AIB, Revenue accounts are impossible to reconcile

AIB and the Revenue Commissioners are now at loggerheads over what precisely was agreed in 1991. And extraordinarily, there appears to be no written and agreed record of the negotiations at the time.

Given this lack of definitive evidence and the glare of publicity, the negotiations between the bank and the Revenue on whether more tax is owed are likely to be tense and getting the full truth about what everyone understood at the time will be difficult.

AIB has told the Dail Committee of Public Accounts that, in its view, it was offered an "amnesty" by the Revenue Commissioners in 1991 on all DIRT owed on bogus non-resident accounts from before June 30th of that year.

The group chief executive, Mr Tom Mulcahy, said that following the deal the bank's external auditors, Coopers & Lybrand, reviewed all documentation and correspondence surrounding the arrangements.

On Tuesday, the chairman of the Revenue Commissioners, Mr Dermot Quigley, said that no "sweet deal" of any sort was entered into with AIB in 1991. "AIB apparently takes the view that there was to be no retrospection for DIRT, but this view is not supported by the documents that have been received and Revenue is not accepting it."

The two versions of events are impossible to reconcile. The chairman of the Dail Committee of Public Accounts, Mr Jim Mitchell, said yesterday he was going to provide each of the men with a transcript of each other's remarks and seek further explanations.

When he was leaving the hearing last night, Mr Quigley - who was not the chairman of the Revenue at the time - acknowledged there was a conflict of evidence in relation to retrospection. He said, crucially, that the Revenue was not given the full information by the bank at the time of the 1991 agreement. This will be the Revenue's key argument in pushing for more tax. How much the bank might owe is far from clear.

The five AIB executives present yesterday, in the words of Mr Mitchell, "rubbished" the 1991 estimate of the former AIB group internal auditor, Mr Anthony Spollen, that the bank's potential liability - i.e. the size of the DIRT arrears - could be as high as £100 million. Yet, the bank's executives said they had no alternative figure, that they had never computed one, and that their efforts at arriving at an estimate, under way since April of this year, was ongoing. Many members of the committee said they found this hard to believe. At this stage the bank surely has a rough idea of what it might owe.

The bank has already said that, as a result of the exercise carried out in 1991, there was an increase of £14 million in DIRT payments for 1990-1991 and 1991-1992, which was in turn deducted from customers' accounts.

Yesterday, the five senior AIB executives explained that these increases in DIRT payments were due to a number of factors, including interest and tax rates, and the volume of deposits involved. They could not say how much was due to accounts being reclassified as resident accounts. If the executives had provided such estimates, then a stab could be taken at the overall tax liability from 1986 on.

The AIB executives said they did not know how many accounts had been reclassified as a result of the 1991 Revenue initiative.

They also said they could not say how many bogus accounts were in the system at the time, and that a figure of 53,000 quoted by Mr Spollen, was based on mistaken calculations. They will continue to be pressed for an estimate on this issue.

Mr Philip Brennan, head of group taxation, said that initially in 1991 the Revenue had wanted the bank to estimate its DIRT liability on bogus accounts, back to the introduction of DIRT in 1986. This was subsequently changed during conversations and meetings, and no estimate was ever sought, he said. However, the bank did not have any document from the Revenue where it confirmed that the agreement involved no liability for DIRT arrears, though it did have contemporaneous notes taken by a bank official during contacts with the Revenue.

Mr Mulcahy said it was an industry-wide problem and that any bank which had independently acted on the bogus non-resident accounts issue in the late 1980s, would have gone out of business. Mr Pat Rabbitte, (Democratic Left) was quick to point out that this indicated potentially enormous DIRT arrears. Just how large such arrears might be remains to be seen.