Irish run out of luck over tax amnesty

WITH press headlines proclaiming 'Crime Does Pay' over its latest Ir pounds 3bn ( pounds 2.8bn) hot money tax amnesty, it would be hard to contrive a worse PR disaster than the one the Dublin government dug itself into last week.

But faced with the alternative of a looming Ir pounds 500m deficit in next January's budget, Albert Reynolds, the Prime Minister, is committed to wooing a generation of large-scale tax fiddlers. Without their cash, he has little chance of reducing draconian tax rates, lifted in January to an aggregate 57 per cent on incomes over Ir pounds 10,900.

Reynolds' plans have managed to weld an almost inconceivable alliance from the hard left to the Catholic Church. Reaction is especially fierce because, unlike the first amnesty that exempted existing taxpayers from only accumulated interest and late payment penalties, this one will wipe actual tax due from the slate.

The state will only take a 15 per cent levy on hot money declared - a fraction of the amount officially due - but pulling in possibly Ir pounds 300m in the process.

Angry opposition MPs seized on the manifest unfairness of the proposals, arguing those who had sweated under Europe's most oppressive tax levels now had to watch as those who enjoyed the high life while evading tax receive instant absolution. John Bruton, the Fine Gael leader, quipped:'It appears the government prefers the Mafia to PAYE votes.'

The amnesty is the fifth in six years, following earlier windfalls from income tax arrears to stamp duty. (A recent cartoon had the Department of Finance renamed 'Amnesty International'). The first amnesty in 1988, projected to attract under Ir pounds 100m, eventually netted over five times that.

What Mr Reynolds hopes to remedy is a long-standing black economy shambles, in which large numbers of people never entered the tax net at all. His plan is aimed at an estimated Ir pounds 2bn to Ir pounds 3bn in undeclared income in Irish or overseas bank or building society accounts. This was a direct consequence of governments raising income tax to levels that many claimed made legitimate business and employment unviable.

Angry tax inspectors would rather they had more investigative staff to trace fiddlers and complain they were just achieving real progress in concerted sweeps of the main evasion sectors, from the drinks to construction trades, when the concession was announced.

The new amnesty will effectively close the book on pre- April 1991 fiddles. To make the deal more attractive, only officials in a special amnesty unit will see case details, with mainstream tax inspectors in other departments strictly refused access.

Pat Rabbitte, Democratic Left MP, said acidly: 'It opens the Orwellian vista of tax inspectors being locked up for breach of confidentiality, while tax cheats get off scot-free.'

Greg Maxwell, the civil service union chief, warned that this carrot of confidentiality could end up sanitising illegally obtained income by handing criminals tax certificates covering such activities.