State plans to seize millions sitting in dormant accounts

New legislation should be in place by the summer to allow the State to seize millions of pounds held in dormant or unused bank…

New legislation should be in place by the summer to allow the State to seize millions of pounds held in dormant or unused bank accounts and use them to fund social and community projects.

The Minister for Finance, Mr McCreevy, said yesterday that past estimates suggested there was anything between £15 million and £20 million (€19E 25.4 million) lying in dormant bank accounts across the State although he believed the actual amount was substantially higher.

Mr McCreevy said there was no need for anyone to be concerned that these funds would be mistreated and there would be a provision allowing anyone who was found to be entitled to the proceeds of a dormant account to make a case to have those monies released to them.

The new legislation will define what constitutes a dormant account. Some sources suggest Mr McCreevy is considering designating a savings account which has not been used for five years as dormant, although constitutional issues will have to be considered in setting a time-frame.

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Speaking at the publication of the Finance Bill, Mr McCreevy said his Department had already been examining the issue of dormant accounts before the Dail Committee of Public Accounts (PAC) sub-committee issued its recommendations and was now well advanced in its efforts to prepare suitable legislation.

The move is in line with a key recommendation of the ail Public Accounts Committee PAC, which called on the Government to ensure that the State, rather than the financial institution, would have use of such substantial funds.

The PAC, which investigated the widescale evasion of DIRT at Irish banks and building societies in the 1980s and 1990s, pointed out that dormant accounts were providing a huge source of free capital to the banking sector which should be confiscated as a means of "reparation" for its role in facilitating massive tax evasion.

Another punitive measure proposed by the PAC - the imposition of a one-off levy on the banks as a further penalty - has been dropped. The Attorney General has advised that such a move would be unconstitutional as it would be an additional penalty on the banks over and above any penalties imposed by the Revenue Commissioners.

The Revenue is currently examining all documents relating to non-resident accounts going back to the introduction of DIRT in 1986. The exercise is expected to raise tax demands of hundreds of millions of pounds.

Each bank found to have had bogus non-resident accounts will have to pay any DIRT arising on those accounts in full to the Revenue, together with interest and penalties. Mr McCreevy said the combination of tax arrears, interest and penalties would make for "very severe" tax settlements which would be published. The Revenue is due to report the results of this "look back" exercise to the PAC before November 1st. To assist the Revenue, the Finance Bill allows for the hiring of suitably qualified people or the engagement of consultants to assist with these audits.

The Minister said the full cost of this exercise would be met by the State and not by the offending financial institutions as recommended by the PAC, as to impose such an additional cost would also be unconstitutional.

The PAC had also called on the Government to amend company legislation to require chief executives of Irish financial institutions also to take on the role of tax compliance officer. This was not included in the Finance Bill, but Mr McCreevy said it would be dealt with as part of the ongoing review of the regulation of the financial sector.

PAC chairman Mr Jim Mitchell TD broadly welcomed the adoption of many of the committee's recommendations yesterday.