The Dáil Public Accounts Committee has issued a report which primarily examined the loss of "Fiduciary" taxes (such as PRSI and PAYE) arising from company insolvency. The Committee concluded that there is a need in Ireland to introduce further measures to reduce the amount of Fiduciary taxes that are lost due to the irresponsible behaviour of directors. There is a need, according to the report, for the introduction of a deterrent which will make directors aware of the negative consequences which could arise for them if they wilfully evade paying the company taxes that are due.
The report states that the Committee accepts that many companies become insolvent because of trading difficulties and only go into liquation after valiant efforts are made by the directors of the entity to save the company. What the Committee is concerned with are those directors who use the protection of limited liability to avoid paying taxes they have collected from third parties. Following insolvency, many of those directors will re-commence operating a business under a different name and they become known as "phoenix operators".
The report's main recommendations are:
- That the legislative provision which exists in the UK which can make company directors with a track record of non compliance for tax purposes personally liable for PRSI contributions collected by the company, be introduced in Ireland as a deterrent to continued malfeasant behaviour by directors. The Committee noted that the UK provision gives the Revenue strong powers which are used very sparingly, as the legislation appears to have a deterrent effect.
- That company law should provide that directors are required to have their tax affairs in order prior to incorporating a new company or being appointed to an existing company.
- That the review of the phoenix monitoring programme be widened to examine the interactions between Revenue and those companies where there was a significant tax write-off in order to establish whether further measures are necessary in order to minimise the level of write-off.
- That the Company Law Review Group (CLRG) examine whether the current levels of capitalisation required when incorporating a limited company in Ireland could be increased to a moderate level. The report suggests a figure of between €5,000 and €10,000, subject to the CLRG's assessment.