The Gazette 1989

GAZETTE

SEPTEMBER

1989

Correspondence

26 June 1989

Mr. Brian A. Bohan,

The Law Society,

Blackhall Place,

Dublin 7.

Dear Brian

I refer to your letter concerning

the introduction of the general anti-

avoidance legislation in this year's

Finance Act.

Following the Supreme Court

decision in what has become

known as the

McGrath

case, it was

clear, as indicated by me in my

Budget speech on 25 January, that

the means to counter tax avoidance

schemes had to be fundamentally

reviewed. It was also clear that the

practice of relying solely on specific

anti-avoidance provisions, taken

only after abuses came to light,

was no longer an adequate

response to the type of tax avoid-

ance schemes which were being

marketed and to the growing

sophistication of the tax avoidance

industry. The Government had no

choice but to take action. The

alternative was to allow tax avoid-

ance to continue on an ever-

increasing scale to the extent that

it would have endangered the

public finances and our economic

recovery.

The purpose of the general anti-

avoidance section now enacted is

to nullify the effects of transactions

which have little or no commercial

reality but are intended primarily to

avoid or reduce a tax charge or to

artificially create a tax deduction or

tax refund.

The section makes clear that

genuine business transactions,

even if carried out in a tax efficient

manner, will not be affected by the

new legislation. There is no need

for any uncertainty in the mind of

the genuine businessman, whether

foreign or domestic, or the person

making legitimate use of a tax relief

provided by the Oireachtas.

Concern was expressed about

the grounds for appeal under the

provision and in particular that an

impossible burden of proof was

being placed on taxpayers. While

that was not in fact the case, in the

spirit of reassuring taxpayers and

making it clear that the provision

was aimed only at tax avoiders, the

approach to appealing against the

Revenue opinion was changed from

one of "reasonableness" to one of

"correctness". This was done by

way of. amendment to the Bill at

Committee Stage. It is now beyond

doubt that the Appeal Comm-

issioners and the Courts will uphold

an opinion of the Revenue

Commissioners only if they

consider it to be correct, and they

can look at all the relevant facts in

arriving at their decision.

Your attention is also drawn to

the procedures which must be

followed before a benefit can be

disallowed under the new pro-

vision. The Revenue Commission-

ers must first form an opinion that

a transaction is a tax avoidance

transaction. Having formed such an

opinion, they must then notify the

taxpayer concerned who has 30

days in which to contest it by

appealing to the Appeal Com-

missioners. There is provision too

for the rehearing of an appeal by

the Circuit Court and the stating of

a case for the High Court on a point

of law.

There is, therefore, no question

of giving an unfettered general

power to the Revenue Commissi-

oners. At the end of the day, an

appeal to the Courts is available

and, in the case of dispute, it will

be the judgment of the Courts and

not the opinion of tax officials

which will finally determine the

outcome.

Under existing arrangements the

Revenue Commissioners are pre-

pared in certain circumstances

involving incentive reliefs to give an

opinion in advance on the possible

tax consequences of a proposed

activity. In addition, the Revenue

Commissioners will give, within the

limits of their resources, opinions

on the tax position of actions

which have already taken place.

These procedures will not be

affected by the new provision. The

Revenue Commissioners will con-

tinue to assist to the maximum

extent possible in dealing with

approaches from business or other

interests about genuine trans-

actions. What they understandably

must be wary about is a request for

an advance opinion on a hypo-

thetical or artificial proposition

which is aimed at constructing a

tax avoidance scheme.

The new provision applies basic-

ally to transactions carried out on

or after Budget day. Transactions

carried out before Budget day are

affected only where the tax which

it is sought to avoid arises as a

result of activities which take place

after that day. To make this clear,

I introduced an amendment to the

provision at the Committee Stage.

In conclusion, I want to stress

again that the new legislation does

not make tax efficiency illegal -

whether for business or family

purposes. The target of the pro-

vision is, rather, those types of

artificial transactions that are

undertaken primarily for tax

avoidance purposes.

Yours sincerely

ALBERT REYNOLDS

Minister for Finance.

The Editor,

Law Society Gazette,

Blackhall Place,

Dublin 7.

Dear Editor,

The article by Timothy Dalton,

Solicitor, on the Civil Legal Aid

Scheme, its scope and operation

was helpful to Practitioners in their

understanding of the

theory

of the

scheme. The

reality

of the

operation of the scheme however

is very different from that outlined

in the article.

The last annual report of the Civil

Legal Aid Board was published in

1986 so that the official statistics

are now completely out of date.

The embargo on recruiting new

solicitors has meant that no

solicitors who have left the scheme

in the past few years have been

replaced. If a Centre reaches a

staffing crisis a solicitor from

another Centre is redeployed. The

Centre at Ormond Quay now has

five

operating solicitors, whereas

months ago it had

eight.

The

situation is often exacerbated by

holidays, sick leave or maternity

leave.

More and more frequently the

Centres are closed to new clients.

Mr. Dalton in his article accepts this

but says that there is always a

service for emergency cases. Every

family case is an emergency case

to the spouses and children

involved.

Contd. on page 294.

288