Examination of Witnesses (Questions 220
- 239)
WEDNESDAY 13 FEBRUARY 2002
MR ROBIN
MARTIN, MR
KEITH MOORE
AND MS
NAOMI FERGUSON
220. I find that a little surprising but please
educate us. When it is known that a large amount of money is syphoned
out for paramilitary reasons, the supporting and financing of
terrorism, does that not point you to look in a different way
at those who are suspected of being involved in terrorism from
those you would, if I can use the Northern Irish phrase, call
an ordinary, decent criminal tax evader?
(Mr Moore) Does it point us to deal with them in a
different way? Not particularly because cases are not referred
to us because of suspect paramilitary links or associations, they
are referred to us and they are investigated because of suspected
tax fraud within the affairs of that individual. Within our investigation
of that we may well come across funds for which there is no apparent
explanation. Our approach in all circumstances, in all cases where
there is unidentified money, is to treat that as diverted takings
from the business which we are investigating. If we have some
reason to believe that the person involved has paramilitary connections
we do not alter our approach in that way, we still deal with those
funds as diverted takings unless there is evidence put forward
by the taxpayer to suggest otherwise.
221. By the taxpayer?
(Mr Moore) Yes.
222. Has it ever happened, for example, that
the police in Northern Ireland have come to you saying "we
have a strong suspicion that this person is involved in terrorist
paramilitary activities, we do not have the evidence to convict
him but at the same time you should be looking at him because
he is probably defrauding you in his support for terrorism"?
A particularly stark example comes to my mind which I will not
mention here. Have the police come to you? Would you expect them
to? Would you ask them to? Would you encourage them to?
(Mr Moore) We have not asked them to or encouraged
them to. The police have brought to us cases in the past where
they have carried out an investigation for one reason or another.
I cannot specifically recall one which was brought to us because
it was paramilitary links that they would like us to investigate
but they have brought various cases to us which we have investigated
where the case fits our normal criteria for taking up an investigation.
We treat the information that is provided by the police as another
source of information. Certainly we give it much greater credence
than we would, for instance, an anonymous letter but we subject
it to the same sort of tests looking for corroboration to demonstrate
that it can be linked to a business.
223. Given that there are various estimates
that there are around £10 million a year being expended by
the paramilitaries in Northern Ireland, you say that you neither
ask for nor encourage the police to help you, why not?
(Mr Moore) Because our task is to gather tax for the
Revenue and investigate suspected tax fraud. If there is tax fraud
that is associated with other offences then we are more than happy
to investigate those tax offences where they fit our criteria
for investigation.
(Mr Martin) If I can just add, Chairman, I think it
is fair to say that on any occasion when the police have brought
a case to us in Northern Ireland we have looked at it very carefully
and in a number of those cases we have found tax fraud and concluded
the case for large amounts of money. I would not want you to get
the impression that we do not take very seriously the cases which
are drawn to our attention by the police.
224. This is not an attempt to criticise, it
is an attempt to learn. You started off, quite rightly, by saying
that you treat the citizens of Northern Ireland the same as you
treat the citizens of England, Scotland and Wales, and that is
wholly admirable, but there is a dimension in Northern Ireland
which by and large does not exist in England, Scotland and Wales
and that is the financing of terrorism in which a number of Northern
Ireland citizens are involved. I am a little surprised that it
is not one of your prime objectives to get after them in co-operation
with the police and to encourage the police to come to you with
any suspected financial involvement as well as actual paramilitary
involvement so that between you you can sometimes do a job which
neither the one nor the other can do alone. Is that a fair comment?
(Mr Moore) Could I expand a little in that you have
asked about cases of suspected paramilitary involvement brought
to us by the police and I have said that I am not aware of cases
such as that being brought to us by the police. We have investigated
other cases which have come to us from other sources, one which
springs to mind was Customs and Excise, where there were paramilitary
connections and we have investigated those cases and taken substantial
sums from those individuals but that was done on the basis that
those funds were attached to a taxable source which we could demonstrate,
or we would seek to demonstrate if necessary, to the General Commissioners
were undisclosed profits of that business. Whether the reality
was that those funds were actually paramilitary funds and, therefore,
the true explanation was not one which the taxpayer would have
wanted to put forward I really could not say. Our approach, I
think, achieves the same ends.
The Reverend Martin Smyth
225. Following that through, because there is
a little bit of ambiguity here, I got the impression there was
not the close relationship that one would expect and it brought
to mind a question asked last week where a stockbroker friend
of mine had an approach to his firm to invest a fairly large sum
of money and he was not altogether happy, he did not know the
background of the person, the cause of the fraud, what was going
on and he reported it to the Fraud Squad. The Fraud Squad investigated
it and came back to him and said there was no fraud but there
was income tax evasion. The stockbroker said to them "Did
you report that to the Inland Revenue?" and he said "No,
we cannot under the Data Protection Act pass that information
on". Is it just possible that some police officers, as perhaps
we have got the impression some Inland Revenue, do not reach across
to have a seamless web to deal with fraud, income tax evasion
and terrorism?
(Mr Moore) Obviously I do not know the details of
that particular case but we have within the last two years or
so investigated certainly two cases of non-Revenue fraud which
were discovered by the police which appeared to have tax connections.
They brought them to us and we have been able to conclude investigations
in those circumstances. In the circumstances that appear to exist
in the case that you have mentioned, I do not myself see that
Data Protection Act problems would prevent that information being
disclosed to the Revenue but without knowing all of the facts
I really could not say. In terms of relationships between ourselves
and the police, I do not think it is a secret to say that it has
been a source of contention between the police and the Inland
Revenue generally, not specifically Northern Ireland, that any
traffic in information was one way in the past because of the
difficulties of the Inland Revenue providing any information whatsoever.
For instance, if a police officer was to disclose to us details
of a case which we could then take forward and investigate and
perhaps recover a large sum of money, we would not be in a position
to report the success of that investigation to the police officer
because of taxpayer confidentiality. That has made it difficult
certainly for some police officers nationally to see the value
of referring information to us so that we can make full use of
it. For the future, under the provisions of the Anti-Terrorism
Crime Security Act we expect that situation to change because
we will be in a position to respond more fully to requests for
information from the police and critically we will be in a position
to spontaneously disclose information where we discover evidence
of some other crime that another law enforcement agency, such
as the police, might wish to investigate. I hope that if there
have been reservations like that in the past that for the future
we will be able to overcome that and a different, more co-operative
attitude will prevail.
226. Certainly we would hope so too. In this
particular case the response of the person who raised it with
me was as a citizen trying to support the police and deal with
fraud.
(Mr Moore) Yes.
The Reverend Martin Smyth: And that was the
response. It does not encourage a citizen to do that again.
Mr McCabe
227. Mr Moore, I am asking this question only
because I want to be clear about what normally happens.
(Mr Moore) Right.
228. You said a few moments ago to the Chairman
that you could not recollect a case where the police had actually
referred the case to you suspecting paramilitary links. I think
you said earlier that the primary task or function of your agency
is to collect unpaid tax or recover unpaid tax.
(Mr Moore) Yes.
229. I just wonder, have you seen the document
we are calling FT10, which is the memorandum from the Treasury
to the Clerk here?
(Mr Moore) Yes.
(Mr Martin) Yes, we have seen it.
230. I just wonder what is meant by the last
paragraph on the first page. I will not read it all but I am looking
at the second line from the bottom: "Mechanisms are also
in place to check any suspicions about paramilitary links of any
particular taxpayer. Where such links are confirmed by the Police
Service of Northern Ireland, SCO take their advice on the appropriate
course of action." When I read that, that implied to me there
was some kind of mechanism or set of procedures where if you did
uncover a case like this it would be normal procedure for you
to discuss it and decide what was the most appropriate way to
move forward. Is there any conflict between that and the fact
that you are saying you do not recollect a case like that being
referred to you and in any event your normal procedure would be
collecting unpaid tax as a priority.
(Mr Moore) I am sorry if I have misled you either
in the terms in which that was drafted or what I have said. The
context within which the mechanism was referred to was the safety
and security of staff. The mechanism is simply that we are able
to check with the Police Service in Northern Ireland whether it
might be safe, for instance, to make unannounced calls on potential
witnesses in a certain area or to approach a certain individual
in those circumstances. The appropriate action then is our appropriate
action in deciding how to approach that witness or how to undertake
that activity.
231. That was purely a reference?
(Mr Moore) Purely a reference to safety and security.
Mr McCabe: I am very grateful to you.
Chairman
232. Sorry to concentrate on this but I think
this is rather a fundamental part of what we are trying to discover.
(Mr Moore) Yes.
233. You run your normal tax inquiries, tax
returns and all that, from Manchester?
(Mr Moore) Manchester and Liverpool for covering Northern
Ireland, yes.
234. Therefore, do you have a mechanism whereby,
for example, if you have a large business operating in West Belfast,
the Ardoyne or the Bogside, which is submitting tax returns, is
there anybody in that office in Manchester or Liverpool who will
say "Hang on, it is a pretty unlikely place to have quite
a lot of money, even to put up as a front for tax returns"
and that prima facie this means looking at a paramilitary
context because that is where so much of it happens? What is the
trigger that will alert someone within the Revenue as opposed
to someone in the police that this looks a little strange? Where
do you get your knowledge of that?
(Mr Moore) I think I should explain, first of all,
the relationship between the Special Compliance Office and the
regions, including the Northern Ireland Inland Revenue region.
The Special Compliance Office deals with cases on a temporary
basis. We will investigate a case for a period and look into specific
offences. The normal consideration of the accounts of a business
is carried out in the tax districts in Northern Ireland. If they
see features which suggest that the case falls within Special
Compliance Office interest then they refer the case to us. The
question of recognising unusual features in a particular business
is much more within the area of activity of the local tax district
because they have got the local knowledge than it is with the
Special Compliance Office.
235. Would you be able to give us a feel for
how many full investigations or special inquiries have been conducted
into businesses running in the "politically" sensitive
areas where the paramilitaries exist on both sides?
(Mr Moore) I can give you figures which relate to
the various tax districts but not within the areas within those
tax districts. I could tell you, for instance, how many investigations
we have carried out or we are currently carrying out in, say,
Londonderry, Coleraine, Newry, but not in particular areas of
Londonderry.
236. As with Southampton, Portsmouth or anywhere
else?
(Mr Moore) Exactly, yes.
237. I am still after a point which I would
like your help with.
(Mr Moore) Yes.
238. You are actually telling me that there
is no-one who is looking specifically for any paramilitary action
with the tax returns which come from what we know to be "politically"
sensitive areas?
(Mr Moore) No, not within the Inland Revenue, I do
not believe there is anyone specifically looking to see whether
there is paramilitary involvement in a business or activity.
239. All you do is react to others who tell
you?
(Mr Moore) Yes.
(Mr Martin) But I think it is fair to say—
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