The following is the text of comments on the DIRT issue to the Comptroller & Auditor-General by Mr Maurice O'Connell, governor of the Central Bank and formerly a senior official in the tax and foreign exchange sections of the Department of Finance:
There were a lot of things at the time that may be forgotten today. Number one, the Revenue machine was not nearly as efficient as it is today for one very good reason. It wasn't computerised, and establishing the computerisation is a pretty slow business.
In the early 1980s you had a situation where the Revenue were constantly exercising pressure, pointing out that they weren't fulfilling their duty in this area. They were very up-front and very open about that.
Various proposals were put forward, including the possibility of an affidavit which came up again and again. It came up first in 1983. Then there was the other side of the coin.
You had the composite rate for the building societies and you had the banks not having a composite rate but being obliged to make returns. These returns were being made to the Revenue Commissioners . . . They were huge; they were paper. We are thinking in 1999 that this was all computerised. It wasn't.
These returns were made, and literally, I honestly believe that you would have needed an army to go through them at the time. This was a real problem.
Side by side with that we had a very deteriorating situation. The Department of Finance and the Central Bank were rightly and totally preoccupied with the exchange rate.
The exchange rate was under constant threat and the exchange rate meant the movement of funds out of the country.
While all this was going on as well we were holding up the exchange rate through foreign borrowing. This had to be the great preoccupation of any minister for finance or any Central Bank at the time. This was the central issue. This was the plank which kept us floating.
Whatever happened, this had to take precedence over everything else . . . we did our best. We were not as efficient as we might be in terms of collecting tax. We were broadly aware of the fact that people were avoiding tax. And all this had to be corrected, this was wrong.
Everybody agreed it was wrong. For God's sake, whatever you do, don't rock the boat. The boat being the exchange rate. That was the culture; that was the necessity that drove us all forward and drove us into a situation where you can see from year to year that we were trying to do something.
We were proposing affidavits, we were talking about the DIRT tax, we were afraid of the DIRT tax. It went on and on. At the same time the level of tax was very, very high.
It is a very different situation to where we find ourselves today. I am trying to put the thing in context and give you an explanation as to why everything wasn't corrected immediately and properly and so on.
Anything sudden or anything drastic would probably have produced some very unwelcome consequences for the nation. In the event, the DIRT tax was a brave event. I think over the years, slowly but surely, it has established itself and it is accepted and it is working. I would say to you that it is working very well today. I would say we have a very compliant culture today. We have come a long way.
I am not offering excuses, I am simply trying to put it in context . . .
There was a genuine concern about what was happening and that it had to be corrected. But there were so many difficulties at the time that you could say we were slow in doing it. You could say that we didn't do it properly. You could say that years passed before it was finally established.
But we came through very difficult times in the 1980s. It was a time when you could say that, economically speaking, the State was under very serious pressure. This was all accompanied by double-digit inflation which is disastrous in its own way anyhow.