State has lost €1bn in taxes from bust firms
THE State has lost €1bn in unpaid taxes from companies going bust over the past decade, TDs said at the release of a report yesterday which called for changes to the law.
The money was lost after companies failed to pay VAT, PRSI and income tax deducted from employees' salaries but not handed over the Revenue Commissioners before they went to the wall, members of the Public Accounts Committee said at the release of the report.
This not only cheats the State of funds but creates hardship for unemployed employees who often have to wait months for benefits because their taxes haven't been handed over.
The committee's report called for the law to be tightened up to prevent rogue company directors from declaring bankruptcy and then setting up a new company a few weeks later.
Revenue is monitoring 536 companies believed to be so-called Phoenix companies -- firms where directors set up new companies a few weeks after going bust and compete unfairly against rivals who do pay tax.
The committee also called for new legislation to make it illegal for people to become directors of companies if their tax affairs are not up to date and to force companies to have a minimum share capital of between €10,000 and €15,000 rather than the couple of euro needed today.
An estimated €150m was lost over the past decade as crooked directors deliberately used PAYE, PRSI and VAT which they had collected for the State to help fund their businesses before they went bust. This is illegal in the US but legal here and in Britain. The Public Accounts Committee called for new legislation to give Revenue the power to make some directors personally responsible for unpaid PRSI but not responsible for VAT and PAYE taxes.
Similar laws exist in the UK and act as a deterrent over there, committee chairman Bernard Allen said.
Mr Allen noted that the Revenue Commissioners and the Public Accounts Committee had been calling for such changes since 2000, but added that he believed the Government would act this time.