Mick Wallace has pledged to use half his TD’s salary to settle his VAT bill with Revenue.
The Wexford Independent formally apologised for lying to the taxman about money owed by his former construction firm.
“I am taking steps to immediately arrange that half my Dáil salary will go towards paying MJ Wallace Ltd’s VAT liabilities with the Revenue,” said the emotional TD as he addressed the Dáil.
Mr Wallace said he feels obliged to cover the company’s €2.1m liabilities out of his own pocket as a mark of “solidarity to the Irish citizens”, whom he now works for.
He maintained he made an error of judgment when he lied about his VAT bill as the property bubble burst, but stressed his personal finances were always under control.
“The manner in which the VAT was dealt with was, in hindsight, an error of judgment made under pressure at a time when the approach of the banks were changing dramatically and the value of property was dropping sharply,” Mr Wallace went on.
“There was never an intention that the money that was owed would not be paid to Revenue and the motive behind the underpayment was to delay payment in order to see out this difficulty.”
Mr Wallace, who earns more than €130,000 a year in pay and perks, also admitted he had considered resigning his position, but said he was not a quitter. His actual salary is around €90,000, which would mean he is committed to paying back about €45,000.
The property developer turned politician told Revenue he knowingly under-declared €1.4m in VAT in 2008 and 2009, as tax chiefs were carrying out an audit investigation into his business MJ Wallace Ltd.
Mr Wallace had initially distanced himself from the tax bill which piled with penalties and charges, stands at €2.1m.
He stated it was the company’s liability and that as it is now insolvent, could not be paid back to the authorities.
“This was not a cavalier comment, but a statement of fact,” he went on.
However, the 56-year-old said he was aware that his remarks had upset Irish citizens who were struggling due to the dire economic climate.
The usually flamboyant Independent was on the verge of tears as he addressed his colleagues – notably without his trademark pink T-shirt and instead dressed in a more sombre dark blue.
He spoke for around 10 minutes, despite being allocated 15 minutes in the chamber.
Mr Wallace said an agreement to pay back the VAT owed was reached in 2010, but following a court case at the end of last year in which he was ordered to re-pay €19m to ACC Bank, it became clear the company could not make its repayments.
The developer had made the decision to lie to Revenue about the company’s VAT returns after it started struggling to finance a project it had committed to in 2008.
He said his bank had pledged more money than it would ultimately lend.
The company, which was forced to make redundancies, then came under pressure from suppliers, sub-contractors and banks, which were becoming “increasingly aggressive”.
It was therefore unable to pay its VAT at the time, although Mr Wallace had hoped to repay the full amount within six to 12 months.
“It was feared that if the problem was revealed at the time that either Revenue or the banks would have moved against the company and put it out of business,” he said.
Government chief whip Paul Kehoe agreed to let Mr Wallace address the chamber after his request was initially refused by Dáil chairman Seán Barrett.
Several TDs have called on the Independent to resign since the scandal broke last week, while he was also asked to leave the Dail’s technical group.
Meanwhile an ethics watchdog – the Members’ Interests Committee – has requested Mr Wallace to authorise Revenue to disclose their dealings with him.
Chairman Thomas Pringle said the group needs a timeframe as to when Mr Wallace informed the tax chiefs of his VAT dodging and exactly when the settlement was reached.
If it finds the platinum-haired politician had these dealings with Revenue after he became a TD, it will have grounds to investigate.
The group could, if it investigates Mr Wallace and finds against him, suspend the deputy from the Dáil for up to 30 days without pay.