The Irish Congress of Trade Unions (ICTU) was informed by trade union members of the Revenue Commissioners in 1990 that banks were abusing the non-resident accounts system, the DIRT inquiry committee has been told.
Two of the Revenue unions stated that the non-resident procedure was "a joke" and the banks were competing with each other to evade DIRT.
ICTU made a submission on its concerns to the Department of Finance which, in turn, sought a briefing note from Revenue.
Mr Sean Moriarty, an assistant secretary in Revenue, said that the Revenue unions were, presumably, in the same position as himself, which was that there were suspicions of a sizeable problem.
But the Revenue had no power to check accounts, although the problem apparently had crystallised by then within AIB.
The committee heard that in advance of a meeting between the Department of Finance and ICTU officials, the Department requested a briefing from the Revenue Commissioners.
A letter from Mr Michael Murphy, of the Department, to Revenue stated: "ICTU seem to be particularly well informed in relation to the position of evasion, collection and enforcement, undoubtedly due to the prompting of the Revenue unions."
Mr Jim Mitchell, the committee chairman, said Revenue staff knew the banks and the financial institutions were competing with each other to be the best tax-evader.
Mr Moriarty replied that neither the unions nor the Department could get figures "any more than we could do ourselves".
Mr Pat Rabbitte said that ICTU's knowledge of the problem implied that the junior ranks in Revenue had a good feeling for what was going on and were "pretty disgusted" that nothing was being done. Mr Moriarty said the feeling would have been coming through the investigation branch.
"It's fair to say that a lot of junior people had a very good feel for what was happening," he said.
Earlier in his evidence, Mr Moriarty said AIB had probably been treated a little harder than the other institutions in being asked to tidy up its non-resident accounts.
"They had got a little bit of the brunt of what would have come to all the financial institutions," he said.
Asked about Revenue's prosecution policy, Mr Moriarty said that in 1991 the advice was that it would have been difficult to prove the collusion of bank officials in drawing up bogus non-resident declarations.
Taxpayers would have signed the forms "and you were trying to prove that the official somehow egged him on or attempted to get him to sign the form".
AIB was told it would not be prosecuted as part of Revenue's proposal to the bank, but that was probably a bargaining ploy.
There were no prosecutions throughout the period, he said.
Mr Moriarty added that following the rejection of his paper on recouping DIRT in 1992, the tax slipped down his list of priorities.
"I felt it was not the organisational priority that I thought it might have been," he said.