Category: Archive

Dublin Report Cheating on taxes was de rigueur in Ireland of the ’80s

February 16, 2011

By Staff Reporter

By John Kelly

The most telling illustration of banking respectability — and bureaucratic respectability — was illustrated in the film "Mary Poppins" when the little boy was presented with an ultimatum to yield a penny back to the octogenarian bank proprietor for investment purposes. The fictional bank was almost ridiculously scrupulous.

The reality in Ireland, it seems, was far removed from the celluloid stereotype.

It has emerged that hundreds of thousands of pounds, perhaps evens millions, were hidden by investors and banks with the clear intention of avoiding tax payments, due under DIRT, or Deposit Income-Revenue Tax.

One can well understand why the oppressed Irish taxpayers should attempt to avoid paying what they were legally obliged to pay, especially in the 1980s when rates were among the highest in Europe.

Workers with no dependents and few investments could be forgiven for feeling that they had been mugged when they saw that their paychecks could be reduced by as much as 50 percent.

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When this was added to the myriad indirect taxes, like VAT (Value Added Tax,) imposed on almost every commodity on the supermarket shelf, which is not to mention cars. heavy durable goods like refrigerators or dishwashers, and excise duty as well, the little island of Ireland was one of the most heavily charged pieces of real estate in the world.

Wage earners were the easiest victims for the voracious exchequer. Only once did they threaten to rebel. That was when the trade-union movement finally yielded to the demands of their members and hosted a huge PAYE protest march in Dublin.

Thousands walked down O’Connell Street, banners to the fore and anger seething behind.

But it accomplished very little. Civil servants, of which there are many in Ireland, are also represented by trade unions. And people in the public service, whether they work directly in the service itself, or whether they be gardai, nurses or teachers, are paid through the public purse, the bulk of which was filled with PAYE proceeds.

That may not have been the only reason for the shelving of the tax issue as a mainspring of mass protest, but it was certainly one of the main considerations, along with a natural reluctance on the part of national trade-union leaders to be led by the mob.

Even as tax protests fizzled out, the truly wealthy individuals in

Irish society, especially many among the farming community who had sold land at top prices, desperately sought ways of shelving their money in cupboards out of the reach of the revenue commissioners.

The banks were only too ready to provide solutions. There was the opportunity to invest relatively huge sums in off-shore accounts, occasionally in exotic climes like the Cayman Islands, but more often in such mundane locations as the tax-free Isle of Man, or Jersey in the Channel Islands.

Even while these people continued to live in the suburbs of Dublin or Cork or Galway, all of the banks were cooperative enough to list them as non-residents, thus freeing them of their obligations to pay the DIRT tax.

Many beneficiaries were leading lights in Irish commercial society and some, as it has emerged at the Public Accounts Committee, which operates rather like a congressional hearing in the U.S., were even employed as banking managerial staff.

Whatever about understanding why they were so keen to avoid alarmingly punitive taxes, the fact is that they were all breaking the law with the fullest cooperation of the supposedly impeccable mandarins of the banking system.

The State was owed a lot of money, a whole lot of money. But even the few top revenue inspectors who suspected what was going on, quite rightly as it has transpired, found that their hands were tied.

A directive had come down from on high — nobody seems to know just how high — instructing that they should leave bogus non-resident accounts alone. The reason, officially accepted, was that the Irish government was extremely concerned at the possibility that a lot of money would be immediately withdrawn from the Irish investment pool with possibly catastrophic results.

The Celtic Tiger had not yet been born. Always subject to the slightest shifts in international fortune, the Irish economy was a notoriously jittery entity in those financially perilous times.

So, the investigators stayed away even as it became increasingly obvious that their worst suspicions had been confirmed. The banking system, spurred by notoriously tax-shy investors, was cheating the Irish Exchequer of millions.

Basically, this is the genesis of the revealing public-accounts inquiry now proceeding in Dublin under the chairmanship of Fine Gael TD Jim Mitchell. Five former financial ministers, including Albert Reynolds, John Bruton, both former leaders of the country, along with the present taoiseach, Bertie Ahern, and Ray McSharry and Ruairi Quinn, leader of the Labor Party, will be called to give evidence.

To a lesser extent, similar motives on the parts of rich and powerful people are at the core of the two public tribunals, Flood and Moriarty, resuming after the long summer legal recess.

Many of the most influential leaders in Irish life have featured and will continue to feature in some, or even all, of these public inquiries.

Mitchell’s committee has set a standard, even though it does not have the extensive judicial powers of the public tribunals.

The members are all parliamentary representatives, mostly without legal training. Yet perhaps because they are legal innocents, their questioning has been always pertinent and penetrative. Witnesses have not been allowed to get away with unnecessary waffling..

The result has been that the Irish people, especially because the committee is televised, unlike the tribunals, have received a thorough education into the ways of the rich and famous.

Still, nobody appears too surprised. All of the evidence appears to confirm what everybody professed to have known in the first place: Public or political corruption is no longer a stranger to Ireland.

It may be an indication of our growing maturity. It may even be that such corruption was always present but better hidden.

Still, when you read newspaper headlines piling scandal upon scandal, breathless revelation on even more sensational revelation, it is entirely understandable that many long for the old days when such scams, like sex, were only in their infancy in the Ireland of the saints and scholars.

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