A loophole in VAT law could have cost the Exchequer hundreds of millions of euro from property developers who avoided payments on building land, the Labour Party has claimed.
Party leader, Mr Pat Rabbitte suggested that a number of Ministers were aware for years of the loophole, which was closed off on the night of the Budget when the Dáil debated the first of its financial resolutions.
He said that it was only when it was brought to the attention of the Revenue Commissioners by the chairman of the Public Accounts Committee, that any action was taken. Through Section 46 of the VAT act, developers could avoid VAT payments through a paper transaction in which they organised a short-term letting of the land to the builder.
Mr Rabbitte asked for an explanation of how "having spent the last eight years rubbing shoulders with developers on every conceivable occasion, including in the tent at the Galway races, Ministers could have been ignorant of this".
But the Tánaiste, Ms Harney, said she only became aware of the loophole last November when the Revenue Commissioners informed the Minister for Finance. She did not believe the Government knew about it and the issue was resolved through the Dáil measure.
The Dáil resolution "gives the Revenue Commissioners the necessary power to look again at cases that might have availed of the loophole".
To her knowledge, no TD on any side of the House had raised the issue in the Dáil. "We have closed off this loophole and it is right that we should have done this." The Tánaiste also pointed out that "no matter what tax schemes we have, there are professionals in this town who know no boundaries when it comes to finding a way through the tax code with a view to creating avoidance measures".
Mr Rabbitte said it was not a question that the loophole had been used, "it was used extensively". During the debate on this issue, the Taoiseach had cited one case where about €18 million in VAT had been avoided. "If this has been going on for seven or eight years and, given the close nexus between developers - the major source of funds for Fianna Fáil - how could this not be known." He added that capital gains tax had been cut for developers from 40 per cent to 20 per cent and developers "engaged in excessive profit-taking beyond their wildest dreams" and it was reasonable to believe that this was known in Government circles and "was effectively facilitated over those years".
Ms Harney pointed out that if it was ongoing for the past eight years, then Deputy Rabbitte was in government when it started, to which the Labour leader replied that "I did not know about it".
The Tánaiste did not know about it and "nor do I believe the Government knew about it and, to the best of my knowledge, no parliamentary questions were tabled on this matter". The Government put it right as soon as it came to its attention.