Not that developers can expect any great outpouring of sympathy but in recent days there have been suggestions (for example here and here) that NAMA is actively sharing information with the Revenue Commissioners to “identify any tax implications arising”, according to Neil Callanan at the Sunday Tribune.
It should be remembered that NAMA is effectively a bank and when granting approval to the NAMA scheme, the European Commission was careful to consider NAMA’s position with respect to other banks to ensure there was no distortion of competition. The EC specifically considered a proposal originally made for the NAMA project, that NAMA would be able to access records from the Revenue Commissioners on developers. NAMA’s powers in this area were set out under section 204 (3) of the NAMA Act:
“Notwithstanding any other enactment, the Revenue Commissioners shall disclose to NAMA information in relation to a named relevant person that, in the opinion of the Revenue Commissioners or of NAMA, is required by NAMA for the purposes of the performance of its functions under this Act, and that is in the possession of the Revenue Commissioners, or of which the Revenue Commissioners have knowledge.”
The Commission acknowledged the undertaking given by “the Irish authorities” that this provision of the NAMA Act would not be used. The Commission had nothing to say on the preceding sub-section of the NAMA Act, section 204 (2):
“Notwithstanding any provision of this Act or any other enactment—
(a) the Revenue Commissioners may, for the purposes of the performance of their functions under Part 42 of the Taxes Consolidation Act 1997 and any regulations made under that Part, seek from NAMA information in the possession of NAMA, or which NAMA has knowledge of, in relation to a named relevant person, and
(b) where NAMA is in possession of, or has knowledge of, the information referred to in paragraph (a), NAMA shall provide it to the Revenue Commissioners.”
You would now have to ask if NAMA is engineering a subversion of s 204(3). The Sunday Tribune refer to the significant fact that NAMA’s chairman is former chairman of the Revenue Commissioners, Frank Daly and a casual observer might infer that there was a two-way exchange between the Revenue Commissioners and NAMA which effectively gives NAMA the ability to question a developer’s business plan by reference to tax records through the effective use of the Revenue Commissioners to investigate the contents of the developer’s business plan .
It would however be difficult to defend a developer in such circumstances – after all if the developer has not been honest in disclosing assets then most people would expect the most draconian investigations and penalties. However it seems that NAMA is stealing an advantage over non-NAMA banks operating in the State. Will the Revenue Commissioners actively engage with National Irish Bank, Ulster Bank, KBC, ACC or Rabobank and others with a view to assisting those banks maximise recovery of debts?
UPDATE: 21st April, 2011. The Revenue Commissioners report for 2010 is now available. Reporting today states that so far, the Revenue has “received data” on 108 cases from NAMA.
NAMA Wine Lake 
Whatever the accountants are charging NAMA for business plans, according to a mid sized developer who was crying on my shoulder, he is being charged €100,000 for his business plan.
These people are from the same pool of accountants that NAMA use to approve the self same business plans.
Double jobbing, conflicts of interest and very incestuous indeed.
Is there one accountant left with a conscience?
So up to €200,000 spent by NAMA on business plan review and perhaps €200,000 spent by a large-scale developer on preparing the business plan – perhaps €400,000 spent on professional fees (presumably accountants, tax specialists and property lawyers and consultants) that without NAMA wouldn’t have been spent. Of course that represents 2-3 days interest on a €1.7bn exposure which was the average in Tranche 1 but it’s still an impressive sum to be injected into the mostly Irish professional services sector.
Interesting on the conflicts. But take PwC which is one of NAMA panel members. Many of the larger developers will presumably have used that firm in the past and PwC would presumably claim it enforced Chinese Walls between different functions/teams/consultants. But on the face of it, it does look incestuous.
The advice to builders from those in NAMA and from the accountants themselves is that if you want your business plan approved you use an accountant on the NAMA panel.
Why would NAMA or a developer use an accounting firm to create or verify a business plan? What do accountants know about real estate development? I thought that was part of the original problem. Every accountant, lawyer, banker, tom, dick, and harry in Ireland, thought they were property developers. Now we have a situation where the government, based on advice from accounting firms, is approving real estate development business plans which are being created by accounting firms. The very same accounting firms that were an integral part of the sorry fiasco. To use laymen’s terms, these accounting firms verified to the bank’s shareholders and bondholders that the banks financial statements were ‘true and accurate.’ Correct?
When dealing with a Kafkaesque bureaucracy such as NAMA, is it better to be truthful or tell it what it wants to hear?
The developers use them (the panel accountants) because they have been told by NAMA insiders that these same accountants produce the information in a form that NAMA (or the accountants acting for NAMA) understand and will approve.
They have been told that if they produce the information themselves NAMA (or its accountants) will likely consider it “amateurish” and not produced in a professional manner or in a format that they can understand. Consequently, they will be unlikely to approve it.
Many “clued-in” developers are therefore using the NAMA panel accountants to produce their business plans – at a price, of course.
But then, how do you value a positive result?
WSTT, My information is still that no business plans have been agreed between any developer and NAMA. Just wondering if you have heard anything different?
Hi BaNAMA Republic,
Can you define “agreed” perhaps by reference to the following stages:
(1) Memorandum of Understanding signed by *both* NAMA and the developer
(2) Heads of Terms signed by *both* NAMA and the developer
(3) New Loan Agreement signed by *both* NAMA and developer
My information is that no plan has yet gotten to stage 2 or 3.
WSTT?
My information is that Stage 1 has not been passed by ‘both’ parties yet. Field day for the solicitors by all accounts. However do not have complete picture so I am looking to be corrected