Fine Gael backbenchers in the coalition government opposed a 1983 Finance Bill section requiring depositors to sign an affidavit when they opened a non-resident account, the inquiry was told.
Mr Sean Cromien, a former secretary-general of the Department of Finance, said there was "uproar from the banks" at the Bill's section and there was a suggestion at the time that the banks had talked to the TDs. He quoted a 1988 comment of former Labour TD Mr Barry Desmond, who said if the party brought in full disclosure for banks, it would probably lose 10 seats in the following general election.
His understanding in 1983 from the Minister for Finance, Mr Alan Dukes, was that Fine Gael deputies were opposed to the original affidavit proposal section when the Bill came before the Dail.
He quoted a Fianna Fail TD, Mr Michael O'Kennedy, who said in the Dail that although the Government backbenchers were not there [in the Dail], "they share our concern in this matter".
Mr Cromien, who was also department secretary from 1987 to 1994, added that Mr Gay Mitchell of Fine Gael had said he believed it was an area of "blatant tax evasion", but the minister's subsequent amendment, which gave banks the option to request an affidavit from non-resident account holders, dealt with the matter efficiently and "takes the police state element out of it".
Mr Cromien said he knew then, along with the Mr Maurice O'Connell, then a senior Department official, that the original affidavit proposal was "a dead duck".
"My recollection was that the suggestion was the banks were talking to the backbenchers at the time, which they've a perfect right to do. That is how the matter developed."
In general it was easier, Mr Cromien said, to persuade governments to deal with tax avoidance - where legal loopholes are exploited - rather than tax evasion, where the law is broken. "The ministers I dealt with were in favour of dealing with both but they had to bring their colleagues along with them." Governments had baulked at increasing the powers of the Revenue Commissioners.
"The reason, and it was a good one, was that there was a fear that Revenue would use the powers that they were given to harass the small taxpayer."
He thought there was a recognition that a large number of people in the 1980s were only partially compliant in their tax affairs, and governments would not be thanked for giving Revenue the power to inspect bank accounts.