Officials consider law on tax loopholes

TAX advisers and banks could soon be forced to provide Revenue with details of controversial tax schemes they market to clients, under radical proposals contained in confidential Department of Finance briefing documents.

Officials within the department confirmed yesterday that they were considering plans to copy tough British legislation that was brought in last year to cut down on the use of so-called “tax avoidance” schemes by companies and high earners. The proposals were first floated in discussions before last year’s Budget but could be in place before the end of the year.

Tax avoidance schemes aim to exploit loopholes in the law that allow those with hefty tax liabilities to cut their bills dramatically and, in some cases, reduce them to zero. The British Government’s move caused uproar within the financial community by forcing promoters of the schemes to disclose details of arrangements they put in place with their clients to reduce their tax liabilities.

These include a summary of each scheme, information explaining the significance of each step and the legal provisions involved.

The new rules were designed to give the British tax authorities early warning of schemes and provide greater scope to spot transactions where existing tax laws were being used in ways not foreseen at the time they were enacted.

Confidential briefing papers prepared by civil servants in Ireland in advance of last year’s Budget noted the British move and said the requirements could also be applied here.

But the complexity of the legislation required meant the timeframe to bring in new rules in time for the Budget was too tight.

“The implications, feasibility, advantages and disadvantages of introducing a similar provision in Irish tax law is under consideration,” one of the papers said.

At present there is no requirement for Irish tax experts to disclose the nature of the products and services which they develop to minimise their clients’ tax bills. This means Revenue must wait for a client who has taken advantage of a new scheme to file a tax return, which usually give details of the tax breaks a taxpayer wishes to claim.

Changing the current rules would give Revenue a head start on the tax planning industry and make it more difficult for schemes to be used over lengthy periods before being detected.

Shortly before he stepped down last year, former Finance Minister Charlie McCreevy warned tax advisers Revenue intended to crack down on tax planning schemes and said the government would put an end to schemes that ran contrary to the spirit of legislation.