A total of 82 wealthy individuals are facing a potential tax liability of €43.8m before interest and penalties.
This arises from an investigation by the Revenue Commissioners’ large cases division which identified a number of instances where taxpayers had structured their tax affairs in such a way that they had extracted large amounts of cash from profitable trading companies without paying any tax.
In a written Dáil reply to Fianna Fáil’s finance spokesperson Michael McGrath, Finance Minister Paschal Donohoe said the Revenue probe, dating from 2011, had identified 120 individuals who had extracted cash from their companies in this way. He said a circuit court decision last year regarding the tax treatment of the transfer of share rights from a company to its shareholders has upheld the Revenue’s view that income tax was due on these transactions. Mr Donohoe said that “82 cases remain open and the amount of tax at stake in these cases amounts to approximately €43.8m, based on the transfer of share rights valued at over €100m.”
“It is not possible to quantify the amount of interest and penalties that may become due in relation to the outstanding tax should Revenue be successful in these cases, but any interest and penalties that become due will be calculated in accordance with the relevant legislation. As the taxpayers involved are awaiting dates for hearings of their own tax appeals, it is not possible to specify the timeframe for receipt of any such tax, interest and penalties,” he said.
“Since 2014, a number of taxpayers involved have come forward to Revenue in order to settle their cases. The yield in those cases comprising tax, interest and penalties amounted to €11.8m. A number of other taxpayers are currently engaging with Revenue with a view to settling their cases and payments on account have been made in a number of cases amounting to €937,000,” he said.
Mr Donohoe also said the tax-free extraction of cash by the individuals from the companies concerned was enabled primarily by the transfer of valuable rights attaching to shares owned by a company to shares owned by its members.
“Revenue’s view is the movement in rights attaching to a class of shares owned by a company to a class of shares owned by its members is a transaction chargeable to income tax as a distribution pursuant to section 130(3)(a) of the Taxes Consolidation Act 1997,” he said.
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