Revenue probe into capital gains tax-avoiding contracts for difference could yield €99m
THE REVENUE Commissioner’s large cases division is investigating almost 100 schemes it suspects were designed by companies and wealthy individuals to avoid paying capital gains tax.
The taxman is enquiring into 89 cases which used sophisticated financial instruments known as contracts for difference to generate artificial losses. The schemes avoided potential capital gains tax of €99m, the Revenue said.
Contracts for difference are best known in Ireland as the financial device used by Sean Quinn to bet on Anglo Irish Bank’s share price, with disastrous results.
The 89 tax cases currently under investigation are well advanced. Preliminary assessments have been made and they are now under appeal.
Tax avoidance differs from tax evasion.
“Evasion involves some kind of mis-declaration with a view to underpaying tax, whereas avoidance involves using the tax legislation in a way that was never intended, to try to avoid paying tax that the law intended should be paid,” a spokesperson said.
The rules around tax avoidance were tightened by the 2014 Finance Bill.
“Revenue’s policy is to actively challenge tax avoidance transactions and to litigate such cases in the courts,” the person added.
The yield from Revenue’s tax avoidance investigations in 2014 was €13m plus the prevention of a further €1.6m losses in future.
The large cases division handling the investigations has around 250 staff. It targets tax compliance by companies and wealthy individuals. It was set up as part of the restructuring of the Revenue Commission in 2003.
Revenue’s annual report, released last week, showed a large uptake in overall taxes alongside its investigation into abusive tax avoidance.
The organisation recorded a 10pc uptick in taxes last year to a total of €41.4bn, the fourth successive year-on-year increase in returns to the Exchequer.
Revenue audits delivered more than €610m in payments during the year.
Audits of construction companies and landlords were particularly fruitful.
Construction audits yielded €35m, while landlord audits yielded €22m.
