Civil servants round on their former masters to dig the DIRT

It was left to former civil servants to lay the blame for the years of inaction in relation to bogus non-resident accounts at…

It was left to former civil servants to lay the blame for the years of inaction in relation to bogus non-resident accounts at the door of politicians.

The former governor of the Central Bank, Mr Maurice Doyle, and a former Department of Finance secretary, Mr Sean Cromien, pulled no punches in explaining why they believed wide-scale tax evasion had been allowed to continue for so long.

Mr Doyle was clearly annoyed by the contents of the Comptroller & Auditor General's report which uncovered widespread use of bogus non-resident accounts and years of official inaction between 1986 and 1989. As no politicians had been interviewed, he suggested, the inference was that senior officials at the Department of Finance, the Central Bank and the Revenue had turned a blind eye to the abuse.

Both Mr Doyle and Mr Cromien pointed out that policy decisions were the business of politicians. Civil servants gave advice and made proposals to ministers. Once such a proposal was accepted by the minister of the day it became "his proposal", Mr Doyle stated.

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He told the inquiry it was crucial to take account of a decision taken by the Fine Gael-led Government of 1983 - three years before the introduction of DIRT - to introduce an anti-evasion clause in the Finance Bill. The clause basically insisted that anyone opening a non-resident account must sign an affidavit to confirm the identity of the beneficial owner of the funds. This was amended, however, with the new version putting the onus on bank managers to satisfy themselves of the identity and address of such account holders.

Mr Doyle said the amendment effectively left the situation unchanged - leaving it to the discretion of the banks to determine which accounts were bogus. "It was an Irish solution to an Irish problem," he said. "The legislation was unenforceable and unworkable and was known to be."

There was much debate on the origins of the amendment. Mr Cromien said it was inspired by widespread opposition on the part of Fine Gael backbenchers. The banks were clearly lobbying for the clause to be changed, he said. At that stage he knew the affidavit was a "dead duck".

Mr Gay Mitchell TD rejected this version of events, highlighting a recommendation sent to the then-minister, Mr Alan Dukes, by the governor of the Central Bank, Mr Maurice O'Connell, who was at that time an official at the Department which recommended the amendment, which was adopted.

Mr Cromien said he believed this note was sent to the minister after the decision to adopt the amendment had been made. Civil servants were used to having their recommendations rejected and it was their job to come up with a position that would be accepted by the minister.

In explaining his actions in relation to bogus non-resident accounts, Mr Cromien said Department of Finance officials put proposals to the Government on tax evasion before each Budget. "It was always easier to persuade governments to deal with tax avoidance than tax evasion," he said. The only way to deal with it was to give the Revenue very strong powers to examine bank accounts but governments balked at this suggestion.

The Dail records show that anytime the suggestion was discussed someone always described it as "draconian". Mr Cromien quoted from a statement made to the Dail by former MEP Mr Barry Desmond, which warned that any political party that backed giving the Revenue the power to examine bank accounts would lose 10 seats at the next election.

The officials acknowledged that while they were aware of some degree of tax evasion in relation to non-resident accounts, they were deeply concerned that any measures to curb this abuse would trigger a huge outflow of funds from the economy. Any flight of capital would undermine the value of the currency and bring pressure to bear on interest rates.

The committee raised the contents of documents which show a tacit agreement existed between the Department of Finance and the Revenue Commissioners that no move would be made to crack down on the bogus accounts without consultation. Mr Cromien said he believed this was directed by the then-Minister for Finance, Mr Ray MacSharry, based on concerns that any flight of capital would have dire economic consequences.