The Central Bank, the Revenue Commissioners and the Department of Finance opposed the introduction of Deposit Interest Retention Tax in 1986, but the Government still brought it in, the DIRT inquiry was told.
Mr Maurice Doyle, former secretary of the Department of Finance and a former Governor of the Central Bank, said public servants put forward policy proposals which ministers and the government either reject or accept, and there was no better example of this than DIRT.
In a trenchant statement, he said that at the time Ireland's economic statistics were those "of a Third World country". Ireland had a higher foreign debt per head of population than Poland, and a higher national debt as a percentage of GNP than Brazil, "both of which were widely regarded as basket cases at the time".
He also took issue with the Comptroller and Auditor General's report, saying it had just one mention of the Executive - the Government - and the rest of the report did not concern itself at all with the role of the Government. Some 121 people were interviewed for the report and "not one of them was a politician".
Mr Doyle - who was in "key positions" for 13 years, most of the time being investigated - said that between 1979 and 1987 there was a deficit of never less than £1 billion and ranging up to £1.6 billion. In other words, "for every £6 that the country as a whole earned, it spent £7".
He had to write a letter to the London Times refuting a suggestion in the paper that "the international bankers were about to pull down the shutters on Ireland. That was the state of affairs at the time." It was against this background that it "must be judged whether or not there was a potential flight of capital out of the country. I have to say, to my mind the miracle is that there wasn't a flight of capital out of the country."
Mr Doyle said his department raised the issue of non-compliance with successive ministers. When the committee chairman, Mr Jim Mitchell, challenged him to produce evidence of this, he said that it was not in any formal memo for government. However, it was raised in budgetary discussions and the 1983 Bill was the most stark example of this. The real fear was that capital from both bogus non-resident account holders and genuine ones would have left the jurisdiction.
He was not pointing to politicians' culpability in the passing of the legislation, but to their responsibility, Mr Doyle added.
He agreed with Mr Pat Rabbitte that bogus non-resident accounts may also have been used to evade taxes apart from DIRT, but "if by acting on this you precipitated a financial crisis, then it simply was not worth the candle".
He said the Department opposed DIRT fundamentally on equity grounds, as there was no refund provision for small savers. "People on incomes too small to be liable for income tax nevertheless had tax deducted at the DIRT rate from the interest they earned on their deposits."
He also highlighted the government's role in the 1983 Finance Bill before the introduction of DIRT. The Bill had an anti-evasion clause which was an effort to tighten up non-resident status and required depositors to establish their bona fides by signing an affidavit. At report stage the then Minister for Finance, Mr Alan Dukes, brought in an amendment which "reversed the compulsion on the depositor" to make the affidavit, "and left it to the bank's discretion to establish bona fides".
This left the matter at precisely the stage it was at before the Bill, at the bank's discretion. "The amendment simply emasculated the anti-evasion measure," he said. "The clear about-turn made by the government of the day on the Finance Bill of 1983 sent a clear pellucid signal to the Department of Finance and the Revenue Commissioners that this was not an avenue that they wanted to be pursued."
However, he agreed with Mr Rabbitte that non-resident accounts had been stable throughout the period, including after 1992 when the pound was devalued. "I think it is very interesting to note that in retrospect, the capital was quite stable under stress."
He accepted that the accounts had been stable because the holders were Irish citizens, and that there was "a flight from disclosure rather than a flight of capital". Many Irish people who worked abroad did not want their wealth disclosed to foreign tax authorities but were happy to lodge it "at home".