Trial told Michael Lowry did not withhold 'one cent of tax'

The trial of Independent TD, Michael Lowry for tax offences has been told the TD has not withheld one cent of tax, and that he had taken out a mortgage on his family home to pay a tax liability.

Mr Lowry has denied knowingly making an incorrect tax return for 2002 in relation to a €372,000 payment from a Finnish company.  He has also denied consenting or conniving with his refrigeration company, Garuda Limited to make an incorrect return and provide incorrect information.

He also denies causing the company to fail to keep proper books of account, recording or explaining the payment.

The charges at the centre of this case stem from a payment of almost £250,000 or €372,000 in commission from Finnish refrigeration company Norpe OY in August 2002.

The prosecution case is that the money was due to Mr Lowry's company Garuda, but instead Mr Lowry directed it to be paid to a third party in the Isle of Man. 

The prosecution says Mr Lowry had the benefit of the money and should have declared it as income tax. They say the payment was also kept off the books of Garuda until the 2006 accounts were finalised, but that Mr Lowry then pretended the payment had been made in 2006 and not in 2002.

The prosecution claims Mr Lowry cooked the books twice in relation to the payment.

The trial heard evidence today from witnesses from accountancy firm, BBT, who audited Garuda's 2006 accounts in 2007.

The accountant who did most of the work on the audit said he was not made aware of a letter signed by Mr Lowry, directing that the €372,000 should be included in the 2006 accounts.

The letter was from Streamline Enterprises - the trading name of Garuda limited - and dated 15 January 2007.  In it, Mr Lowry said he wished to advise that he had issued an invoice to Norpe in respect of money outstanding up to the end of 2006 to the value of €372,000. 

He said he obtained payment of this amount directly to himself. But he said, this was money properly due to the company and asked it be returned and reflected in the accounts with tax paid and set against his director's loans.

Kevin Burke said he did not recall this letter and said the partner in charge of the audit; Neale O'Hanlon did not bring it to his attention.

He said that the insertion of the figure into another document had been done by Mr O'Hanlon and had not been recorded by him.

He said if he had become aware of the letter while carrying out the audit, he would have looked for a back up for it, such as an invoice. Or he would have raised it as a query. 

He agreed he had carried out the audit without ever being made aware of this payment.

Lawyers for Garuda, put it to Mr Burke, that one of the charges against the company and against Mr Lowry was that the company failed to keep proper books of account.

Senior Counsel, Patrick Treacy put it to Mr Burke that Garuda's defence to this charge was that it believed it had employed a competent and reliable person, under company law to ensure its books were in order.

Mr Burke agreed his firm was competent enough to have conducted the audit. He agreed with prosecuting counsel, Remy Farrell, in re-examination, that it was not an auditor's role to keep the books for a company but to inspect them, and express a view about whether or not they were a true and fair reflection of the state of that company.

In his evidence, the accounting partner in charge of the 2007 audit said he did not specifically recall receiving the letter from Streamline Enterprises.

But Neale O'Hanlon said it would have been drafted by the accountants, and then signed by Mr Lowry. He said he did not recall bringing it to Mr Burke's attention.

He said he was not aware until he met Michael Lowry, when the Revenue Commissioners began an investigation in 2013, that the payment had actually been made in 2002 and not in 2006.  He said if he had been aware of that he would have dealt with it differently in the 2006 accounts.

He said he would have needed to send an amended tax return for 2002. He agreed that Revenue should have got €48,000 in corporation tax that they did not get at the time, because the corporation tax was paid at the lower 2006 rate instead of at the 2002 rate.

Under cross examination by lawyers for Mr Lowry, Mr O'Hanlon agreed that the Revenue Commissioners raised assessments against Mr Lowry and Garuda totalling more than €1 million. 

But these had been reduced to zero on appeal. He agreed with Defence Counsel, Michael O'Higgins that "not one cent of tax had been withheld".

Mr O'Hanlon also agreed that in relation to a previous tax liability, Mr Lowry was anxious to discharge it personally, so that his company and people's employment at Garuda would not be in danger.

The court heard a €1.26 million settlement by Garuda was finalised in 2007. Mr O'Hanlon agreed that Mr Lowry had loaned money to his company to deal with this tax liability. 

The court heard Mr Lowry had not discussed liquidating the company and had mortgaged his family home to raise money to pay the tax.

Mr O'Hanlon said it was "possible" that confusion had arisen with Mr Lowry in 2007 about whether the €372,000 payment was made in 2002 or 2006. But he said he had no recollection of ever hearing that it was made in 2002, until 2013. He said he did not tell Revenue about the issue in 2007.

He agreed that BBT had suggested that Garuda create an invoice to have it in the company's records. He said he was not aware until 2013, of an agency agreement in relation to commission between Garuda and the Finnish company.

He also agreed that he had not seen the invoice mentioned in the letter.

The trial will continue tomorrow.