1993 tax amnesty rewarded the cheats

Among the most useful of modern inventions are those ingenious power plants which convert human waste into electricity

Among the most useful of modern inventions are those ingenious power plants which convert human waste into electricity. And what we need most urgently in Ireland right now is the political equivalent of one of those plants. We need a mechanism which turns the stench of corruption into a form of political power.

So far this decade we seem to have been able to turn the outrage which is generated by scandal into useless cynicism. Instead of transforming public life into something approaching a genuine democracy, the revelations have served only to make politics seem hollow and wretched.

The most obvious reason for this failure is the absence of a real conviction that there is an alternative political force out there, capable of turning anger and revulsion into a positive energy for social change.

In the early 1990s, when disillusionment was in its first flush, Dick Spring's Labour Party seemed to have captured the mood and to be capable of channelling it right into the heart of the system. As the early glimpses of a deeply corrupt system broke the surface in the beef, Telecom, Greencore and Carysfort scandals, Mr Spring articulated the sense of disgust.

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As a result, Labour performed spectacularly in the 1992 general election. It went into government as the force to change Irish politics, break the golden circles and invigorate Irish democracy.

What happened, of course, was the tax amnesty of 1993. That, essentially, is the reason public anger has remained politically inert. That Labour, after all the passion and eloquence with which it had denounced the old system, agreed to and defended an amnesty which benefited, in the words of Dick Spring's adviser, Fergus Finlay, in his book Snakes and Ladders, "every sleazebag in the country", seemed at the time astonishing.

Knowing what we now know about the evasion which was then rampant among the business classes, the amnesty is simply inexplicable. And until it is explained there is almost no chance of turning outrage into political power.

The 1993 amnesty is one of those events so strange that new information, instead of clearing up the mystery, serves only to deepen it.

We got new information last week in the form of the Department of Finance's memorandum for government about the amnesty and of remarks by the then minister for finance, Bertie Ahern, in his evidence to the Public Accounts Committee's hearings on the DIRT scandal. All of it makes the whole thing much more baffling.

We know from the memorandum for government that the amnesty was fiercely opposed by the Revenue Commissioners and by the Department of Finance. We also know that one of their many reasons for opposing it was that "money within the country" in disguised accounts and bogus non-resident accounts with financial institutions "could readily be transferred abroad to avail of the tax remissions".

This statement is highly significant. It tells us the cabinet then knew that there were "disguised accounts" like the Ansbacher scam being held in Ireland and there were bogus non-resident accounts held by Irish people with Irish banks.

WHAT is being revealed now, in other words, was in essence known to the government at the time it brought in the amnesty. It may not have known the details or even the scale of these frauds but it knew they were going on.

All the current tut-tutting and muttering about hindsight is no more than a gesture to the masses. The fact is that they knew what was happening and decided to reward the cheats.

We discovered something else from this document and from Bertie Ahern's evidence: that, at the time the amnesty was introduced, the Revenue was on the brink of taking some very big players in the golden circle for a lot of money. The memorandum notes that rather than merely raising extra money the amnesty would also lose the Revenue a good deal of money which it expected to get from "current investigations".

These audits, including one which is enigmatically code-named Investigation B, were expected to raise £101 million. This money would be at "high risk" if the amnesty were granted.

The memorandum doesn't identify these potentially lucrative current investigations. But Bertie Ahern, who was then as minister for finance responsible for the Revenue, revealed in his evidence to the PAC that they were the most politically sensitive investigations imaginable.

Early in his evidence, he mentioned that Revenue was looking to "get out there and collect more money" because of "the Telecom, Goodman and other issues and the uncovering of a lot of the scams that were being used".

He elaborated, though rather incoherently. "Back at that particular time [i.e. the time of the amnesty] there were three major issues to do with what were known as the tax scams at the time and that was the Greencore, the Telecom and the beef issue. All three were hotly running . . . but in the end of the day if we were going to do it [i.e. introduce the amnesty] and improve the tax base for the future and if we were going to have strong powers in the future, that would help."

This is not a particularly crystalline statement, but the implications are clear enough. The Revenue expected to get a lot of unpaid taxes from those involved in the major scandals of the early 1990s, all of which had suggested an uncomfortable closeness between business and politics.

The government knew, therefore, that the amnesty would confer very substantial benefits on these individuals, cutting their tax bills to a fraction of what they might have been and precluding any possibility of penalties or prosecution. It is an extraordinary precedent for the current situation.

We need to know why, with all of this information, the government went ahead with the amnesty. We need to know in particular why Bertie Ahern seems to have withdrawn the objections contained in the memorandum for government.

According to Finlay's book, Bertie Ahern called Dick Spring's adviser, Greg Sparks, at 1 a.m. on the day of the fateful cabinet meeting: "Bertie was absolutely resolute, Greg reported, and determined to ensure that the amnesty didn't go through. He wanted Greg to tell him that the Labour ministers would support him, and Greg had done so"

But at the cabinet table, according to Finlay, "no arguments were put forward on behalf of the Department of Finance . . . None of us knew what had happened. But the amnesty that the minister for finance opposed was put into effect a few weeks later by the minister who opposed it."

This isn't just a matter of historical interest. We know from the memorandum for government that the amnesty may be unconstitutional and that there is an opportunity to undo it and recover a great deal of money for the taxpayer.

If the political will exists it may well be possible to remove the greatest single barrier to justice for Ansbacher, DIRT and all the other scams. But first Bertie Ahern has to clear up the mystery of why that barrier was erected in the first place.