A senior tax inspector has said that he was appalled and flabbergasted at the extent of bogus non-resident accounts revealed in the media. Antoin MacCarthaigh, a former member of the investigations branch of the Revenue Commissioners, said that he had not the remotest idea during the 1986 to 1990 period of the extent of the bogus accounts. He said that he regarded bank management as pillars of society licensed by the state to generate profit and he would have expected very high levels of compliance.
Mr. MacCarthaigh told the public accounts committee that he believed Allied Irish Bank condoned breaches of legislation relating to non-resident deposit accounts. He outlined correspondence between him and AIB in 1983, after he discovered evidence of bogus non-resident accounts at two branches of the bank. He said that AIB's response to his discovery was to engage in a damage limitation exercise. He added that the bank refused to disclose the names of individual branch managers responsible.
Mr. McCarthaigh also outlined efforts made by the revenue commissioners to establish contacts in all of the financial institutions. He said that, while other banks were open and co-operative, his relationship with AIB was difficult. The committee also heard that the Revenue held the opinion that bonus schemes, proposed by senior management in the two main banks, may have encouraged individual branch managers to contravene the rules relating to non-resident deposit accounts.
The chairman of the revenue commissioners, Dermot Quigley, told the Public Accounts Committee that the Revenue Commissioners had no powers to tackle DIRT evasion until this year. In his opening statement, Mr. Quigley said that DIRT tax constitutes less than one per cent of the £20 billion collected by the commissioners each year. He said that he believed, in collecting £2.6billion in DIRT since 1986 and intervening to collect £42m put at risk through various schemes, they had acted reasonably in discharging their duties. Mr. Quigley said that he was generally happy with the report of the Comptroller and Auditor General on DIRT evasion through bogus non-resident accounts.
Mr. Quigley added that the introduction of DIRT in 1986 did not solve the problem of bogus non-resident accounts. He said that the new powers given to the commissioners in the 1999 Finance Act were being used to the full at present in ensuring the collection of DIRT tax. He also said that it was facile to suggest the Revenue Commissioners could act independently of the general economic situation in the 1980s. While asserting the independence given to them, he said, it was wrong to suggest that the revenue could act without reference to the economic climate.
The enquiry heard, before lunch, that Irish Banking Federation records of a 1987 meeting on the regulation of non-resident accounts was broadly in agreement with Department of Finance records, and contradicted those of Allied Irish Banks. Current and former tax inspectors have been sworn in to the enquiry and will begin giving evidence later this afternoon.
The Director General of the Irish Banking Federation, James Bardon, told the Public Accounts Committee that at no stage did his organisation condone or defend the existence of bogus non-resident accounts. Mr Bardon was responding to a submission by Deputy Pat Rabbitte that the Irish Banking Federation had advocated that Ireland should be a "disclosure free zone with no supervision and no monitoring of non-resident accounts”.
James Bardon told the committee that the federation had made representations to the then Minister for Finance, Ray MacSharry. He said that there were fears of an outflow of capital from the country if non-resident accounts were liable for inspection by the revenue authorities in other countries. He said that official records of the meeting with the minister were broadly in agreement with the Department of Finance records.
The records suggested that the minister was sympathetic to the case being made by the IBF and that he would look into the matter in the context of the 1988 budget. However, the federation's records did not contain any details of a commitment made by the minister that accounts would not be inspected, as had been contended by AIB. The provision allowing for the inspection of such accounts was included in the 1986 Finance Act which introduced DIRT, and was due to come into effect in 1987.
