Last year tax protestors took to the streets of Dublin to highlight the hypocrisy of U2’s Bono in the wake of the band’s 2006 decision to move its business to Holland, a well-known tax-shelter. U2’s move came after the Irish Government capped the artist income tax exemption scheme at €250,000.
While Bono and chums weren’t breaking any laws, they were engaged in the morally dubious practice known as ‘tax avoidance’. Campaign group the Debt and Development Coalition Ireland (DDCI) claimed that U2 was depriving the Irish exchequer of revenue which could be spent on overseas aid. ‘We wanted to raise our concern that while Bono has championed the cause of fighting poverty and injustice in the impoverished world, the fact is that his band has moved part of its business to a tax shelter in the Netherlands,’ said DDCI’s Nessa Ni Chasaide.
In their move to avoid helping pay for not only foreign aid but also essential services such as healthcare, roads and education, U2 were following a time honoured tradition among the Irish elite. Indeed the fact that gambler JP McManus, press baron Tony O’Reilly, speculator Dermot Desmond and controversial media magnate Denis O’Brien do not pay their full share of tax in Ireland has never stopped them telling people how the country should be run.
Meanwhile, this summer, a political scandal erupted in France over the disclosure that French officials took money from L’Oréal billionairess Liliane Bettencourt (87) and enabled her to evade taxes over a lengthy period (tax evasion, unlike avoidance, is a de facto illegal activity).
‘Claire T.’, Bettencourt’s former accountant, claims that as well as funding various officials and politicians, an illegal donation of €150,000 went towards Sarkozy’s presidential campaign. Claire T. told Mediapart magazine that she would withdraw €50,000 per week from Bettencourt’s accounts:
“Partly it went to doctors, hairdressers, minor employees, etc. Partly it went to politicians … There was a regular parade of politicians at the house. They came mainly at election time … Each [politician, including Sarkozy himself] came to get his envelope. Some even received €100,000 or €200,000.”
As a result, according to Ms. T, the Bettencourts had not received a single tax audit since atleast 1995. Sarkozy denies any involvement. Sounds a bit like Ireland in the high old times when brown paper envelopes
were dispensed with no questions asked and no receipts, thank you very much. Indeed, the recent history of this country is full of tales of wealthy men and their tax dodging exploits.
In the 1970s a system was devised in which money from a select bunch of Irish clients – including Charles J. Haughey – was nominally lodged with the Ansbacher bank in a Caribbean tax-haven and could miraculously
(and illegally) be withdrawn tax-free from a bank in College Green, Dublin. Although, the Central Bank discovered the dodge in the 1970s, no-one was called to account.
Eventually in July 2002 High Court inspectors found that the system was designed to help people defraud
the Revenue (which has since collected €107 million from 139 former Ansbacher account holders) but no criminal charges have ever been brought.
The DIRT scandals of the 1980s and ‘90s represented an even greater attempt to defraud the taxpayer. Although the Department of Finance realised in 1986 that staff in financial institutions were briefing and facilitating customers with regard to opening non-resident accounts as a staging post to transfer the money out of the country, they decided not to act on this knowledge.
Maurice O’Connell, former Governor of the Bank of Ireland, later had this to say about his predicament: “We were not as efficient as we might be in terms of collecting tax. We were broadly aware of the fact that people were avoiding tax. And all this had to be corrected, this was wrong. Everybody agreed it was wrong. For God’s sake, whatever you do, don’t rock the boat. The boat being the exchange rate. … you can see from year to year that we were trying to do something. We were proposing affidavits, we were talking about the DIRT tax, we were afraid of the DIRT tax. It went on and on”. Indeed it did. Eventually, in the early noughties, some banks and individuals were brought to book but this didn’t stop the banks, their leading managers and their more wealthy customers from continuing to play fast and loose with tax money.
In 2006 as a result of an audit by the Revenue Special Investigations Branch going back 23 years, contractors Michael and Tom Bailey of Bovale Developments reached a settlement of €22 million with the Revenue, believed to be the largest yet made. As Fintan O’Toole put it, “… in almost any other democracy, Tom and Michael Bailey would be behind bars”.
The people who mostly do end up behind bars for financial impropriety are those among the poor who receive unemployment benefits while working. In 2005 the Department of Social and Family Affairs sent 476 cases of benefit fraud to the Chief State Solicitor and 144 of these were taken to court. Prison sentences were imposed in 36 cases. Compared with this, 57 white-collar tax evasion cases were sent to the investigations division of the Revenue Commissioners and just 13 files were forwarded to the DPP, with convictions in just six cases. Indeed in the recent 10 year period the Republic has seen 3,183 prosecutions for welfare fraud worth €43 million, leading to 48 people jailed for 12 years in total. In the same period there were only 39 prosecutions of tax evasion worth €2.25 billion.
Similarly, in Northern Ireland when it was reported a few years ago that 507 people had been convicted for benefit fraud in one year, then Department for Social Development Minister Margaret Ritchie rejoiced that it was, “heartening to see, in light of the current financial climate, that professional thieves are being brought to account.” Yes, people doing the double are real gangsters.
The differences in conviction rates for tax evasion and benefit fraud have nothing to do with the efforts of the Revenue and everything to do with the bias of the politicians who decide the priorities. In 2002 the Revenue Commissioners had eight full-time officers, backed by a support staff of 22, working on Ansbacher and related investigations while the office of corporate enforcement had a staff of 38. During the same period a staff of more than 600 at the Department of Social and Family Affairs was dedicated to investigating and preventing social welfare fraud.
One might expect from this that welfare investigation brings a greater return to government coffers, but if recent evidence from the UK National Fraud Authority is anything to go by, tax evasion by the rich is 15 times greater in extent than welfare fraud by the poor and desperate.
Research in the UK by groups including the Tax Justice Network indicates that tax avoidance costs £25 billion a year at present and unpaid tax is even more. In November 2009 the Treasury Select Committee of the UK’s parliament reported that HM Revenue & Customs was sitting on £28 billion of unpaid tax debt. Tax evasion is even worse.
A report published by the Public and Commercial Services Union (PCS), which represents about 80 per cent of the staff of H M Revenue & Customs, has shown that tax evasion in the UK may cost HMRC £70 billion a year. The total loss is at least 15 per cent of all tax that should be paid. There are plans afoot to cut the num-bers of HMRC investigators when any sane government would hugely increase their numbers.
Given the track record of successive Irish governments, can we assume that the Irish situation is any better? If this money, most of it stolen from the people by the already rich, was recouped it could be used in the job creation programmes that are needed. But this will only happen if the political will is found to hunt down and bring to justice those committing financial crime, whatever their wealth.