# Are the banks supporting tax evasion (again)?



## rainyday (12 Dec 2001)

Sarah W said 

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Some lenders will look at "cash" income as long as this is not the main salary and they can see proof by way of regular bank credits<hr></blockquote><!--EZCODE QUOTE END-->

Does this mean that the lenders in question are choosing to support the black economy by recognising untaxed income? Surely they must have learnt something from the NIB/CMI scandals? And surely this is a high-risk lending practice, given that the mortgage receipient is effectively building up a large debt to Revenue to be repaid at some point in the future which the lender is ignoring in their calculations.

I'd be very interesting from industry insiders about the bank's policies in this area - Have they issued anything in writing? Do others see this as a corrupt policy?

Thanks - RainyDay


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## tedd (12 Dec 2001)

Hi RainyDay,

Sarah's statement was in response to a specific query about a music teacher who seems to be self-employed and whose income was not being considered in calculating the level of mortgage she and her partner could get. It's not uncommon for music teachers, teachers who give grinds, etc to receive cash. In my opinion, it is the responsibility of the person earning the income to declare it for the purposes of tax. And it is relatively easy for the Revenue to detect evasion in this case, as the price of the house and the amount of the loan (if they claim mortgage interest relief) are a matter of record.

tedd


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## rainyday (12 Dec 2001)

Hi Tedd - My comment wasn't meant to be a criticism of Sarah. If it came across that way, I apologise.

I agree that the primary responsibility for declaring income is with the taxpayer. However, Sarah's statement about "cash" income (including her quotation marks) seemed to apply that lenders were basically prepared to accept income which they know is undeclared for tax purposes when they are calculating mortgage limits.

Are the lenders doing this?

Regards - RainyDay


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## mf (12 Dec 2001)

*banks and tax evasion*

I think the problem is that from a lenders point of view most sources of income are verified by reference to tax returns, accounts or P60’s. Anything else, other than sight of a cash amount (and with that you cannot be sure that it is the borrowers own money) is difficult to assess, uncertain and that is why in general these are what the banks will look for. If they don’t look for that then I think rainyday is right – I think there is a tacit collusion in tax evasion and I also think that despite all the tribunals that it is still widespread. 

Given the current climate, I think banks need to be circumspect in their lending but  perhaps they would say that they will lose market share if they do not lend on wide criteria. 

mf


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## CM (12 Dec 2001)

*Lending criteria*

I've heard various rumours that, in general and given the perceived uncertain economic climate, lenders are becoming more strict/conservative in assessing the borrower's ability to service a mortgage before advancing loans lately. Can any industry "insiders" comment on this?


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## UDS (12 Dec 2001)

*Re: banks and tax evasion*

I think there is a clear distinction between

(a) banks colluding in tax evasion by (for example) designating an account as non-resident when they know perfectly well that this is false, and

(b) banks not insisting that customers prove tax compliance in all their affairs before they will do business with them.

In the case of a loan applicant who has odd bits of cash coming in in addition to verified salary, it may be already taxed, it may be exempt from tax (e.g. earnings from writing short stories, remittances of capital by a non-domiciled individual), it may be taxable but not yet taxed, or it may be taxable and the customer may intend to evade tax.  I don't approve of tax evasion, but as long as the banks aren't being asked to help evade tax I don't see that there's any obligation on them to investigate the situation.  If they suspect that there may be tax evasion going on on a scale which should affect their assessment of the credit risk, fine, in their own interests they'll look into the matter - they'd be stupid not to.  But otherwise I don't see why they should be expected to.  And in any event it's not really practical; if I'm the customer, and I make a few quid by writing slushy stories for "Ireland's Own" or composing lyrics for Daniel O'Donnell songs, how am I supposed to prove to the bank that this is the source of my extra earnings and that they are legitimately not taxable?   This is a matter between the Revenue and me, and none of the bank's business.


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## Grundy (12 Dec 2001)

*Money Laundering*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> <!--EZCODE BOLD START-->* <!--EZCODE ITALIC START--> "If they suspect that there may be tax evasion going on on a scale which should affect their assessment of the credit risk, fine, in their own interests they'll look into the matter - they'd be stupid not to."<!--EZCODE ITALIC END-->*<!--EZCODE BOLD END--><hr></blockquote><!--EZCODE QUOTE END-->They are obliged to report such suspicions to the Gardai.


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## rainyday (12 Dec 2001)

*Re: banks and tax evasion*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> I make a few quid by [blah blah blah] how am I supposed to prove to the bank that this is the source of my extra earnings and that they are legitimately not taxable? <hr></blockquote><!--EZCODE QUOTE END-->

Hi UDS - I not really talking about a few odds & ends of irregular income here. Presumably, for income to be acceptable to the banks as part of a mortgage application, it needs to be shown as regular and ongoing income. It also needs to be a significant amount for it to have any material effect on the maximum amount to be borrowed, particularly if it is the secondary income of the spouse in a joint application. In that case, there would be a 1:1 relationship between the extra income and the mortgage level. Eack £1k increase in the income will result in a £1k increase in the mortgage.

So, can Sarah or other insiders confirm if any/many banks will accept income which they know to be undeclared when calculating their mortgage limits.

Regards - RainyDay


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## UDS (13 Dec 2001)

*Re: banks and tax evasion*

Hi Grundy

<!--EZCODE ITALIC START-->_ ". . . obliged to report such suspicions to the Gardaí"_<!--EZCODE ITALIC END-->

Can you elaborate?  Have we strayed into money-laundering territory rather than tax evasion territory?

Hi rainyday

Fair point.  But isn't the first question "do the banks enquire as to the tax status of income" and only then "what is their attitude to untaxed income"?


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## Grundy (13 Dec 2001)

*ML Suspicions*

Where  a bank employee suspects proceeds from a serious crime she must report those suspicions to the MLO who must inform the Gardai.

"Serious Crime" includes terrorism, drug dealing, extortion and.............TAX EVASION!:rolleyes


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## rainyday (13 Dec 2001)

*Re: ML Suspicions*

Thanks Grundy & UDS - Rather than getting into the theoretical arguements, I'd really love to get a view on what is happening in the real world today - Can anyone provide details on real current practices on this issue by the big lenders today?

Thanks - RainyDay


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## Lucretia1 (13 Dec 2001)

*Re: ML Suspicions*

Hello RainyDay, 

I suspect that "industry insiders" may not be responding to this topic lest they incriminate a financial institution with whom they have a business relationship...  

As a strictly anonymous industry insider, I have found that some lenders will accept "cash income", whose existence is supported only by regular lodgements to a bank account but only as a means of squeezing an extra few thousand onto an otherwise straightforward loan application.  Example - husband and wife have verifiable PAYE incomes which don't quite get them the necessary mortgage, but husband also works nights as a bouncer at weekends for cash.  This can be used to swing the application in the client's favour.  

I've never seen undeclared income being used as a "principal earner".    

While UDS makes a typically cohesive argument above, I fear he or she is being a little naive.  If a lender really believed that the offered cash income was genuinely tax free (artistic exemption etc.) the lender would ask for proof of this.  Lenders are cautious creatures and if they can get nice comfortable proof for their files, they will take it at every opportunity.  Sure the argument is valid that it's not their responsibility to vet a client's tax compliance, and no doubt this will be argument offered at the tribunal in 2004, but in reality where cash income is being offered, a lender is aware that it's the proceeds of tax evasion and chooses to turn a blind eye.  

Kind regards, 

L


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## rainyday (14 Dec 2001)

*Re: ML Suspicions*

Hi Lucretia - I'm sure you're right about the reasons for others keeping quiet on this. I'd certainly welcome postings (even under cloak of anonymity) from others who can confirm current practices ...

Regards - RainyDay


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## Tommy (14 Dec 2001)

*Re: ML Suspicions*

'Fraid I can't help with any insight into the banks' practices here but I would point out that the banks would be getting into a minefield here if they insisted on quizzing people about whether tax is paid on their earnings.

Take the example of the part-time bouncer, as cited by Lucretia. 

Anyone who does bouncing work at a nightclub or similar establishment will normally do so as an employee of either the establishment itself, its tenant, or a third-party agent or middleman. The onus in these cases is on the employer to pay the PAYE/PRSI on the employee's earnings. In law, it is none of the employee's business whether the employer fulfills their statutory obligation to pay over all PAYE/PRSI on the grossed-up total of their employees' net earnings.

If the employer doesn't do so, then the Revenue should be well able to hound them for the tax & prsi due on the grossed-up earnings of their bouncer employees. After all, no revenue inspector will swallow a yarn that a disco, for instance, is able to open its doors without having security personnel in situ.

Now, if the part-time bouncer lodges his 2 or 3 £50 notes from the weekend in the local bank every Monday morning, and says so on his mortgage application, what happens if a bank official queries whether tax has been paid on these earnings? 

The bouncer doesn't know whether his employer has paid over the tax and (apart from requesting a payslip showing gross pay, tax deducted, net pay etc) has no right to enquire into their employer's PAYE/PRSI affairs. So, most likely, he wouldn't be able to help the bank with their query, even if he wanted to. 

On the other hand if the poor bank official is construed (rightly or wrongly) of alleging tax evasion on the part of their customer (the bouncer) or a third party (the employer) then they could and occasionally would be facing slander proceedings. The banks would therefore be mad to allow themselves to be ensnared into such a trap. As a bank customer (and potential shareholder), I would be appalled if they did so.

(Obviously, this kind of scenario will apply to people in various casual labour situations - not only our friends in the security business.)

On the wider point, I wonder are we all becoming, in general, a little too PC for our own collective good?


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## rainyday (14 Dec 2001)

*Re: ML Suspicions*

Hi Tommy - I'm expecting the banks to act as the tax police. However, I'm very concerned if they have implemented policies/procedures that specifically encourage or support the black economy.

The bank will typically ask for payslips and/or P60's and/or reference letter from employer showing salary details for a PAYE employee. So they already take steps to verify source of income above & beyond just looking at the lodgements. However, I got a feeling from other posters that there is an explicit policy (though presumably unwritten) to accept a certain level of unverified cash income to boost the applicant's earnings and boost the maximum mortgage level.

If such a policy exists, it seems to me that this is specifically designed to support the black economy, and I'm amazed if the banks are still taking such a risk. So, as I've said before, I'd love to hear from any insiders who are prepared to clarify what exactly happens at present with cash income on mortgage applications.

In terms of the broader issue (are we getting too PC), I'd be happy to debate this with you on a seperate thread, if you're interested.

Regards - RainyDay


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## CM (14 Dec 2001)

*PC or not PC*

<!--EZCODE BOLD START-->* On the wider point, I wonder are we all becoming, in general, a little too PC for our own collective good?*<!--EZCODE BOLD END-->

On the substantive point of the financial institutions policing things for the Revenue I am generally of the opinion that this is not, and should not be, their job (allowing for the specific "money laundering" legislation for "large" transactions). On the other hand I do believe that individuals should (and largely do) meet their tax obligations. If this is PC then so be it even if your comment seems to use it in a pejorative sense.


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## Tommy (15 Dec 2001)

*Re: ML Suspicions*

Hi everyone

Rainyday, I see the logic in your point but the way I see it the banks are, like Bart Simpson, "damned if they do and damned if they don't" on this issue.

IMHO, the risk of defaming a customer is a bigger problem for any bank official than any potential public odium arising from their failure to interrogate Jo Bloggs as to where their extra £50 a month income is coming from. 

One way out of it for the banks is to insist (as they regularly do) on a declaration that the borrower's tax affairs are in order. This mighn't on the surface be too much of a deterrent to anyone who is intent on fiddling the system but it tidily shifts the onus of responsibility back on to the borrower, with important consequences if things go haywire later on.

Personally I think that the extent and seriousness of this particular "problem" is highly exaggerated. From what I know, a far bigger problem is that of mortgage borrowers "declaring" non-existent cash income in order to bolster up their borrowing capacity. They don't pay any tax on this income because they don't earn the money in the first place. Let's face it, if someone works 35 hours a week in a regular 9-5 job and spends 2 hours per day travelling to work, when are they going to get the time (or energy) to work on a nixer that will earn them more than a pittance every week? 

Okay, we all know of unregistered childminders, mechanics who will service cars at night, teachers who give grinds, tradesmen who look for cash for repair jobs, etc, etc but these people tend, to my knowledge, to be older people in relatively cushy positions in their "daytime" occupations - a far cry indeed from the typical hard-pressed first-time buyer who struggles to buy a home in some far-flung suburban outpost like Gorey, Kells or Rochfordbridge, or who is forced to gamble on taking out a ridiculous mortgage to buy a house convenient to their needs.

Personally, it doesn't matter a damn to me if my neighbour tells the bank that he earns £20 or £120 per week on the side (unless he's my client, of course!). If he's evading tax, of course it's illegal and immoral on his part, but in a liberal society it is his responsibility to pay his taxes like the rest of us, and I won't shed any tears if he's caught by the taxman. But, on the other hand, I certainly won't lose any sleep at night worrying why is he getting away with it.  Ditto if (s)he is sleeping around every night of the week. 

I would love to debate the merits or otherwise of political correctness but sadly there aren't enough hours in the week. My point about political correctness is based on my own perception that these days people in Ireland seem to spend all the time whinging indignantly (and hypocritically) about the failings and wrongdoings of others while being totally blind to their own shortcomings. 

3 quick examples - all unrelated and of varying importance - which show the depth of the problem:

- our appalling treatment of asylum seekers, refugees, and people who come here from poorer lands just to make a few bob, in the light of our rush to pass judgement on unionist and loyalist figures who suppress the rights of northern nationalists and on the Bush administration in the US "war against terrorism.

- Govt. ministers going crazy at the profanity of an opponent who speaks of "bastards" but doing nothing to curb the Dail privileges of the disgraced Liam Lawlor.

- officials in An Taisce who chastise country people for choosing to live in their own rural community and for driving their cars everywhere, yet who themselves admit in newspaper interviews to regularly driving their own offspring to school in rush-hour traffic.

Tearing our hair out about how the banks "facilitate" the black economy, which, lets face it, we all gladly use from time to time, is another example of the "holier than thou" attitude which is making Ireland a very unpleasant place to live in. 

Live and let live, for once, for God's sake..............


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## rainyday (15 Dec 2001)

*Re: ML Suspicions*

Hi Tommy - Fascinating response - It sounds like I'm really getting up your nose - I genuinely don't mean to (though I have to confess that you're not the first to react in this way to my rantings).

Just a few points in response;

- Tax evasion by others does have a direct impact on you and a direct impact on me - Quite simply, the reduced tax take as a result of tax evasion has to be made up by additional taxes paid by you and me. It also distorts the market for fair competition. For example, if there is a black market bookkeeper operating in competition to your accountancy practice, he can change half your price and still make a bit more money than you.

- I was unaware that the banks required mortgage applicants to confirm that they are tax compliant in writing. I guess this at least allows them to give the appearance of operating in a reputable manner.

- You say "the black economy, which, lets face it, we all gladly use from time to time" - Believe it or not, I don't & won't use the black economy on principle. I admit that I have used it on occasion in the past. (In fact, I was introduced to the black economy by the solicitor who suggested 'half price for cash'). But I do believe in putting my principles into action, and I have refused various offers of reduced fees for cash. 

- I completely agree that the three examples you gave (treatment of asylum seekers, hypocrisy from politicians and An Taisce) are more important that this issue. I can probably think of about a hundred other sociological, economic or political issues which are more important also. I never said that this was a hugely important issue. I don't really know the extent of this issue - That's one of the reasons why I was looking for inside information about what is really happening. And I've far too little hair left to go tearing it out about this.

- I see another kind of hypocrisy out there which galls me. It's the kind of person who rants & raves about alleged fraud/evasion by CJH, Lawlor, Burke et al while evading tax themselves - the kind of person who boasts about not paying CGT on their Eircom gains (yep - some did make a gain) or their rental income or their weekend nixer. In my book, one loses the right to complain about others.

- You appear to be saying that 'a little bit of tax evasion by others is acceptable'. To me, this smacks of the 'cute hoorism' of Ireland in the 70's & 80's, where a little bit of tax evasion/drink driving/jobs for the boys/brown envelopes for planners/speeding (etc etc pick your vice) was OK. I thought we had moved on from those bad old days - Maybe I'm wrong.

- I'm really surprised by your comments about the 'holier than thou/PC' attitude making Ireland an unpleasant place to live. I have the complete opposite view - that by challenging these unacceptable but traditional behaviours, we actually improve society for the future. I need to think about your comments further to try to understand where you're coming from. I'd welcome comments from others on this.

- On the original issue, I'm guessing that I'm unlikely to get any real information on how common the issue of banks accepting unverified cash income for mortgage applications is - So I'll just ungracefully give up, let go of this bone and move on to more interesting matters.

Cheers - RainyDay


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## Grundy (15 Dec 2001)

*Tax Evasion*

Let's face it, Ireland simply doesn't believe that Tax Evasion is immoral.

Imagine passing a law which said that sex abuse of minors was forgiven provided it was declared before date xyz.

What would that say?  It would say that sex abuse of children was kinda understandable, but we wanted to stop it going forward.

That's exactly what the tax amnesties said.  There is absolutely no moral condemnation of tax abuse in our society, simply a varying culture as to attitudes to collection.

The amnesties indicate quite clearly that our society understands and tolerates tax evasion, but we want to stop it in the future. 

It is almost unbelievable that Government Ministers admitted to availing of the tax amnesties and still retained their jobs.

Lets face it.  Ireland does not beleive that Tax Eveasion is immoral, even if technically illegal.:mad


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## jem (15 Dec 2001)

*Re: Tax Evasion*

I don't condone Tax evasion however I would say that it is almost a national passtime. It is said that the self-employed are all at it and it is this and that. I would say that there are as many in the paye system evaiding tax as those in the self-employed ranks.The fella doing a nixer at night, the person paying cash for a job etc etc. It is part of our society like it or not. 
I am of the opinion that we should all pay what is due in tax as it we did we would not have to pay as much but this is the real Ireland we are living in and I would estimate that 70% of people in Ireland that are working have evaided tax at somestage. 
We need therefore to try to change the culture of the country.
As a side bar did you know that evaiding tax is not a crime at all in Switzerland.


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## Tommy (15 Dec 2001)

*tax evasion & the banks*

Hi Rainyday, 

I suppose my lengthy posting might have shown the signs of something getting up my nose - if that worries you, it shouldn't - I was of course looking forward to the cheery prospect of driving home on a dark winter's Friday evening!

I take your point regarding the evils of tax evasion. Just for the record, and to rebut one particular point in your reply, in no way was I attempting to apologise for tax evasion or to say that it is acceptable, even in small doses. I'm sure you'll understand that it is important for me to make this distinction.

You are right on the issue of tax fiddling and unfair competition, but to tell you the truth I would have personally no fear of competing against a black economy competitor, even though that may be because of the business I'm in. There's not much point in a black economy "accountant" trying to represent his clients properly if he can't disclose the existence of his accountancy business to the Revenue! Whatever about my other competitors in the market, I think I have little to fear from the "cash" operators - this would be different, for example, if I was, say, a construction tradesman.

I may not be fully correct in saying that the banks require declarations of tax compliance from mortgage applicants - they definitely do so for self-employed borrowers both for mortgages and other loans. I'm not sure if this is done for other classes of borrower, although I do think it would be a good idea from everyone's viewpoint to extend this to all borrowers. This would go some way towards addressing your original concerns.

I hope you didn't take offence that I seemed to lump you in with all the others in the 'holier than thou' camp. You could have been forgiven for assuming so, yet that wasn't intended. What I was getting at may be a pet gripe ( and incidentally strays way off the original topic) but I am really fed up with what I see as rank hypocrisy on the part of the Irish people. A few years ago, if we did something wrong we would keep our mouths shut and hope that our indiscretion would be forgotten. Nowadays we are too busy hectoring and shouting at everyone else to take any responsibility for our own actions. I'll give you another example to try to illustrate what I mean. 

Coming up to every Christmas, we all read countless newspaper articles and media reports on the unacceptable carnage on our roads. Almost all these items concentrate almost exclusively on the evils of drink driving and inexperienced drivers. On my daily commute these mornings (on the main N3 road) I see drivers take chances with their own and others' lives that would make your hair stand on end.(even what's left of it!) This is a time of day when there is nobody driving with even a smidgin of drink on them and the drivers taking the risks are generally not young bucks of 19 or 21 driving battered 10-year old Bluebirds or Kadetts, but the well-off 30-, 40-, 50-, and 60-somethings driving gleaming 01-reg or 00-reg BMW's, Mercs and the like. (Interestingly the worst offenders seem mostly to be Dublin registrations) I rarely hear anyone complaining about this craziness yet if any of us were to mention in social company that we might occasionally drive home from the pub with 1 or 2 pints on board, we would be treated like an outcast. 

Its easy to blame the anonymous drunk or young thrillseeker for road fatalities - less so to finger the Minister for Justice who allowed his children to be driven home at 100mph or the pillars of society who daily parade their brand new jeeps around the towns of Ireland, blissfully ignorant of the bull bars on the front of their vehicles that would pulverise, even in a minor collision, any pedestrian unlucky enough to get in their way. And, lets face it, those of us who drive all do so from time to time  in an impatient, hurried or plain reckless manner - but again its easier to blame the obvious targets, than it is to ask ourselves awkward questions, so the problem never solves itself. 

That's where my comments on attitudes towards tax evasion were coming from. As far as I can see, we as a people have a lot of growing up to do in many areas - tax evasion is one, road safety is another, waste policies yet another - yet we seem to think we're the best in the world, and we don't mind telling everyone about it. We used to love to poke fun at our neighbours across the Irish Sea for having similar attitudes, now we've turned into our own parody. Its funny what a bit of money does......

Meanwhile, and finally, back to your original query - and don't give up - I'll do my best (unofficially) to find an answer to your query. No time better than the Christmas party season to prise open the darkest of secrets from even the most fastidious of bankers!

I'll keep you posted.

regards

Tommy



p.s 
Thanks jem,

I've always wondered why everything is so expensive in Switzerland. Must ask for cash prices the next time I'm there!


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## Freddie Kruger (15 Dec 2001)

*Re: tax evasion & the banks*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr>  but I am really fed up with what I see as<!--EZCODE BOLD START-->*   rank hypocrisy*<!--EZCODE BOLD END--> on the part of the Irish people. A few years  ago, if we did something wrong we would keep our mouths shut and hope that our indiscretion would be forgotten. Nowadays we are too busy hectoring and shouting at everyone else to take any responsibility for our own actions. <hr></blockquote><!--EZCODE QUOTE END-->

Hi Tommy,

I didn't realise there was a name for it. You have my vote  

Your posts bear all the hallmarks of someone who is in touch with reality.


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## tedd (15 Dec 2001)

*Re: tax evasion & the banks*

<!--EZCODE ITALIC START-->_ "My point about political correctness is based on my own perception that these days people in Ireland seem to spend all the time whinging indignantly (and hypocritically) about the failings and wrongdoings of others while being totally blind to their own shortcomings."_<!--EZCODE ITALIC END-->

Tommy,
I'm with you on this one. I would add that the fascination with enquiries and tribunals is another facet of this in my view. I think the excuse of "the public interest" is sometimes just an excuse to be nosy, while taking the high moral ground.

It is clear that in the past many (I would say the majority) evaded tax or availed of the black economy in one of its many guises. In my view the public interest would be better served if we drew a line in the sand on 31st December and gave the Revenue Commissioners adequate resources and manpower to rigourously implement the tax code, with stringent penalties for those who do not comply from that date, including the power to retrospectively audit. If this change in policy was widely advertised and seen to be implemented without favour, I think it would work.

tedd


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## rainyday (15 Dec 2001)

*Re: tax evasion & the banks*

Hi Tommy - Thanks for the clarifications. Yeah - hypocrisy gets up my nose too, though I must say I see our growing ability to speak up for ourselves as a healthy development, when it's done at the right time and in the right spirit.

Looking forward to hearing the outcome of your Christmas investigations!

Cheers - RainyDay


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