The Memorandum for Government on the tax amnesty from Mr Bertie Ahern's office when he was minister for finance makes the Cabinet decision to introduce the 1993 tax amnesty appear bizarre.
Not only was Mr Ahern strongly against it, the Labour Party ministers were against it, the attorney general was against it, two out of three independent experts were against it and the Revenue Commissioners were against it.
However, the then Taoiseach, Mr Albert Reynolds, persevered, arguing that the amnesty would bring large amounts of hot money back into the State where it would benefit the economy. The payment of tax on this money, even at the extraordinarily low rate of 15 per cent with no interest or penalties, would reduce the tax burden for others, he told a Fianna Fail Parliamentary Party meeting at the time.
When the Cabinet met on May 25th, 1993, Mr Reynolds called the item relating to the tax amnesty. Mr Ahern said he was proposing it, while the Labour ministers, who were vehemently against it, said nothing. Some party sources say now this was because they had expected Mr Ahern to oppose the scheme, thus rendering their opposition unnecessary. When Mr Ahern proposed it, they maintain, the Labour ministers were unprepared and therefore allowed the scheme to go through.
Indeed, the content and tone of the memorandum from Mr Ahern's office just four days earlier suggested that the opposition from him and his department was unshakeable. Far from supporting such a scheme, Mr Ahern sought government approval to issue a statement saying there would be no tax amnesty in order to end media speculation that such a scheme would be introduced.
The May 21st memo predicted an amnesty would have "a serious negative impact on compliance" with the tax system. It would "run counter to the tightening up of collection and enforcement in recent years". It could have "a sizeable adverse impact on tax yield in 1993" and produce an "outcry" from compliant taxpayers.
It states that it was Mr Ahern's "strong recommendation" than the amnesty not be proceeded with.
The memo pointed out that there was a major difference between the type of tax amnesty introduced in 1988 and the one proposed in 1993. The 1988 amnesty required full payment of all tax due, absolving only interest and penalties. However, the 1993 proposal involved substantial remission of taxes due and the absolution of penalties. The 1988 requirement for a declaration of income and full disclosure was also dropped in the 1993 proposal.
The memo also emphasised that the 1988 amnesty was sold as a "once off" chance for tax-evaders to clear up their affairs in advance of a tightening up of the collection and enforcement system. Now it was proposed to introduce a second amnesty, thus suggesting that tax could be evaded in the expectation of regular chances to legitimise this evasion through amnesties.
The memo argued that if there was to be a tax amnesty, the charge on the total tax evaded should be 15 per cent rather than the 10 per cent proposed in some quarters. This was an attempt "to seek to limit opposition from compliant taxpayers".
Were an amnesty to be proceeded with, the choice of a particular type of scheme would rest on the balance "between the attraction to the `evader' and the risk to ongoing revenue collection".
This risk to revenue collection was considerable, the memo went on. Of the £320 million collected by the Revenue Commissioners' audit, arrears collection and enforcement measures, £265 million was regarded to be at "high risk". This is because those who availed of the amnesty would be immune from the attentions of the Revenue Commissioners' investigations and could not be forced to pay the full amount of tax they owed, let alone interest and penalties.
The minister estimated that if £500 million was disclosed under the amnesty, £75 million would be yielded to the Exchequer assuming a 15 per cent levy. On the other hand, he warned that the amnesty would prevent the Revenue Commissioners' audit/enforcement programme from pursuing tax-evaders who availed of the amnesty, leading to recurring annual losses to the Exchequer of £60 million to £265 million.
He warned that no basis had been produced for media speculation that £1 billion to £2 billion in hidden funds was available to be targeted by an amnesty. However, the amnesty ultimately yielded some £240 million to the Exchequer, indicating that around £1.6 billion in hidden funds was declared under its terms.
The memorandum's reference to the existence of "disguised accounts and bogus non-resident accounts with financial institutions" shows again the level of political knowledge of this problem.
The government considered but rejected a variation of the tax amnesty in which tax-evaders could present an amount of repatriated money to an "agent" who would impose some charge in exchange for a certificate to the effect that this amount of money was amnestied. However, Mr Ahern, while opposing the type of amnesty ultimately agreed, said it would be "less damaging" than the variation suggested.
The memo then proposed details of a scheme to be considered if the Cabinet was to go ahead against the minister's advice. The scheme would be open for six months after it was announced and 15 per cent of the funds involved would be paid to the Exchequer in exchange for an amnesty for the rest. This formed the basis of the scheme ultimately introduced.