Amid political and trade union outrage over the latest banking revelations, the Government is to consider establishing a watchdog regulatory body for the financial services sector. Radical legislation to allow the Revenue Commissioners examine bank accounts is also being considered.
The regulatory body measures are expected to be brought to Cabinet within three weeks. However, legislation to give effect to the new office will not be ready until next year.
The Committee of Public Accounts has called on the governor of the Central Bank, Mr Maurice O'Connell, and the chairman of the Revenue Commissioners, Mr Dermot Quigley, to appear before it on Tuesday to answer questions arising from the controversy.
The decision to proceed with proposals to appoint an independent financial regulator emerged yesterday amid widespread anger at disclosures in Magill that the Revenue made a secret multi-million pound settlement with AIB for a fraction of the money due in DIRT tax.
The Tanaiste, Ms Harney, described the revelations as a "kick in the teeth" to the PAYE worker. She said she and the Minister for Finance, Mr McCreevy, would bring the proposals to Government shortly.
The extent of the powers to be conferred on the regulator is unclear. According to senior sources, the new authority would have powers to ensure banks and financial institutions were adhering to proper procedures.
At present, the various operations and functions of these institutions are overseen by a number of bodies, including the Central Bank, Government Departments and the Director of Consumer Affairs. The concept of a single regulator emerged from a working group set up by Mr McCreevy following the NIB controversy.
Ms Harney said yesterday that new investigative powers to allow the Revenue Commissioners trawl through bank accounts were being considered by a Government advisory group on taxation. "The Revenue don't have the power to trawl through bank accounts and they may need it," she said.
The SIPTU president, Mr Jimmy Somers, said there would be a "fearsome backlash" from PAYE sector workers if there was not "action" in response to the AIB revelations.
The chairman of the Revenue Commissioners, Mr Quigley, said they would pursue the banks for settlements if it emerged they gave incorrect information about DIRT obligations in the early 1990s.
Opposition indignation at the latest reports in Magill - estimating the outstanding AIB DIRT bill in 1991 to have been some £100 million - forced an emergency Dail debate on the issue before the House concluded the week's business yesterday afternoon.
The Minister of State for Finance, Mr Martin Cullen, said the report that many bogus accounts existed in one or more of the main banks in the late 1980s and early 1990s gave rise to "considerable and justifiable concerns".
He said the Revenue had informed him it always "took action" when it discovered individual cases of false non-resident declarations to evade tax on deposit interest.
In spite of his assurances, Opposition spokespersons criticised the Revenue for entering a deal with AIB to write off a tax liability of £86 million. Fine Gael's deputy leader, Mrs Nora Owen, demanded that the Government find answers to questions involving the Revenue and AIB.
Labour's finance spokesman, Mr Derek McDowell, said the firmament of Irish banking in the 1980s and early 1990s was "rotten to the core". Mr Pat Rabbitte, of Democratic Left, said what was in Magill was "an account of an ongoing, sophisticated programme of white collar crime".