The Gazette 1985

INCORPORATED LAW SOCIETY OF IRELAND GAZETTE Vol. No. 79 No. 5 June 1985

Only Collect

T HE comments recently made by Professor Thomas Ward, Jefferson Smurfit Visiting Professor at University College Galway, on the unfortunate effects of the position of the Revenue Commissioners as preferential creditors in insolvency in Ireland were timely. It is therefore all the more disappointing, if not surprising, to find the Minister for Finance so quickly dousing any hopes of a change in the position. Professor Ward spoke in support of a recommendation by the Cork Committee in the United Kingdom that the State's preferred position as a creditor should be abolished. He commented that such preferences contribute to a lax and too lenient approach to current enforcement by the Revenue Commissioners and others responsible for collecting State monies. A company in financial difficulty should not be permitted to use the Revenue as an auxiliary banker. Its trade creditors have no means of knowing that such irregular funding is in progress and, by continuing to allow credit to the ailing company, often seriously worsen their chances of being paid when the ultimate insolvency arrives and the Revenue takes priority over the ordinary creditors. Worst of all, there have been many insolvencies where the Revenue's priority is itself postponed to that of the secured creditors in which the Revenue's leniency has proved disastrous, not only for the ordinary creditors but also for the Revenue itself. A receiver appointed by secured creditors in such circumstances may not be able to dispose of the assets for much more than the amount due to his appointor, leaving nothing for either the Revenue or anybody else. It is generally believed that representations to the

Revenue are made by politicians on behalf of ailing firms, urging the need to preserve the firms in the interest of continuing employment. Apart from the questionable propriety of such representations, they are frequently short-sighted, ignoring the previous failure of such a policy which, so far from saving the ailing firm, has in some cases also dragged down the trade creditors into insolvency. The failure of the State to collect revenue is a major defect of our tax system. Each week the trade gazettes record the numbers of judgments in favour of the Collector General, regularly in six figure numbers; most, if not all, are confessions of failure on the part of the Revenue, which seems to believe that the regular spewing forth by its computer of demands for payment is in some way synonymous with the collection of tax. There is evidence too that there is considerable delay in the collection of capital taxes. Solicitors frequently find it impossible to get rapid assessments, even in cases where there are very substantial amounts due to the Revenue which are immediately available for payment. It is futile to introduce draconian measures of tax and to endeavour to close every minor loophole in the semantic jungle that comprises our tax laws if the machinery of collecting tax fails to collect such taxes as are clearly payable. The efficient collection of revenue is a duty which the State owes to those in the PAYE sector and to those outside it who pay their tax promptly. When the exercise of leniency is seen to be so frequently a misjudgment, as it is in the case of insolvent companies, it is time to take a hard look at the operation of the collecting arm of the Revenue Commissioners. •

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