Irish tax authorities this week signalled they want to pursue scandal-ridden offshore banking group Ansbacher for back taxes — contradicting Ansbacher and its owners, local finance giant FirstRand.
Irish Revenue said in a statement: “Any Irish liabilities will be pursued.”
FirstRand, in turn, this week hinted at its defence: Ansbacher no longer has a presence in Ireland and it believes it is out of Irish authorities’ reach.
Ansbacher management in London and FirstRand locally earlier sought to play down their financial exposure in the “Ansbacher accounts” Irish banking scandal. But if Irish Revenue’s latest statement is to be believed and FirstRand’s defence does not hold water, the risk is very real.
The Irish scandal centres on the manner the Cayman Islands subsidiary of Ansbacher helped the high and mighty hide their money and dodge tax. Charles Haughey, Irish prime minister until 1992, also accepted secret payments through the bank.
Ansbacher and FirstRand are partially correct when they protest that they are not responsible for the Cayman operation’s illicit business. The abuse started in the early 1970s, long before either was involved. Ansbacher bought the Cayman bank in 1988 and Ansbacher in turn was bought by South Africa’s First National Bank only in 1993. Ansbacher is now a full subsidiary of First National parent FirstRand Bank.
But, as an Irish High Court inspectors’ report released last month makes clear, some illicit Irish accounts were maintained as late as 1996. And, whether or not Ansbacher and FirstRand have a moral responsibility, as owners they could still be liable for debts, including back taxes that may be demanded by Irish Revenue.
After the release of the court inspectors’ report, Ansbacher’s London management released a statement saying: “Given the effluxion of time and the incompleteness of records it is difficult to envisage how [Irish tax] assessments, if any, might be formulated.” And FirstRand Bank chief executive Paul Harris told the Mail & Guardian: “We have had auditors crawling over this from every side … In our view we don’t have a material liability.”
Approached for comment this week, Irish Revenue spokesperson Marian Leavy pointed to findings in the court inspectors’ report that Ansbacher (and its predecessors) had helped its Irish clients evade taxes, and that it had evaded taxes on its own account as well. The report is littered with comments such as: “The affairs of Ansbacher were conducted with intent to defraud a creditor of some of its clients, that is the revenue authorities”; and “Ansbacher failed to pay corporation tax lawfully due.”
From the court inspectors’ report it appears that Ansbacher’s and, by extension, FirstRand’s potential back-tax liabilities may include corporate tax — it never paid tax on its own profits in Ireland — and, perhaps more significantly, Irish DIRT tax — taxes on clients’ interest, which the bank should have deducted on behalf of Irish Revenue, but did not.
Increasing the tax burden could be penalties — 100% of the original amount — and interest, which could be significant because of the passage of time. One rough calculation given to the M&G runs into hundreds of millions of rands.
Leavy said in a statement that Irish Revenue was studying the court inspectors’ findings “with a view to taking appropriate action”. Responding to questions about the Ansbacher argument that time and incomplete records would impede a tax assessment, her statement said: “Passage of time is not a barrier to assessment where there is fraud or neglect. Any Irish liabilities will be pursued. The liabilities date as far back as 1971.”
Leavy said that an Irish Revenue “Ansbacher review team” had by June 30 already recouped 17,25-million euros (about R170-million) from 52 individuals. A different set of figures provided by Leavy shows that banks, and not just individuals, are at risk in such investigations: in DIRT investigations separate from the Ansbacher affair, Irish Revenue had by last year recouped 447-million euros (about R4,5-billion) — half from individuals and half from financial institutions.
FirstRand group chief executive Lauri Dippenaar this week commented: “I have no doubt that they have to investigate the matter. [But] we’ve heard nothing from them; zero … It is not as if we have an assessment on our desk.”
Dippenaar said Irish authorities “have no jurisdiction over Ansbacher Cayman … We’re good corporate citizens. It is not something I want to flaunt [that jurisdiction will be the defence]. We are happy to cooperate, but we are not going to spend shareholder money if we don’t feel we have to pay.”
Dippenaar pointed out that the group had cooperated with the Irish court inspectors.