. The state benefits from super-wealthy people living here because it adds to the exchequer’s fortunes, and doesn’t want to scare them away with draconian tax laws.
The new unit, part of the Revenue’s large cases division, will provide better customer service to individuals with “sophisticated” tax needs and will catch evaders.
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“We would be aware some of them would be entrepreneurs that the economy depends on. We have a two-pronged approach. It’s better customer service, but also making sure that people who don’t comply are prosecuted where necessary. It’s treating everyone fairly.”
What has tweaked this latest interest is the exponential spending on luxury goods over the past decade.
From 28 to 70 new Porsches have been registered in Ireland every year since 1997 against 16 in total in the eight-year-period prior to this. The trend is similar for other luxury marques.
Last year saw 4,200 new BMWs, 3,800 Mercedes, 560 Lexuses and 280 Jaguars on Irish roads. Ten years ago the equivalent numbers were 767 BMWs, 702 Mercedes, 21 Lexuses and 20 Jaguars.
Demand among Irish investors for residential property abroad has also increased markedly.
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Irish investors are also prepared to look beyond the traditional overseas markets of Britain, Spain, Portugal and France. Developments in central and eastern Europe, South Africa and New Zealand have been successful in attracting interest.
Gabrielle O’Malley, of CB Hamilton Osborne King, reports strong sales: “Since June, we’ve sold over 100 apartments in Cape Town and another 100 properties in France.”
She says that France and Spain are particularly popular for holiday homes, with buyers willing to pay prices of €700,000 to €1m.
Investment in commercial property is also favoured. Marie Hunt, head of research at Insignia Richard Ellis Gunne, says Irish buyers spent £1.4 billion (€2 billion) on commercial property in Britain last year.
She predicts Irish investors will also spend €250m on commercial property in continental Europe this year.
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According to estate agents, from 5% to 10% of high-end homes in Dublin are sold without ever being put on the open market. No brochures are printed and no advertising is placed. Instead, estate agents discreetly contact their “golden list” of wealthy clients and try to match the vendor with a buyer.
Although it may be easy to buy or sell a property without attracting publicity, estate agents are adamant that those involved never do so to evade tax.
“With tribunals now about two flies running up a wall, most people are very concerned that everything is above board,” says Gordon Lennox of Jackson-Stops in Bray.
The economic boom also saw increased interest in the art world, with paintings changing hands for millions.
“We see people in their thirties who are earning more buying more contemporary art than old masters,” says Christine Ryall, Irish representative for Christie’s.
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Annual sales of Irish art are organised by Christie’s and Sotheby’s every May in London. This year’s event recorded sales of more than €10m, with Irish buyers estimated to account for up to 80% of sales.
Working on the basis that tax evaders cannot act in isolation, the Revenue has turned up the heat on financial advisers, who face stiff punishments for aiding tax dodgers.
Under new legislation due to come into effect on September 15, auctioneers, estate agents, solicitors, investment business firms, tax advisers and all dealers in high-value goods, from art to jewellery and cars, are obliged to report suspicious transactions involving €15,000 or more in cash.
Consumer activity can provide an indication of unusual spending patterns for tax inspectors. A new Revenue computer system designed to highlight questionable financial returns will be up and running by the end of 2005 when, according to the Revenue, even the smallest discrepancy will set off alarm bells at its headquarters in Dublin.
AT the same time as the level of monitoring is being increased in Ireland potential tax evaders are finding an equally hostile environment overseas.
Four years ago, when George Redmond, the former planning officer, was nabbed at Dublin airport returning from the Isle of Man with €381,000 in cash, the island’s financial link with Ireland was brought into sharp focus.
Redmond was only one of thousands of Irish individuals who had special reasons for not checking in their bulky bags on the Isle of Man service. The figures back up the anecdotal suspicions.
Ireland’s economy is on a par with that of greater Manchester. Yet when the figures for banks located on the Isle of Man are totted up, Irish banks make up five of the top 20 institutions located there by assets.
According to a report published last year by KPMG, Bank of Ireland customers had the equivalent of €1.2 billion lodged in the Isle of Man in 2001, making it the seventh largest holder of assets on the island. AIB had the equivalent of €891m, giving it the number 10 position, closely followed by Anglo Irish Bank, which had the equivalent of €876m.
While still retaining stoic reticence on the issue of dirty money in overseas accounts, Irish financial institutions are doing what they can to avoid another tax debacle.
The banks claim that much of the cash on the island is held on behalf of companies and expatriates located in Britain, but the whiff of hot cash attaching to at least some of this money is hard to avoid. Such is the bad smell that many Irish banks have closed their Isle of Man operations to Irish customers.
Irish Life & Permanent, which in 2001 had the equivalent of €269m lodged in its Isle of Man branch, has not only stopped accepting new business from Irish-based customers but is handing back the money that was lodged there.
According to David Went, the chief executive of IL&P, there is nothing dodgy about the money in the accounts, but the bank is conscious that
operating a significant Isle of Man operation does not do the bank any favours on the public relations front.
The publicity gurus at Bank of Ireland have won a similar battle. The bank, whose offshore customers are coming under increasing pressure from Revenue officials both here and in Britain, has all but wound down its Isle of Man services for Irish customers.
Even leaving out the corporate customers, this means that there are Irish people with hundreds of millions of euros in cash looking for a new home for their money. These are people who are only too aware that the Revenue is getting closer to having unfettered access to information on the Isle of Man and elsewhere.
And if tax evaders believe they are just a loophole away from another safe haven, they could be making a serious miscalculation. Ever since the events of September 11, 2001, the world has become an increasingly cold place for would-be tax evaders. They may not be the primary focus of the US war on terrorism but they certainly constitute collateral damage. John Cunningham, global director of investigations at London-based Control Risk Solutions, a company specialising in investigating global tax evasion, says the US Patriot Act, introduced in the wake of September 11 to root out conduits of dirty money, means all funds that spend even a nanosecond crossing the US financial system will now be open to scrutiny. “Offshore jurisdictions such as the Caymans and the Virgin Islands will have far greater difficulty operating in their old way,” he says. “And numbered accounts, such as the Ansbacher deposits, have probably had their day.” Another powerful new tool in the Revenue’s growing armoury is the so-called John Doe summons, that allows access to bank accounts regardless of the identity of the account holder. In addition, from January 1, 2005, the Revenue will be given the names of Irish people who have accounts all over the European Union, apart from Austria, Belgium and Luxembourg.
CONSPICUOUS consumption remains a legacy of the Celtic tiger era. Last week’s launch by the Revenue Commissioners of a new snoop squad aimed at smoking out tax evaders indicates that one arm of the state, at least, is not convinced that all the taxes due on this apparent wealth has been paid. The vast majority of the money spent on these trophy assets is no more than the fruits of the economic boom that has maintained Ireland’s position as the eurozone’s fastest-growing economy. But those who have cut corners have suddenly run out of room for manoeuvre. Lying in a cold sweat in their beds over the coming months, they will wonder if the car crawling past their opulent home, is jotting down the information that will culminate in that dreaded knock on the door.
Additional research: David Clerkin and Kathy Foley