COMPANY LAW should be changed so that directors who wilfully avoid the payment of PRSI contributions to the exchequer can be made personally liable, a report from the Dáil Public Accounts Committee said yesterday.
In its First Interim Report on the Loss of Fiduciary Taxes arising from the abuse of limited Liability, the committee also recommended that directors being appointed to limited liability companies should have a tax clearance certificate.
“This is an area where company law has fallen behind other regulated industries,” the chairman of the committee, Bernard Allen, told a press conference in Leinster House.
The committee has further recommended that the Company Law Review Group look at introducing a minimum capitalisation level for limited liability companies, and suggested a level of €5,000 – €10,000.
Mr Allen said the committee was hoping that the “conservative proposals” included in the report would be introduced into law.
Committee member Roisín Shortall said the Department of Enterprise, Trade and Employment had resisted the suggestion of a new code that would allow directors be made personally liable for PRSI, on the grounds that it might act as a disincentive to foreign direct investment.
However, she said the regime in the US stipulated that public money such as taxes had to be put into dedicated bank accounts.
She said the introduction of a measure that covered only PRSI payments would be “a start”.
The committee looked at the law as it applies in the US, Australia and the UK, and opted for the UK system, whereby company directors with a track record of non-compliance can be made personally liable for PRSI.
“Genuine businesses have nothing to fear,” said Mr Allen. “We are after the blaggards, the cowboys.”
Committee vice-president Darragh O’Brien said the State suffered a “double hit” when PRSI payments were not paid over, as the employees who made the payments were still entitled to the associated benefits.
Committee member Jim O’Keeffe said the regime in the UK allowed the tax authority issue a notice to a company stating it believed it was involved in “fraud or serious neglect”.
The Revenue is monitoring approximately 500 companies as part of its “phoenix operator” monitoring programme.
Over the past 10 years, the Revenue has written off €1 billion in PAYE, PRSI and VAT collected by companies but not passed on to the exchequer. It is not known how much of this was due to wilful or fraudulent conduct.
Responding to the report Sonia Manzor, a tax partner with William Fry, said criminal sanctions can be applied to company directors who fail to pay company PAYE and PRSI deductions to the exchequer because of reckless behaviour.
The Institute of Certified Public Accountants in Ireland (CPA) said the committee had “got this wrong”. There are already adequate provisions under existing laws to protect Revenue and pursue errant directors, according to CPA president John White.
