AIB hints at legal action in row with Revenue over DIRT

AIB is considering legal action in its dispute with the Revenue following the Public Accounts Committee's dismissal of its claim…

AIB is considering legal action in its dispute with the Revenue following the Public Accounts Committee's dismissal of its claim of a tax amnesty in 1991.

In a statement yesterday, the Republic's biggest bank said it would continue to work with the Revenue towards seeking a resolution of its DIRT liabilities. But it insisted it had entered a deal with the Revenue which involved the write-off of tax arrears due between 1986 and 1991. "As the next step in the process of moving towards a resolution, AIB will continue to work with the Revenue Commissioners and sees this as the appropriate forum for taking the issue forward." AIB said it accepted its share of responsibility for the failings in the administration of DIRT and had already confirmed that abuses took place.

"However, AIB does not agree with the PAC findings on the outcome of the exchanges between AIB and the Revenue in 1991." One of the key findings of the PAC's report was that nothing which occurred during meetings between AIB and the Revenue on the DIRT issue could be construed as a deal to write off the tax arrears involved. The PAC report also questioned the reliability of one of AIB's internal memos, which purports to support its claim of a deal with the Revenue.

But AIB yesterday rejected "the PAC contention that no reliance can be placed on the written documentation generated within the bank in relation to its negotiations with Revenue. The outcome of these negotiations is a question of law and AIB is considering its position".

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The bank has refused to make any further comment on the controversy for the moment.

The Revenue is currently conducting a DIRT audit throughout all of the State's financial institutions and has been requested to undertake a fresh audit with a view to recovering what is estimated to be millions of pounds in tax arrears.

The results of such an audit could put AIB's tax liabilities somewhere between £35 million (€44 million), which is seen by the bank as a maximum figure, and £100 million, estimated by its former head of internal audit. Its eventual tax bill could rise well above £100 million to reflect penalties and interest charged by the Revenue. AIB has signalled it will challenge any Revenue assessment it is presented with on the basis that it had secured a deal which wrote off substantial tax liabilities in 1991.

As financial institutions considered the detail of the PAC's findings, the Central Bank said yesterday it was planning to seek a report each year on tax compliance from the boards of every bank to monitor a voluntary code of ethics in the sector from next year.

The Central Bank will write to the boards of 56 commercial banks early next week, asking them to draw up and submit a code of standards and ethics, which it must approve. Each of the institutions will be obliged to make an annual report on this to the Central Bank.

A separate report on tax compliance will also be requested from each institution. This must be compiled by the tax compliance officer at each of the commercial banks, who must report every year to a board meeting. The Central Bank will also seek to inspect the minutes of these meetings.

The PAC has called on the Department of Finance, in conjunction with the Department of Enterprise, Trade and Employment, to draft legislation which would require that each chief executive of a bank or building society must also become the tax compliance officer for his or her organisation.