THE REVENUE Commissioners expect to collect up to €40 million by the end of this year from special investigations into trusts and offshore structures which have been used to evade tax.
Officials are investigating at least 1,133 cases in jurisdictions such as Jersey, Switzerland, Liechtenstein and the Cayman Islands where trusts may have been used to keep funds out of the Revenue’s sight.
Many of these funds were designed to create the impression that the non-resident trustees or entities are the owners of the funds, concealing the identities of the Irish beneficiaries.
The Revenue has already collected around €20 million in voluntary disclosures and settlements from 100 cases, or an average of €200,000 per individual, since last October.
It is now focusing its attention on funds across hundreds of trusts where individuals have not made voluntary settlements.
“The investigation into these 1,133 people is under way and is focusing on identifying undeclared tax liabilities by people who have transferred or settled property, assets or funds to trusts and other similar structures,” according to briefing material prepared by Revenue officials.
Revenue gave taxpayers who had undeclared funds an opportunity to make a voluntary disclosure by September 2009.
The benefits of voluntary disclosure included mitigation of penalties and non-publication as a tax defaulter.
Initial investigations show that most offshore trusts were facilitated by third parties such as fund managers, investment advisors and tax consultants.
Under recently enacted legislation, they have been required to supply information to the Revenue regarding transfers of funds and assets made by Irish residents involving non-resident trustees. The obligation applies to transfers made since December 2003.
As well as the money collected from trusts, Revenue anticipates collecting millions of euro from special investigations into other sectors. These include income from “legacy investigations” such as bogus non-resident accounts (€3 million), single premium life insurance policies (€3 million) and undeclared offshore assets (€3 million.).
Officials expect further significant yields from investigations into other forms of offshore tax evasion.
Since December 2009, the Revenue has had new powers to require clearing banks in the State to provide information on transfers to and from Ireland involving jurisdictions such as the Isle of Man, Jersey, Guernsey, Switzerland and Liechtenstein.
In the initial stages of its investigation Revenue has sought details of transfers to and from the offshore entities of Irish banks in these jurisdictions.
The probe requires financial institutions to provide information on all transfers over a threshold of €5,000, irrespective of whether the transfer had an Irish connection.
New powers will also allow the authority to access information on developers as uncovered by the National Asset Management Agency (Nama).
The economic downturn and a shortfall in tax means there is now increased pressure on the State to collect as much tax revenue as possible.
The State’s tax take, for example, fell by some €7 billion in 2009 compared to 2008.
The yield from investigations into offshore trusts, however, is likely to be relatively small compared to previous investigations.
DIRT audits yielded around €225 million for the Exchequer, while bogus non-resident and Ansbacher accounts resulted in €419 million and €109 million being returned to the State respectively over the past decade.
The Revenue Commissioners have also been looking to new areas for potential revenue.
For example, it says its financial services unit has been monitoring tax issues arising from the crisis in the banking sector.
This yielded €28 million last year in corporation tax, VAT and stamp duty.
This was due mainly to technical adjustment rather than deliberate attempts to underpay tax.
In addition, its “high-wealth individuals unit” initiated inquiries into around 300 directors and senior executives in the banking sector.
To date, this investigation has yielded around €1 million in tax settlements.
