Internal Revenue report not acted upon

Up to £750 million in DIRT taxes, interest and penalties was the cost to the Revenue Commissioners of bogus non-resident accounts by 1992, the Dail Committee on Public Accounts was told yesterday.

Yet an internal Revenue Commissioners' report suggesting ways to recoup the money was not acted upon.

Giving evidence to the Committee on Public Accounts, Mr Sean Moriarty said that in 1991 he was assigned to implement the National Audit Programme, in the wake of self-assessment. He had drawn up a report which would ultimately go to the chairman of the Revenue Commissioners detailing what were then just suspicions.

Mr Moriarty said he had worked on the report for much of 1991 and expected to have it finished by the middle of that year, but due to industrial difficulties it was not completed until mid-1992.

In the report Mr Moriarty told the board of the Revenue Commissioners that he believed there were substantial funds undisclosed in bogus non-resident accounts. The practice, he suspected, was widespread and involved the complicity of local managers in banks and other financial institutions across the State. Mr Moriarty's suspicions were fuelled by the knowledge that in 1986 building societies had 1.9 per cent of their total deposits marked down to non-resident accounts. That was the year that Deposit Interest Retention Tax (DIRT) was introduced and by 1992, the building societies declared more than 11 per cent of their deposits to be based on non-resident accounts.

It was, he suggested, an extremely suspicious situation, made none the less suspicious because in the building societies' advertising, the largest word was the word "confidential".

Ultimately, Mr Moriarty concluded in his report that a number of actions could be taken by the Revenue Commissioners. The board of the Revenue Commissioners could, he felt, "call in the chief executives of the financial institutions and eyeball them" or get the banks' agreement to appoint an independent auditor at their own expense, to ascertain that the non-resident accounts were genuine.

The Revenue Commissioners were missing out on as much as £750 million by 1992, he calculated yesterday. He said he knew that the Revenue Commissioners had been pushing for more powers but, in his judgment, would not get them. The report he drafted was as much as he could do to "make some attempts" in recouping cash. Questioned by Mr Sean Ardagh TD, Mr Moriarty agreed that he was "disappointed" when his report was dismissed.

He was, he said, aware that there were other people who for no selfish reason felt that this money should not be chased. There were people with the best interests of the State at heart who felt that the danger of a "flight of money" from the banks and building societies to another jurisdiction would be harmful to the economy as a whole.

Mr Moriarty submitted his report and was told that the Revenue Commissioners would not be acting upon its recommendations.

Ultimately Mr Moriarty was left with little option but to accept that the board of the Revenue Commissioners had very little evidence on paper for the conclusions he was drawing.