Bringing banks to book on DIRT

A lot of noise has been made this week over the revelations in the Comptroller and Auditor General's report on the widespread evasion by financial institutions and their customers of Deposit Interest Retention Tax. It now appears to be accepted that millions of pounds is owed to the Exchequer in taxes on bogus non-resident accounts and the revenue is chasing it up.

All the furore goes to show that AIB Bank may well prove to have been correct when it said that evasion of DIRT - by channelling depositors' money into DIRT-free non-resident accounts, even though the customers were tax residents in the State - was an industry-wide practice in the 1980s and early 1990s.

What now seems certain from Mr John Purcell's report is that the Central Bank, the Revenue Commissioners, the Department of Finance and successive governments were fully aware of what was going on and chose to do nothing about it. They may argue about a fear of the flight of money from the State but the simple truth is that they appear to have chosen to ignore the law of the land for "the greater good". Of course, the law is there to ensure this greater good.

There has been much talk from union officials about "fat cats" benefiting from tax-free deposits and calls for jail sentences for tax evasion. Given the scale of the evasion and the apparent collusion of the banks and the State apparatus, there would be no room in the jails for other offenders and many more than so-called fat cats would be doing time.

The truth is that nobody comes out of this looking well - not the customers, the banks, the regulators or the State. The biggest loser may well be the Central Bank which is arguing strongly for the retention and expansion of its powers.