The first settlement between a bank and the Revenue arising from the DIRT tax affair has left some of the State's biggest financial institutions facing multi-million pound tax bills far in excess of their own estimates.
The £30.5 million settlement with Bank of Ireland is more than 10 times the bank's own estimated liability of £2.8 million, suggesting that other institutions, such as AIB, ACCBank and National Irish Bank, can expect potentially huge tax demands in the coming months.
The Revenue has also said it will pursue the holders of bogus non-resident accounts, which were at the centre of the DIRT tax affair, once its audit of financial institutions is complete. The institutions will be asked to explain the source of funds held in such accounts and the Revenue will seek to collect income tax and penalties where they apply.
The Revenue is now in the final stages of the look-back audit ordered by the Dail Public Accounts Committee following the DIRT Inquiry. Some 37 financial institutions are involved and the Revenue must report its findings to the PAC in November.
Bank of Ireland is the first to reach a settlement. Following extensive audits, the Revenue determined that the bank had a DIRT tax liability of £12.75 million on bogus non-resident accounts held between 1986 and 1999 - way above the bank's own estimate of £1.5 million.
The Revenue then applied interest and penalties totalling £17.75 million, bringing the final tax bill to £30.5 million against the £2.8 million final settlement anticipated by the bank.
Bank of Ireland is the State's second-biggest bank but evidence given to the DIRT inquiry suggests it was not one of the biggest offenders when it came to facilitating tax evasion for customers.
AIB is expected to face the biggest tax bill, with estimates ranging from between £35 million and £100 million. ACC is also braced for a hefty tax demand on liabilities ranging between £1.5 million and £17 million.
The Bank of Ireland settlement gives the first indication of the basis on which the Revenue is recouping taxes. In its case, the penalties and interest, which are based on the number of bogus accounts held during the 13-year period, accounted for around 60 per cent of the total settlement.
Public Accounts Committee chairman Mr Jim Mitchell TD suggested that the banks should collectively make an act of reparation in addition to tax settlements to atone for facilitating widespread tax evasion.
AIB and ACC said they were continuing to co-operate with the Revenue.