Bogus Non-Resident Accounts - Non Co-operation

Bogus Non-Resident Accounts Consequences of Non Co-operation

Introduction

The first phase of Revenue’s response to the uncovering, since 1998, of detailed information on the use of bogus non-resident accounts for tax evasion purposes was about recovering unpaid deposit interest retention tax (DIRT). This phase was successfully completed in 2000 with the recovery of ₤173 million (€220 million) in unpaid DIRT, interest and penalties.

Phase 2 was unveiled in Revenue’s Statement of Practice (SP Gen 1/01) released in May 2001 and is concerned with the recovery of tax liabilities behind the funds deposited in bogus non-resident accounts. People who held bogus non-resident accounts were given the opportunity, in May 2001, to come forward to Revenue and pay the full amounts due. They were given until 15 November 2001 to do so, and avail of the advantages provided for in the Statement of Practice, i.e., a cap on interest and penalties, no investigation with a view to prosecution and no publication. Many took this opportunity and payments of €227 million were made.

Action after the 15 November Deadline

Immediately after the 15 November deadline, work commenced on the pursuit of taxpayers who held bogus non-resident accounts and did not avail of the voluntary disclosure scheme in 2001. In addition to identifying taxpayers from information obtained in the DIRT audit of the financial institutions, Revenue used new powers to get High Court orders requiring financial institutions to supply information about bogus non-resident accounts. There are currently 17 High Court orders in place. Due to takeovers and amalgamations, these court orders cover the non-resident deposit books of 23 different deposit takers.

Revenue set out in Tax Briefing Issue 49 (August 2002) how it intended to deal with bogus account holders who did not avail of the 15 November 2001 disclosure scheme.

Arising from the information supplied to date by financial institutions under Section 908 TCA 1997 High Court orders, Revenue enquiry letters issued on the 11 October 2002 to almost 30,000 of these individuals inviting co-operation by paying any underpaid tax, interest and penalties by 17 December 2002. Letters did not issue in cases where Revenue considered investigation with a view to prosecution as a first option.

Following the issue of this enquiry letter, payments of about €100 million have been received from bogus non-resident account holders, bringing to €119 million the amount which has been received since 15 November 2001. The names of all of these taxpayers, where the settlement exceeds €12,700, will be published.

Revenue auditors in each region will examine a small representative selection of disclosures that have been made in response to the enquiry letter that issued on the 11 October 2002.

Consequences where no response received to 11 October Enquiry Letter

Lists of all the account holders who were issued the 11 October enquiry letter and did not respond to it are being examined for follow up. A number of these have now been selected for immediate investigation with a view to prosecution. Revenue officers will shortly commence visiting the remainder to decide if an investigation with a view to prosecution or the exercise of Revenue powers, including assessment, is the appropriate course of action to advance these cases. The opportunity of mitigation of penalties of up to 30% is no longer available to these account holders (there is, of course, no penalty mitigation in any event for 1990/91 and prior).

Issue of Enquiry Letter - 20 January 2003

On the 20 January 2003, Revenue issued enquiry letters to a further 40,000 individuals inviting co-operation by the payment of all underpaid tax, interest and penalties. Account holders who receive these enquiry letters have to contact Revenue and make a payment before the 27 March 2003 if they wish to avoid the prospect of being investigated with a view to prosecution. The names of all cases, where the settlement exceeds €12,700, will be published.

Information under High Court orders will continue to become available on a phased basis to Revenue during 2003. Further issues of enquiry letters will take place throughout this year.