Substantial misinformation about the level of non-resident deposit accounts held in Allied Irish Banks was given at a meeting between the Revenue Commissioners and bank officials in 1991, a senior tax inspector told the DIRT inquiry yesterday.
Mr Tony Mac Carthaigh described how he and the three other senior tax inspectors in Revenue's investigation branch had a gut feeling in 1990 that there was widespread abuse of non-resident bank accounts. He and his colleagues were getting a feeling for what was "going on" although they had nothing substantial when AIB officials visited them for the meeting on February 13th, 1991.
The meeting followed tax cases he had worked on, involving AIB branches in Templemore, Co Tipperary, and Skerries, Co Dublin. He had written "some pretty straightforward correspondence" and eventually got an admission of the culpability of the branch managers involved although the cases had been settled with the taxpayers over two years previously, said Mr Mac Carthaigh.
AIB had made the effort, he said, "to resolve the impasse", telephoning him and proposing the meeting.
"During the course of that conversation, whether it was by divine inspiration, by prompting or otherwise I don't know, but it appears that I decided that the compliance of the entire bank situation should be discussed."
Mr Pat O'Mahony, manager of branches, had said during the meeting there was "in his words, a major problem" although he was not forthcoming with details.
Mr Mac Carthaigh added that "substantial misinformation" was given out at the beginning of the meeting and he had an "absolute and total non-belief in most of what they told me".
The inspectors were told that AIB's non-resident account deposits had dropped from £900 million to £350 million.
"I know that is patently not true," he said. He believed the true figure for the deposit levels at the time was £983 million.
He and his colleagues had tried to get information on bogus non-resident accounts but failed. There had been an admission of a major problem, but it had been fudged. No attempt was made to quantify it and there was incorrect information of the amounts. In a letter to AIB following the meeting, he suggested an examination be carried out on the numbers of non-resident accounts held in the various branches and any "unexpected preponderance" be investigated by the bank's internal audit and notified to the Revenue Commissioners.
It was a suggestion, he said, as he had no legal power to require them to comply. He offered the "incentive" of no prosecution, no penalty, no publication, and reasonable interest on payments due on any bogus accounts. "It was a proposal on the understanding that the bank would come back and make a full and voluntary disclosure and dispose of the problem," he said.
But he added that there was a reference in the Comptroller and Auditor General's report to AIB reclassifying £15 million as DIRT-liable in the year to December 1990, but no tax had been paid.
"AIB gave themselves an amnesty. They had no intention of ever paying tax on any of this money, and there is the proof of it," he said.