The Revenue Commissioners are set to face further questioning of their role in relation to the settlement of AIB's tax liabilities in relation to DIRT to on non-resident accounts. The chairman of the Revenue, Mr Dermot Quigley, is to appear before the Oireachtas Public Accounts Committee next Tuesday and is likely to face detailed questioning on the issue.

Meanwhile, the Government will face questioning on its response to the revelations and how much the Fianna Fail/Progressive Democrat government at the time knew, with the Labour leader, Mr Ruairi Quinn, calling for new prosection powers to be given to the Revenue Commissioners.

Source believe that the Revenue is likely to have struck the deal to accept £14 million from AIB in 1990/91 as part of a "global settlement" of tax liabilities in the area, representing an agreed estimate of what the bank owed. However, the Commisioners, while not commenting directly, have indicated that they believe that they were not provided with full information by the bank at the time.

This indicates that they did not accept a final settlement of £14 million of behalf of known laibilities of £100 million, although the full details have still to emerge.

On the basis of revelations earlier this year that AIB had some 53,000 bogus non-resident accounts in the late 1980s and early 1990s, the Revenue is believed to have initiated investigations of AIB and the other banking groups and is now close to completing these inquiries.

The extent of any further tax liability facing AIB or other financial institutions is unclear, but the Taoiseach, Mr Ahern, reiterated yesterday that any outstanding tax debts must be paid. AIB, meanwhile, was making no further comment.

The extent of bogus non-resident accounts became clear in the 1993 tax amnesty, when £1.5 billion of unpaid tax liabilities were "forgiven" in return for a payment of 15 per cent of the sum owed. Sources believe that a large proportion of this money resided in such accounts and that opening accounts was a common practice in a number of institutions. The relevations are expected to give fresh impetus to discussions at official level on new powers for the Revenue Commissioners to combat tax fraud.

Meanwhile, the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy, are to hold discussions on introducing a new regulator for the financial sector. An inter-departmental working group has tabled a number of options for such a regulator, ranging from establishing it within the Central Bank to setting up an entirely new agency, with the latter options believed to be favoured by Ms Harney.

The move highlights Government unhappiness with the regulatory role of the Central Bank. However, the bank is understood to be unhappy with much of the criticism of its role and sources point out that, under Central Bank legislation, it is unable to pass on anything it discovers to the Revenue Commissioners and cannot publicise any sanctions it takes against the banking sector. Meanwhile, the Labour leader, Mr Quinn, has said that, if necessary, the Minister for Finance, Mr McCreevy, should use the next Finance Act to ensure that tax validly due from AIB is properly collected.

He said Mr McCreevy should signal in the budget what he intends to do about the revelations in Magill magazine. He said legislation might be necessary to recover monies "witheld", irrespective of when they became liable for payment. The Government of the day would also normally be informed of major settlements, he said, and his party would be questioning what the Revenue told the Fianna Fail/ PD government at the time.

"The Minister for Finance must meet immediately with the chairman of the Revenue Commissioners to examine in detail the transactions which took place in relation to the settlement of outstanding DIRT tax arrears," he said.

He added that the Government's reaction to the issue of AIB's DIRT liability is "totally inadequate". He said the proposal from the Tanaiste for a new regulatory body, would "not recover one pound for the taxpayer".

He added: "The Revenue Commissioners must be given the right to initiate prosecutions where they have sufficient evidence to commence a case. The present system where responsibility for prosecutions rests with the Director of Public Prosecutions is not working."

However, a Government spokesman said last night that the Taoiseach had made it clear that the Revenue Commissioners would act to collect any taxes outstanding.