Select Committee on Northern Ireland Affairs Minutes of Evidence

Examination of Witnesses (Questions 220 - 239)



  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.


  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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