I’m afraid I’m one of the people who admire Mick Wallace (pictured below). The “man of the people” image might be overblown, but he comes across as a quietly-, but considerately-spoken man with an educated and wise head on him that might be at variance with his dishevelled appearance. Active in the community through sports, and a man with a history of accomplishment under his belt and a non-politician, it was no surprise he topped the polls in Wexford in February 2011 as widespread anger and contempt for traditional politics saw so many new faces enter Leinster House.
Last week, out of the blue, he announced that he had knowingly under-declared VAT in his building business, that he had reached a €2.1m settlement with the Irish tax authorities, the Revenue Commissioners but that it was unlikely the debt would be paid as his business was in receivership and, under the terms of the settlement, the debt was owed by the business. He was prompted to make the announcement by the fact the Revenue Commissioners were this week publishing the list of tax sinners for Q1, 2012 – extract showing Mick’s company settlement above – and his company would feature prominently in that list.
Many might be able to sympathise with the man who said he under-declared the VAT in order to save his business – keeping up to 60 people in work and not disappointing his customers who had paid deposits, presumably – and people might also be able to sympathise with the panic you can feel when you screw up and in the case of the Irish property market, there was a lot of screwing-up and many property developers were caught short. So he says he made the under-declaration so as to conserve cash and consequently to save the business, in the hope that something would turn up so that he could make good on his sin.
Many people wouldn’t be able to sympathise with his actions up to this point, but even on here, the well of sympathy would run dry if the cash that was supposedly being conserved to save the business was in fact used to enrich Mick and his associates personally. The last accounts filed for the company appear to be for 2008 so we don’t have an answer for how the conserved cash was spent, but the accounts for 2008 show that Mick and his son who was the other director of the company drew €290,000 total salaries, which was double the previous year.
Here is the chronology uncovered so far:.
2008/9, it is unclear from media reporting but it seems to be suggested that the VAT under-declarations were made in 2009. VAT is generally paid on a 2-monthly basis, but we don’t know what 2-months period saw the under-declaration, or indeed if there were multiple under-declarations across a number of 2-month periods.
October 2010, Mick went to the Revenue to reveal the under-declaration of VAT. This would seem to be at least nine months – January to October 2010 – and possibly up to 20 months – March 2009 to October 2010 – after the under-declarations were made.
9th February 2011, Mick declares his candidacy for the impending general election
25th February 2011, Mick is elected as a TD for Wexford. He tops the polls for 1st preference votes with 13,329 ahead of Labour’s Brendan Howlin who received 11,005. Third, fourth and fifth seats in the 5-seat constituency went to John Browne (FF), Liam Twomey (FG) and Paul Kehoe (Government whip, FG).
May 2011, receivers appointed at the behest of ACC Bank to M&J Wallace Limited
November 2011, receivers appointed at the behest of ACC Bank to MJ Wallace Limited
Settlement with Revenue agreed in February 2012
June 2012, list of defaulters for Q1, 2012 published by the Revenue Commissioners
Many people cannot fathom why Mick can seemingly walk away scot-free from such a large tax bill when his company apparently continued to reward him and his family after the under-declarations were made. To many people, there are still un-answered questions
1. When did the under-declaration take place? The suggestion in the media is 2009 but VAT returns are generally made every two months, so when precisely?
2. Was it a single incidence or were there multiple under-declarations?
3. What salary, rewards and other benefits were paid to Mick Wallace, his family and associates between the under-declaration and October 2010 when Mick ‘fessed up?
4. Why did it take 15 months for the Revenue – between October 2010 and February 2012 – to examine what was presumably a straight-forward matter with a cooperative defaulter and make a settlement?
5. Since MJ Wallace was placed in receivership in November 2011 and Mick Wallace’s financial issues have been prominently reported in the media during 2011, why did the Revenue agree a settlement in February 2012, when there would have been strong suspicion that the settlement would not be discharged?
6. Why has the chairperson of the Revenue Commissioners, Jospehine Feehily – pictured below – not been summoned before an Oireachtas committee to answer for the behaviour of her organisation, either in general or specific terms? After all, she was summoned lickety-split in January 2012 after those letters were issued to pensioners advising them of claw-backs!
Yesterday’s publication of tax defaulters by the Revenue Commissioners contained the usual list of tax sinning and the resultant penalties which include imprisonment. To many people in this country, including on here, it is incredible that the Mick Wallace file has apparently been closed with an acceptance that the settlement cannot be paid. Mick Wallace has asked to address the Dail on his tax affairs and that request has been turned down, but in 2012 we are all media companies and Mick has his own website which remarkably has no statement whatsoever on the matter.
NAMA Wine Lake 
Might there be a question re. the VAT as distinct from tax since VAT is an excise matter. Granted it’s the same pocket it’s going into these days but it’s not being drawn for the same reason.
I expect many such questions with regard to VAT there will be a distinct lag since in effect the tax is on the transaction rather than the profit and therefore dependent on continuing operation.
Another query might be why put a penalty on what is noncollectable. And god be with the 10% interest, never allow it be said that Finance didn’t learn anything from Shylock.
Vince VAT is not an Excise matter. Excise is a purely local issue. Ii the UK VAT was administered by the C & E who handled it until the merger into HMRC.
VAT is an European tax, in the sense that the rules are drawn up at a European level.
If there is no penalty -no publication.
Excise is precisely what it is. What I cannot find out at the moment, since the Collector-Generals office in Limerick is being downright cagey and is requesting a letter be sent framing my question, is how they view VAT these days viz other types of tax.
@nwl
Good Morning Namawinelake,
For forty years now I have had “opportunities” similar to those exposed to Deputy Wallace. I like to think that it was virtue rather than fear of discovery which kept me straight.
Perhaps also it was that I was (though bad enough on occasion) never really, really up against it in financial terms. Many amongst us face such difficulty now.
Revenue’s righteous interventions, no matter how proper and desirable in their own right, can sometimes comprise the last straw. It can seem as if one’s world has collapsed, that all favourable prospects are extinguished. For some this is so.
It is this simple. We cannot give such powers – powers that are essential if we are to have a fair and effective system of taxation – unless they are exercised with utter consistency.
It seems altogether reasonable to suggest that any person – and a company director in exercise of his functions as such is nevertheless a human being – who acts in willful and persistent violation of his obligation to comply with the law as it provides for the assessment and collection of taxes, has no rightful place amongst our legislators.
I suggest it would be appropriate to give our Parliament the means whereby such interlopers could be required to undergo a “recall” of the type open to some of the Western Cousins.
All the best to all,
Sincerely,
Eric.
There are a couple of other items missing from your timeline: 1. an issue about forgetting employee pension contributions and 2. transferring an Italian vineyard to his brother.
A few basic points.
The company’s account year ends on 31st August. His abridged accounts for y/e 31/12/2007 are available (https://www.documentcloud.org/documents/367589-m-j-wallace-accounts-2007.html) These accounts signed off in January 2008 raise various questions in themselves in particular in relation to the revaluation reserve and the value placed on work in progress.
Subsequent accounts therefore should have been for the years ended 31st August 2008, 31st August 2009 & finally 31st August 2010.
A company is obliged to file its accounts with the Revenue within nine months of the end of the account year. The filing dates for the 2008, 2009 & 2010 accounts were
31/8/2008 end of April 2009
31/8/2009 end of April 2010
31/8/2010 end of April 2011
Assuming a) that audited accounts for 2009 had been prepared and submitted on time, b) that Mr. Wallace went to the Revenue in October 2010, it is reasonable to assume the offence(s) of knowingly making a false tax declaration refer to the period after 1st September 2009.
One of the first things to be checked by an auditor would be the VAT account. If the 2009 accounts were prepared, it is reasonable to assume that the VAT was in order at 31st August 2009.
VAT on the sale of property is levied at 13.5%. The tax fraud here involved the sale of more than €10M in property. It is reasonable to assume that the sales were over a number of VAT periods,
Moving on to Revenue procedure. If a taxpayer comes in to make a disclosure, it is unlikely that the Revenue official handling the case would have formally warned the individual that any information given could or would be used in evidence against him in a court prosecution. Having failed to formally warn the person, it would be very difficult to take a prosecution. Indeed my experience is that the Revenue prosecution unit would not take such a case, even to look at it with a view to prosecution.
Assuming that the initial meeting took place in October 2010, the liability could have been agreed reasonably quickly, unless it was felt that a full field audit was required. However discussions on the payment of the liability could have take some time. An audit settlement of this magnitude must be signed off by a Revenue Commissioner and would have to be submitted by the audit manager via his District Manager and on to her Asst Secretary before being signed off by a Commissioner. All of the above posts have been vacant at some time in the recent past, indeed the audit manager of the City Centre district retired around that time. Submission of the audit report which is a purely electronic process may have been delayed by discussions around payment. In the past I would never have submitted an audit report without having collected the payment in full.
Mr Wallace can count himself lucky that a prosecution is unlikely. As it appears probable that there was a series of incorrect returns submitted, his case would have fallen within the provisions of the Murray case [2011 No. 178 CCA]. This appeal decision leaves Judges with no option but to hand down a long custodial sentence where the State has suffered financially because of the deliberately fraudulent action of an individual. This is why Mr. Begley went to prison over his numerous false declarations of garlic as apples. You can read the Murray appeal decision on the Courts website
http://courts.ie/Judgments.nsf/bce24a8184816f1580256ef30048ca50/0d6878ae2d101d93802579b40052fc3f?OpenDocument
@Niall, thanks very much for that.
“Moving on to Revenue procedure. If a taxpayer comes in to make a disclosure, it is unlikely that the Revenue official handling the case would have formally warned the individual that any information given could or would be used in evidence against him in a court prosecution. Having failed to formally warn the person, it would be very difficult to take a prosecution. Indeed my experience is that the Revenue prosecution unit would not take such a case, even to look at it with a view to prosecution.”
Standing back from Mick Wallace’s own case, and speaking in general terms, the above suggests that anyone who has knowingly under-declared tax, whether that’s €10 or €100m, can simply make a disclosure to the Revenue Commissioners and after that, the Revenue Commissioners cannot seek a prosecution? It will simply be a financial matter involving penalties and interest. That being the case, shouldn’t every limited company up and down the country be under-declaring VAT, taking the under-declared VAT out of the company as salary and then going to the Revenue Commissioners when the company is broke and saying mea culpa? Surely that can’t be right?
@NWL
No, it certainly is not right. Though it may be correct.
However, such conduct would likely result in the lifting of the corporate veil, rendering the directors liability without limit for the debts of the company in question.
E.
The Irish Examiner suggests that Revenue documents showed the investigation was classed as a “prompted qualifying disclosure”, meaning that tax authorities were set to swoop before any confession by Mr Wallace. “A prompted qualifying disclosure is a disclosure made after an audit notice has issued from Revenue but before an examination of the books and records or other documentation has begun.” More at http://www.irishexaminer.com/ireland/wallace-confess-claims-left-in-tatters-197248.html
This would seem to mean that the Revenue was “onto the case”.
@ NWL There are a number of issues to be considered. Firstly there are a lot of “unprompted voluntary disclosures” made to Revenue. If you were to consider them all for prosecution, which involves formally warning them, you would never get anything done. I have seen large errors in the past, far larger than this one, which was clearly a genuine errors and corrected quickly when discovered. In an owner managed business, such as Mr. Wallace’s I accept that there should be a higher level of examination of such disclosures. However with hundreds of experienced staff left in the past four years that is not possible.
The annual audit should pick up these errors. My own guess is that Mr. Wallace ran to the Revenue just before the auditors walked in the door.
The Irish Revenue is run on a shoe string and produces the second best results based on efficiency comparisons in Europe. (The Danes are No. 1). I don’t see how much more can be done unless far greater resources are committed. The EU via 40% of Customs duties and the Social Insurance Fund in its payment to the Revenue for collecting PRSI pay a high proportion of general Revenue costs
Penalties and interest are penal and as Mr. Wallace has discovered publication and the attendant publicity is also very serious. More criminal prosecutions would be great, but they are very expensive, time consuming and require a lot more staff, who are in very short supply.
Up until the Murray appeal decision, there were also very few custodial sentences being handed down. I remember one former head of the Revenue’s prosecutions division wondering out loud about the value for money in bringing criminal prosecutions. Clearly Justice Finnegan and his colleagues make it more worthwhile now.
In relation to Mick Wallace’s affairs a number of questions could be added.
1) If the liability is solely for VAT where did he get the money to pay PAYE/PRSI liabilities on his enlarged salaries for the periods are we to believe all other taxes are up to date.
2) We can assume on closing of units that contractors would have to have been discharged and some would require RCT to be paid are these up to date.
3) Due to the fact he is receivership is it the case the Revenue did not expand the audit to include the above. Or on the basis that there would be little point as no funds would be recoverable they did not check. The Revenue need to answer this as sure as night follows day and as evidenced by the shortfall on CIF pensions payments I do not believe his other taxes were in order.
4) As the company is in receivership there has to be a case for reckless trading which would result in the Directors being potentially personally liable where is Paul Appleby. He admitted he knowingly defrauded the Revenue in an insolvent company clear cut for enforcement action if ever there was.
5) We have no sight of the accounts we do not know how much his Directors loans were. Have they been redeem in preference to other creditors.
6) We do not know what level of expenses he ran through the company cars etc.
What we do know is the man is being limited with the truth. It is a pity ACC did not do the state a favor and bankrupt him. I believe he has no right to represent the state in the Dail you have to admire the MP’s in the UK who demonstrate ethics and moral fortitude in recognising they did wrong and going.
When he goes will we have to pay him redundancy and a pension I hope not as that would be the absolute insult compounded.
The funds that are lost to the state by this action are unacceptable we all can make mistakes but this was cold and calculated there is no excuse.
He has to go from politics and face the full rigor of the law if we are ever to change and rectify the failings of the past people must be accountable is that not what caused the problem in the first place.
“I’m afraid I’m one of the people who admire Mick Wallace (pictured below).”
Really,where else but little old Ireland,can you stiff a creditor,then get a salary from the same people off almost 100,000 a year plus expenses.Assume,ACC and AIB were not hiring,he has absolutly no moral authority left.
Not much to admire here I’m afraid,he is a failed incompetent builder,reluctant to call him a developer.People,with delusions of grandor,elevated self confidence and a bubble,like Wallace,are one the reasons you are in this mess.He had neither the skill set nor street smarts to navigate the RE cycle.
He’s a failed businessman,creditors owed 40million including Irish Taxpayer,via AIB,acknowledged submitting fraudulent tax returns,dubious asset transfers,what is there to admire,his chutzpah?
In the words of Mark Twain, Mick should “Do the right thing. It will gratify some people and astonish the rest.”
Character is defined by doing the right thing. Mick should be bigger than this. Too many people think that the only thing that’s right is to get by, and the only thing that’s wrong is to get caught. The question has been put in relation to Mick’s character.
IMO, he should fall on his sword – but it speaks volumes about him if he doesn’t do it of his own free will and it’s forced upon him later.
Mick was well advised-by whom? Someone recently retired from Revenue? Politician ? He knows no one can touch him .He will brazen it out like Lowry,Stag(for another matter) Flynn,Ahern and all the others. The awful part of this is if there were an election in the morning he will be voted back in by the fools he is stiffing. People seem unable to equate their reductions in welfare and increased taxes with people like Mick Wallace ..We are all responsible for this situation.If we continue to vote these people in we deserve what we get. How can we expect the Germans to give us debt relief? When they see this ,they must think we are having a laugh @ them.This went on in the 1980s .Nothing appears to have changed. It is still a case of only the little people pay tax. Watching all the back slapping yesterday,as he entered/exited the dail (please note the small d) made me ill.
NWL
Will the balance of the revenue assessment be paid by the recievers of Micks companies?
If this is the case the taxpayer / state will be fully paid at the expense of the other creditors!
@ PWS If you look at the company’s accounts for 2007, you will see that the assets are made up of a) investment properties, b) work in progress, which I take to mean properties being built by the company for sale and ongoing contract work for others.
The investment properties were valued @ €20.17M. on 31/7/07. Assuming a 60% fall in value suggests they are worth €8M now.
Moving on to WIP again, stock is valued @ €31.65M. Assume a 70% decline and you get a value of maybe €9.5M.
The banks are owed far more than that which is why they put in receivers over the assets guaranteed against the debts, leaving nothing for anyone else
If this were Greece and Mikos Wallakopolis was brazening it out in the Hellenic Parliament, on the taxpayer’s dime, after defrauding the bankrupt state of €2M – certain conclusions would be drawn about the Greek attitude to tax collection.
But Ireland is different… isn’t it?
Its simply amazing that he hasn’t been arrested.
We also need to change the law so as to more effectively prevent people moving assets to family members to avoid liabilities.
Further, we need to increase teh jail sentences and penalties for financial crimes.
Deliberate avoidance of tax ought to be met with truly substantial penalties.
Good post
NWL,
Not a fan of Mick Wallace or any other developers who ostentatioulsy support charitable causes for PR. However, in this matter, and in other recent cases of “forbearance” Revenue have more questions to answer than he has.
Take, for example, the quietly delivered tax amnesty for Gardai which saw the taxpayer stiffed for €12.4m of taxes wlhich should have been paid on allowances: http://www.independent.ie/national-news/garda-bosses-raid-budget-to-pay-12m-bill-for-staff-taxes-2998923.html
Take too, the quietly delivered change to the VAT regulations which gave developers a break on VAT which they should have repaid on rental income from unsellable apartments.
Do we have a truly independent tax collection and enforcement system?
Sometimes I think we’re worse than Greece, just better at hiding it.
PTIW If an failure to operate PAYE correctly the liability falls on the employer, not the employee unless they were active participants in the non operation. The real story of course is the sweetheart settlement – the real liability was many multiples of the figure finally agreed.
In relation to your second point, can you point us towards the said regulations? VAT on property legislation was re written to simplify the VAT system on property transactions and also to prevent VAT fraud. The Revenue were working on the changes for some years, openly publicised the issue and requested contributions from those interested.
@Niall,http://www.rdj.ie/publications/commercial/october2008.pdf
Previously mentioned on NWL but also at link above.
ah you sure the settlement was only made/started in feb 2012? he said he was paying a settlement as he went into the dail and stopped doing so in nov 11 http://mickwallace.net/index.php/2012/06/statement-by-mick-wallace-td/
Interest on €1,418,894 @ 0.0322% per day means interest is accruing on the outstanding tax at the rate of €456.88 per day. This crook’s offer does not even pay a third of the interest accruing annually.