Harney ‘not aware’ of tax loophole

TÁNAISTE Mary Harney denied yesterday that Government ministers were aware of a VAT loophole which builders used to evade paying up to 1 billion in tax.

The loophole on building land was closed off by the Finance Minister Charlie McCreevy in Budget 2004 last week and the Taoiseach admitted that just one scheme cost the exchequer 18 million.

Under the loophole, development land was let out to builders on a short-term basis, allowing the transactions involving the sale of the site and the building to be separated, thereby dodging VAT.

The loophole was finally closed after Dáil Public Accounts Committee chairman John Perry brought it to the attention of the Revenue Commissioners and the Comptroller and Auditor General.

Given the close associations between builders and the Government with developers rubbing shoulders with Ministers in the tent at the Galway Races for years, Labour Party leader Pat Rabbitte said a number of ministers were well aware of it for years.

“It is unreasonable to believe this was not known by Government circles and was effectively facilitated over those years,” he said.

Demanding to know when Ms Harney first became aware of the loophole, he claimed it operated for eight years and resulted in hundreds of millions of euros being lost to the exchequer. According to Ms Harney, the Government has now closed off the loophole and it was right to do so, but denied there was widespread awareness of the practice.

“I was not aware that a loophole of this kind has been in existence for quite some time,” she said.

Asking how it could not have been known in Government circles, Mr Rabbitte added that Capital Gains Tax was reduced from 40% to 20% and the 60% CGT introduced in 1998 to penalise speculators was repealed once it began to bite for developers. Denying awareness of the scheme, Ms Harney said builders who were beneficiaries of the scheme were not going to blow the whistle on themselves. “We put the matter right. We did it as soon as it came to our attention. The loophole is closed off and now no one can avail of it,” she said.

Also yesterday, the Tánaiste said if any response is needed by the Government, by way of resources or legislation , to tackle child pornography, then it will come.

Describing the RTÉ Prime Time investigation into child pornography in this country as an act of public service broadcasting, Ms Harney agreed it was a serious issue.

Responding to queries from Sinn Féin TD Caoimhghín Ó Caoláin about resources to tackle the problem, the Tánaiste said there were a number of prosecutions for possession of child pornography in this country, but added that issue needed to be examined by co-operation at a European and a worldwide level.