The Irish Revenue has launched an investigation into the use of trusts and offshore structures, to see if they have been used by Irish residents to avoid paying tax.
The Revenue estimates, that the amount of tax avoided via trusts, could be "substantial."
A voluntary disclosure scheme, which includes a number of benefits for those who avail of it, will be available until September 1st.
The Revenue says the benefits of voluntary disclosure include a substantially reduced penalty on underpaid taxes.
Defaulters will also avoid having their name included on the quarterly list published in Irish Oifiguil, and no prosecution will be taken against the individuals concerned.
Under the most recent Finance Act, new obligations were put on third party professionals dealing with tax affairs, including accountants, tax practitioners, solicitors, banks and other financial institutions, to report all transfers of property, assets and funds made into offshore trust structures to the Revenue since December 2003.
The obligation falls on those, who through their trade or profession, have been involved in making an offshore transaction with a trust for someone who lives in Ireland for tax purposes.
As a result of the legislation, the Revenue will shortly begin receiving details of the identities of people who have made transfers through trusts over the past five years since December 24, 2003.
They will also get details of the identities of the non-resident trustees and the dates that the transactions took place. This information will be used to identify and pursue where necessary, people who have used trusts and offshore structures to avoid paying tax, and who have not declared them for tax purposes.
The Revenue says it has become aware of the possible use of such trusts for tax evasion purposes through their other recent special investigations and initiatives. It says they are one of the last hiding places for tax evaders in this country.
The Institute of Chartered Accountants in Ireland (ICAI) says, it has received details of the new Revenue Investigation into Trusts and Offshore Structures.
According to ICAI Director of Taxation Brian Keegan, the new investigation is structured in the same way as previous investigations into Deposit Accounts, Offshore Assets and Single Premium Insurance Policies. “While the subject matter of this investigation is complex, Revenue’s focus is simple. Revenue want to establish whether moneys put in trust were properly taxed in the first instance. They are seeking to ensure that trust structures, whether onshore or off-shore, are not being used to hide untaxed income and gains”.
The Revenue approach, which involves background information gathering, the issue of a warning, and incentives to pay the tax, interest and penalties owing by a deadline date, is recognised internationally as a successful strategy. This approach has been followed by other Revenue authorities, notably in the UK, for similar investigations. “Usually Revenue’s background information gathering takes place after the investigation deadline date. New reporting requirements in last year’s Finance Act mean that Revenue will have their background data by the end of June, though the investigation deadline is 1 September” said Keegan. “We hope that this will mean the investigation overall can be swiftly concluded”.
ICAI says, that with every successive investigation, the number of people availing of incentives to come forward gets smaller. “Nearly 15,000 people availed of the Offshore Assets incentive five years ago. By comparison, the last investigation involving Deposit Accounts last year brought some 2,000 cases into the net. Because of the very specialised nature of this investigation, we expect the numbers of tax defaulters involved to be lower still” said Keegan.
