Wednesday, 8 July 1992
Dáil Éireann Debate
109. Mr. Callely asked the Minister for Finance if his attention has been drawn to the widespread concern by accountants about implications of certain provisions in the Finance Act, 1992, in particular measures which allow Revenue officers and gardaí enter premises to search and seize records, and arrest individuals without any warrants; whether he has received any submissions on the matter; and if he will make a statement on the matter.
Minister for Finance (Mr. B. Ahern): I have received a number of submissions on the new powers of the Revenue Commissioners which were contained in the recent Finance Act. As I have indicated on many occasions during the passage of the Act, the measures, which are circumscribed in law, are necessary to ensure that the Revenue Commissioners can tackle tax evasion effectively.
The Government are committed to taking action to curb tax evasion. This is a firm undertaking given in the Programme for Economic and Social Progress and in the Review of the Programme for Government. Firm action in this area requires that the Revenue Commissioners should have the necessary powers to deal effectively with evasion. In considering proposals relating to Revenue powers for inclusion in the 1992 Finance Bill, which was enacted on 28 May, the Government had to consider three factors in particular: the Revenue Commissioners have now had some years' experience of auditing under the self assessment system. This experience showed up certain weaknesses in the powers available to them to secure necessary information; the inquiries which the  Government had ordered into the affairs of certain companies in the last year had revealed some quite unacceptable practices in relation to taxation. The Bill provided the Government with the first opportunity of putting in place appropriate safeguards against these abuses; and with the Single Market coming into operation next January, the tax compliance environment for businesses operating in the State will be fundamentally altered. There will be no routine customs checks on intra-Community trade and VAT at the point of entry will have to be abolished. Moreover, VAT-free or zero-rated goods will circulate freely. This will provide much greater opportunity for fraud which could threaten legitimate businesses. From 1 January 1993 the bulk of VAT will have to be collected under the internal VAT collection system i.e. as if the Border had been moved back to the traders' premises. In these circumstances, the powers already available to Customs officials in relations to VAT at the point of entry must logically be extended to the internal VAT collection system if VAT receipts are to be maintained and if compliant businesses are to be protected. The Government were satisfied in the light of the above that an increase in the powers available to the Revenue Commissioners was necessary.
On the other hand, the Government were conscious of the need to foster good relations between the Revenue and the great majority of taxpayers who comply fully with the law. They were equally conscious of the need to keep to the minimum the amount of paperwork that compliant taxpayers must undertake in connection with their tax affairs. Finally, they were conscious of the need not to upset the balance that must be struck between the rights of the citizen and the powers of the State.
Concern has been expressed to me about the powers of entry and search. It should be noted that Revenue have had the right to enter and search premises for records since 1972, in the case of VAT, and the right to enter premises and examine books since 1976 in the case of  income tax and corporation tax. This has not led to any significant difficulties with compliant taxpayers. For example, there have been no complaints to the Ombudsman about abuses of these powers. The 1992 Finance Act does, however, give Revenue new powers to search in relation to VAT, income tax, corporation tax and certain other taxes including PAYE and construction industry tax.
In so far as search of premises is concerned, this power will be needed in only a small minority of cases where taxpayers do not co-operate. The board of the Revenue Commissioners have emphasised that officers concerned will receive appropriate training and guidance in the use of the powers to enter and search premises. The board, as does the Government, intends to monitor closely the use of the measures. In addition, a Revenue official can only gain entry to a private dwelling by invitation or on foot of a search warrant issued by the District Court.
Public comment on the powers of arrest seems to indicate that there may be some misunderstanding in this regard. Section 189 provides, in relation to VAT, for the possibility of arrest but only in very limited circumstances. An arrest can only be made where there are grounds for suspecting that a criminal offence has been committed under the provisions of section 94 of the Finance Act, 1983. Only a person who is not resident in the State or who is likely to leave the State can be arrested. The power of arrest in similar circumstances is already available to Customs officials in relation to VAT at the point of entry and the new provision merely takes account of the shift in the collection mechanism away from the frontier. The whole purpose of the arrest provision is to make the alleged offender amenable to the judicial process — any abuse of the provision would quickly be highlighted by the courts. Moreover, in order to further ensure that this arrest provision is not abused, only certain Revenue officials, specifically authorised under the new subsection, will be empowered to make arrests.
Section 236 of the Act provides for  gardaí to accompany Revenue officials on audits. The necessity for Garda protection for officials will seldom occur. It has already been made clear by me a number of times that, in making a decision to arrest, a garda will be acting entirely on his own initiative; the Revenue official has no power to direct an accompanying garda.
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