The Gazette 1985

INCORPORATED LAW SOCIETY OF IRELAND

GAZETTE

Vol. No. 79 No. 5

June 1985

Only Collect

HE comments recently made by Professor Thomas

Ward, Jefferson Smurfit Visiting Professor at

University College Galway, on the unfortunate effects of

the position of the Revenue Commissioners as

preferential creditors in insolvency in Ireland were timely.

It is therefore all the more disappointing, if not surprising,

to find the Minister for Finance so quickly dousing any

hopes of a change in the position. Professor Ward spoke

in support of a recommendation by the Cork Committee

in the United Kingdom that the State's preferred position

as a creditor should be abolished. He commented that

such preferences contribute to a lax and too lenient

approach to current enforcement by the Revenue

Commissioners and others responsible for collecting

State monies.

A company in financial difficulty should not be

permitted to use the Revenue as an auxiliary banker. Its

trade creditors have no means of knowing that such

irregular funding is in progress and, by continuing to

allow credit to the ailing company, often seriously worsen

their chances of being paid when the ultimate insolvency

arrives and the Revenue takes priority over the ordinary

creditors.

Worst of all, there have been many insolvencies where

the Revenue's priority is itself postponed to that of the

secured creditors in which the Revenue's leniency has

proved disastrous, not only for the ordinary creditors but

also for the Revenue itself. A receiver appointed by

secured creditors in such circumstances may not be able

to dispose of the assets for much more than the amount

due to his appointor, leaving nothing for either the

Revenue or anybody else.

It is generally believed that representations to the

Revenue are made by politicians on behalf of ailing firms,

urging the need to preserve the firms in the interest of

continuing employment. Apart from the questionable

propriety of such representations, they are frequently

short-sighted, ignoring the previous failure of such a

policy which, so far from saving the ailing firm, has in

some cases also dragged down the trade creditors into

insolvency.

The failure of the State to collect revenue is a major

defect of our tax system. Each week the trade gazettes

record the numbers of judgments in favour of the

Collector General, regularly in six figure numbers; most,

if not all, are confessions of failure on the part of the

Revenue, which seems to believe that the regular spewing

forth by its computer of demands for payment is in some

way synonymous with the collection of tax.

There is evidence too that there is considerable delay in

the collection of capital taxes. Solicitors frequently find it

impossible to get rapid assessments, even in cases where

there are very substantial amounts due to the Revenue

which are immediately available for payment. It is futile

to introduce draconian measures of tax and to endeavour

to close every minor loophole in the semantic jungle that

comprises our tax laws if the machinery of collecting tax

fails to collect such taxes as are clearly payable.

The efficient collection of revenue is a duty which the

State owes to those in the PAYE sector and to those

outside it who pay their tax promptly. When the exercise

of leniency is seen to be so frequently a misjudgment, as it

is in the case of insolvent companies, it is time to take a

hard look at the operation of the collecting arm of the

Revenue Commissioners.

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