Thousands are believed to have put undeclared income into investment-type insurance and Revenue is in pursuit, writes Siobhán Creaton, Finance Correspondent.

The Revenue Commissioners is hoping that anyone who is guilty of hiding more than €20,000 in one or more life assurance products since 1980 will be feeling a bit uncomfortable this week. These tax dodgers are now in the taxman's sights and early indications suggest there are thousands of them.

Just hours after the Revenue announced its voluntary disclosure scheme on Monday, its head office received more than 300 phone calls from people seeking information. The following day another 200 calls were logged and many more inquiries were handled by Revenue staff across the Republic.

Some 4,000 people have logged onto its www.revenue.ie website specifically to look at the section carrying details of the scheme.

This latest investigation is similar to those that have forced holders of bogus non-resident accounts, Ansbacher deposits and the individuals who purchased unauthorised products from National Irish Bank to evade tax, to settle their affairs. To date they have coughed up more than €1 billion in unpaid taxes, interest and penalties. There has been speculation that holders of these life assurance policies could eventually hand over a similar amount.

For anyone who is guilty of investing undeclared income in an investment-type insurance product either directly with an insurance company or through a broker or agent, there are two key dates they should note if they want to avail of the voluntary disclosure scheme. On May 23rd they should inform the Revenue of their intention to disclose their liability and they are expected to hand over this amount of money by July 22nd 2005.

There are considerable benefits for those who avail of these arrangements. They will be entitled to avail of significantly reduced penalties on their tax liabilities. By complying with the terms of this scheme they will also avoid having their name and details of the amount they are paying published in the tax defaulters list.

The Revenue also undertakes not to initiate a criminal prosecution against them.

There had been some speculation that the Revenue's next target was the life insurance sector.

For months now Revenue officials have been meeting the various life assurance companies in an effort to define the scope of their investigation. Many of these companies have provided the tax authorities with a broad range of information, such as details of the type of policies sold over the past 20 years or so but none have handed over the names of its policy holders.

The Revenue has now asked the life insurers to write to any policyholders who could fall within the terms of its current trawl, alerting them to the investigation and advising them to contact the Revenue or an accountant if they believe they have a tax liability. Most have agreed to do so and will begin to post these letters next week.

The more than 250,000 individuals who put funds into policies at the Republic's biggest life assurer, Irish Life & Permanent, will not receive a letter from the company. It is alone in refusing to acquiesce to the Revenue's request and believes the investigation is a matter between the errant policyholders and the Revenue. Yesterday the Revenue said it was disappointed with the firm's stance.

Referring to the unfolding investigation on Monday, the Revenue's head of investigations, Paddy Donnelly, said it was not looking around in the dark. "We have clear indications that this is an area that needs to be investigated" he said.

The financial institutions, including Irish Life & Permanent, have written to customers in the past notifying them about imminent Revenue investigations into bogus non-resident accounts and the use of offshore investments to evade tax.

The Revenue was in possession of a huge amount of intelligence ahead of the bogus non-resident account holders inquiry that was born out of the Dáil Committee of Public Accounts inquiry into tax evasion.

These tax evaders were offered a voluntary disclosure scheme and once it closed, the Revenue was then able to force the financial institutions to hand over details of customer names and accounts, and pursue those who refused to admit their transgressions. This investigation is expected to unfold in a similar fashion.

The last Finance Act gave the Revenue new powers to send its inspectors into life assurance companies to sample a range of customer policies as a precursor to its seeking a High Court order to obtain further information.

This time the Revenue is purely interested in the source of the funds invested. It is not investigating the role of the insurance industry in selling the products but officials named Irish Life, New Ireland, Hibernian, Ark Life, Eagle Star and Canada Life as companies that had sold such products in the period under examination.

Accountants and tax advisers claim to have been taken by surprise by the announcement of this investigation this week and the tight timeframe during which they are expected to process declarations from clients.

Depending on the numbers of individuals involved, they say it will stretch their resources in terms of being able to advise these individuals on the consequences of making a disclosure.

A spokesman for the Institute of Chartered Accountants in Ireland says it is still too early to assess just how many people used these policies to evade tax. Accountants across the Republic have reported a trickle of calls in the past couple of days but expect this will swell considerably in the weeks approaching the May 23rd deadline.

The Revenue has also signalled that it will broaden its trawl to uncover tax evaders who invested sums smaller than €20,000 in these policies at a future date.