Introduction
I would like to thank Grant Thornton for the opportunity to address this gathering on illicit trade. And also to acknowledge their contribution to this important area, one which crosses all sectors and touches all parts of business and society.
Today I will focus for the most part on the more traditional forms of illicit trade. This Government recognises that the main areas of shadow economy activities include:
· Cash economy practices
· Oil laundering.
· Tobacco smuggling, and
· Counterfeiting or other abuses of IP rights.
These nefarious activities not only result in substantial losses to the Exchequer, but also negatively impact on legitimate businesses as regards competitiveness, sustainability and long term job creation.
I acknowledge the conclusion in the Report launched today that, by its very nature, illicit trade is difficult to quantify. I agree and take the view that any attempt to measure the economic impact of illicit trade must be handled with care.
That said, illicit trade poses significant risks for Ireland’s economic recovery and the equitable collection of tax revenues and the response from the State reflects the importance accorded to the issue by the Government.
In this respect, I hope that today provides an opportunity for you to develop concrete proposals for tackling the shadow economy.
Cash Economy
A significant element of the shadow economy consists of the ‘under-cutting’ of legitimate businesses by the use of practices such as keeping certain cash payments ’off the books’ to minimise declared tax amounts and paying employees under an ‘off the books’ arrangement so as to avoid tax and PRSI, and facilitates people working and signing on for Jobseekers’ payments.
Revenue commits significant resources to conduct specific targeted programmes to address these substantial risk areas and yield from these programmes represents a sizeable portion of Revenue’s overall compliance yield.
The Government is prepared to bring forward legislative proposals to tackle this aspect of the shadow economy and, in recent times, this has included an enhanced penalty regime for employers who fail to operate PAYE Regulations fully as well as strengthening Revenue’s powers to require returns of information from merchant acquirers of all payments for goods and services received by businesses through payment cards.
Input from legitimate businesses
The Government recognises that all State agencies and legitimate businesses have a role to play in combatting shadow economy activity.
The Hidden Economy Monitoring Group is a multi-agency group, chaired by Revenue, comprising of representatives from business groups, some of whom are represented here today, trade unions and State agencies who have a common commitment to tackle the shadow economy.
Whilst State agencies are putting a huge resource into tackling shadow economy activity, they recognise that the best use of their resources is by way of targeted and focused operations.
It is very easy to state that “somebody should do something about shadow economy activity” but the knowledge that business representatives have of shadow economy activity is a vital constituent of the intelligence required by Revenue and other Government agencies to combat hidden economy activity and, therefore, help legitimate businesses.
To date, the flow of hard information to State agencies has not been to the levels expected. In this regard, on behalf of the Government, I urge the business community to make use of the Hidden Economy Monitoring Group to report – even anonymously – any information on shadow economy activities. This is an opportunity for YOU to level the playing pitch for yourselves.
Fuel Laundering
Fuel laundering not only creates a loss of excise to the Exchequer but it also creates hazardous waste which causes serious damage to the environment.
I am happy to state that the Government introduced a series of supply-chain control measures designed to make it difficult for fuel criminals to source marked fuel for laundering and to get laundered product onto the market. New control measures have been introduced incrementally since 2011-
· The licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability of the fuel criminals to get laundered fuel onto the market.
· A new licensing regime was introduced for marked fuel traders in October 2012, which is designed to limit the ability of criminals to source marked fuel for laundering.
· New requirements in relation to fuel traders’ records of stock movements and fuel deliveries were introduced to ensure data are available to assist in supply chain analysis.
· Following a significant investment in the required IT systems, new supply chain controls were introduced from January 2013. These controls require all licensed fuel traders, whether dealing in road fuel or marked fuel, to make monthly electronic returns to Revenue of their fuel transactions.
· The change in the most recent Finance Act to hold a mineral oil trader liable for the tax evaded, where they knew, or should have known, that they were participating in a transaction connected to mineral oil tax evasion.
Enforcement is also critical and I am pleased to say that Revenue, in co-operation with law enforcement agencies on both sides of the border, continues to intensify enforcement action against fuel fraud and this work has yielded significant results to date.
From 2011 to end December 2013, 119 filling stations throughout the State were closed for breaches of licensing conditions. Since the beginning of 2011, over 2.7 million litres of fuel have been seized and 29 oil laundries detected and closed down.
Tobacco
I needn’t tell you that the tobacco smuggling problem is not just an Irish problem but is very much a global one.
The World Health Organisation estimates that 10% of world trade in cigarettes is illicit. Internationally and domestically, tobacco smuggling is dominated by organised crime groups operating in a number of key regions in Asia, the Middle East and Eastern Europe where there is large-scale production of cigarettes for illicit distribution to high-tax countries such as Ireland.
Combating the illegal tobacco trade remain a high priority for Revenue, with their strategy and enforcement activities kept under continuous review by Revenue’s Tobacco Executive.
The most important measure for Revenue is the survey data on illicit consumption. The most recent survey found that 13% of tobacco consumed in Ireland is illicit. This indicates containment on importation of illegal cigarettes and possibly some modest progress and that is to be welcomed.
Nationally, Revenue works very closely with An Garda Siochána and the Criminal Assets Bureau, and also with the PSNI and Her Majesty’s Revenue and Customs. Revenue also works very closely with EU and other member state law enforcement agencies including the European Anti-Fraud Office, OLAF, and Europol to build the best possible intelligence on illicit shipments into Ireland.
Intellectual Property Rights
The Government supports the initiatives of State agencies in combatting counterfeiting. During 2013, targeting of counterfeit goods at point of importation led to 5,246 seizures, involving 162,298 items.
The estimated market value of the genuine equivalents of the seized items was €4.1 million. The main categories of goods seized consisted of mobile phones, including parts and accessories, as well as DVDs, toys and computer games.
In keeping with recent trends, the vast majority of these seizures occurred in postal traffic as a consequence of increased levels of internet activity. A recent seizure by Customs officers at Cork Airport of 100 counterfeit electric hair curlers also highlights the potential dangers to consumers from buying sub-standard, illegal goods. We are all responsible for ensuring that the message gets out to the general public that this is also a serious consumer protection issue.
Conclusion
I’ll conclude by touching on the area of IP & Cyber-crime, areas that will be covered in greater depth by today’s second panel.
These constantly evolving areas reflect the important role that cooperation plays – nationally, internationally, between agencies and the cooperation of the relevant public-private stakeholders.
The end of our EU Presidency last June saw the EU Cyber Security Strategy welcomed by Member States. The Strategy is an essential element to the implementation of a comprehensive approach for EU cyberspace policy.
The European Policy Cycle for the period 2014-2017 has been formulated and includes the priority ‘To combat cybercrimes committed by organised crime groups generating large criminal profits such as on-line and payment card fraud. The necessary Operational Plans have now been developed to take forward this work at an operational level.
Of course the putting in place of the necessary legislative underpinning for tackling cybercrime is also necessary and 2013 saw agreement reached on the EU proposal for a Directive on attacks against information systems.
In Ireland we continue to take significant steps to build our capabilities in tackling cybercrime.
Among the Bills promised in the Government Legislation Programme is the Criminal Justice (Cybercrime) Bill. The Bill was originally intended to enable
ratification of the Council of Europe Convention on Cybercrime (the ‘Budapest Convention’) and the transposition of the 2005 EU Framework Decision on attacks against Information Systems.
Work on the Bill was put on hold pending finalisation of the Directive so that Ireland will have a single comprehensive piece of legislation dealing with cybercrime.
Of course, the Directive has recently been formally adopted and a review of the Bill is being carried out to assess what further provisions, if any, may be necessary to ensure that the Bill gives full effect to the Directive and the Convention.
Also work is continuing on the development of a National Cyber-security Strategy, an area being led by the Departments of Justice and Communications.
If goes without saying that, whether at national or international level, IP and cybercrime will be a feature on all our agendas for the foreseeable future.
I wish you well with your discussions.