Banks could `sleep easy' on accounts, Rabbitte

The former chairman of the Revenue Commissioners was told by a member of the DIRT inquiry that the banks could sleep easy at …

The former chairman of the Revenue Commissioners was told by a member of the DIRT inquiry that the banks could sleep easy at night in the knowledge that the non-resident bank account system was not being challenged.

Mr Pat Rabbitte was asking Mr Cathal Mac Domhnaill why proposals drawn up by an assistant secretary, Mr Sean Moriarty, in 1992, to tackle DIRT evasion using the Revenue's existing legislative powers were not adopted.

Mr Rabbitte also put it to Mr Mac Domhnaill that taking Mr Moriarty's tax proposal of 1992 as advocating an amnesty was "a woeful injustice to the author". It implied Mr Moriarty was in favour of an amnesty when he was trying to shape a number of proposals, in the context of the existing legislation, that would "fly".

Mr Mac Domhnaill, who has already told the committee he was against the proposals primarily because they supported an amnesty, said that at the time he had to form a view of those proposals which were focused on DIRT evasion. "I had to make a judgment," he said.

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By adopting them he would have been excluding himself from other courses of action on the broader tax evasion taking place in deposit accounts and insurance products.

The Revenue had made submissions to increase its powers in 1988, with the introduction of self-assessment, and again in the lead-up to the 1992 Finance Bill.

He added that the late Mr Tony Brown, a principal inspector, or "somebody under him", had put together SIM 263, a circular instructing inspectors not to inspect declarations of non-resident accounts until further notice.

He did not know why what seemed to be "a temporary holding option became an almost permanent moratorium". "There are eight stacks of these instructions, everything, all manner of actions that have been taken," he said.

The exercise of the power to inspect the declarations would have had "a minuscule effect in tackling the problem", he said.

Mr Rabbitte put it to Mr Mac Domhnaill that he had not been waging psychological warfare against the banks, in contrast to Mr Tony Mac Carthaigh, a senior inspector, who had said he was.

"They could sleep easily in their beds at night, confident in the knowledge that you didn't share Mr Mac Carthaigh's frame of mind," he said.

Mr Mac Domhnaill said he had made a judgment on the evaluation of the leverage he had from existing legislation.

The chairman, Mr Jim Mitchell, said a deterrent effect was lost through SIM 263 because the banks knew the declarations were not being checked. The value of comparing the number of declarations in one bank and another, or from region to region was also lost, as was the overall picture of how much DIRT was being paid compared to the amount of money held on deposit.

The committee also heard the Department of Finance was not approached in 1992 about suspicions the Revenue Commissioners had that one State-owned bank was abusing the non-resident account system.

Mr Mac Domhnaill was asked why the Department, which is represented on the board of ACC, was not informed of Revenue's concern, which, as one district inspector put it in 1989, was that "ACC, as a matter of policy, was facilitating the evasion of DIRT for their clients by setting up fictitious UK accounts".

Mr Rabbitte asked: "How could an agricultural bank, you know, be a big hit with the international high net worth individuals of Germany or France?"

Mr Mac Domhnaill said the suspicion was there but hard evidence was needed before he could take action. Tax legislation had to be enforceable. He wanted a hard case, "even one".