The Public Accounts Committee has been questioning senior tax officials on their failure to act against DIRT tax evasion through bogus non-resident accounts in the major banks. Committee chairman Jim Mitchell said the Revenue Commissioners were on the one hand seeking greater powers to investigate the banks while not using the powers they already had.
Throughout the week, tax inspectors have been telling the Public Accounts Committee that they were aware of bogus non-resident accounts, but that they did not have the power to investigate them. Revenue officials described how, until last year, there was one law for all other businesses and another for the banks. However, today, they were challenged by Committee chairman Jim Mitchell, who accused the Revenue of not using the powers they already had.
He referred to the 1986 Finance Act, which gave tax inspectors the power to view documents relating to non-resident accounts. However, after the law was passed, tax inspectors were told by their superiors not to use those powers until further instructions were given. According to Deputy Mitchell, those instructions did not come for nearly 12 years. The committee also heard from Sean Moriarty, a senior official who put forward measures to tackle tax evasion in 1992. Among other proposals, he wanted all the major banks to be called in and asked to regularise their non-resident accounts. However, his proposals were rejected by his superiors.
A principle tax inspector told the inquiry earlier that no politician had put pressure on him to be lenient in applying to law to one of their constituents. Pádraig Ó Donghaile said that they had had plenty of representations from elected representatives on the tax concerns of their constituents, but none of that nature. Mr. Ó Donghaile was asked by the Public Accounts Committee chairman, Jim Mitchell, if the Revenue Commissioners had not inspected non-resident declaration forms held at the banks, because it was view of the Minister for Finance that it should not be done. He replied that had the impression that there were other considerations involved, and he agreed that the risk of a flight of capital was the main one.
The Committee has been told that, in 1991, the Revenue Commissioners believed that they might be owed up to £750m in DIRT tax on bogus non-resident accounts. £4billion was held in non-resident accounts at the time. The committee's special public hearing also heard that the Revenue uncovered almost half a million pounds owned in DIRT tax at an AIB branch, five years after the bank was supposed to have rectified the situation. The discovery was made in connection with a branch of AIB in Castlebar, County Mayo. The discovery was made 5 years after the bank was supposed to have "cleaned up its act" with regard to DIRT.
Pádraig Ó Donghaile, who was principal tax Inspector with the investigations branch at the time, said the discovery was made in 1996. Deputy Pat Rabbitte pointed out that this was 5 years after the bank's 1991 dealings with Revenue on the issue of DIRT. Mr. Ó Donghaile said that, at the time, he was assured by the bank that it was a once-off scenario and a maverick official had been responsible. The official had since moved to another financial institution and was never prosecuted by the Revenue.
The committee also heard how tax inspectors uncovered evidence of tax evasions among business people in County Clare. Mr. Ó Donghaile said that the one common denominator was that they were all customers of Bank of Ireland in Milltownmalbay. Bank of Ireland was contacted about these concerns and appeared to be moving in the right direction, according to Mr. Ó Donghaile. However, Deputy Rabbitte referred to comments in the report of the Comptroller and Auditor General’s report which said that the Revenue Commissioners had failed to use their bargaining powers with the bank after this discovery to get more information on non-resident accounts.
The inquiry will resume on Tuesday, when the Revenue commissioners will be questioned on meetings that took place with AIB bank in 1992 after evidence of DIRT tax evasion was discovered.
