Irish Revenue Commissioners Taking Tough Stance On 'Mattress Money'

by Jason Gorringe, Tax-News.com, London

10 August 2001

Failing to take the lead from France, where the authorities have taken a pragmatic approach to the possibility of tax evaders coming out of the woodwork with the introduction of the euro, the Irish Revenue Commissioners have announced that they will take a dim view of the conversion of what they are calling 'mattress cash', and will be requiring banks to report anyone who is believed to have been hoarding cash for tax evasion purposes.

According to a recent report issued by merchant bank UBS Warburg, entitled 'Coming Out From Under The Mattress: When The Euro Meets The Cash Economy', the cash economy in the euro area accounts for between 7% and 16% of the EU economy. When the the euro is introduced in January 2002, Irish pounds will cease to be legal tender shortly afterwards, meaning that retailers will not be obliged to accept them, although banks will continue to change them for some time. After February 9th 2002, those who have been holding their funds in cash will no longer be able to spend them without a visit to the bank.

The Revenue Commissioners have stated that although the conversion of amounts over £10,000 must be immediately and automatically notified to them, if bank tellers have any suspicions regarding transactions for less than that amount, they are legally required to notify the tax man. A spokesman for the Irish Banking Federation said that households would be able to change £500 each without paying foreign exchange fees, but if there was suspicion that customers were visiting several different branches in order to circumvent the restrictions, this would be looked into. 'If there is any suspicion it is dirty money, there will be questions asked,' he warned.

The UBS Warburg study predicted that until February 2002, there would be a significant increase in spending on luxury goods and properties, using Spain, where the prices for apartments and homes in coastal areas are currently booming, as an example. Although Ireland does have some anti-money laundering and tax evasion legislation in place, there is evidence that this phenomenon could take place there as well, as some professions, such as accountants and estate agents are not yet bound by it.

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