Current and former Irish Permanent Building Society executives yesterday told the Committee of Public Accounts they never fostered a culture of non-compliance and made strenuous efforts to tackle any wrongdoing as soon as it was discovered.
The society's single biggest case of bogus non-resident accounts was discovered in Killarney, Co Kerry in 1991. A routine branch audit revealed that £5 million in non-resident accounts belonged to local customers, opened under false names at an address of a relative with the same name in the US.
Irish Permanent's former chief executive, Dr Edmund Farrell, explained the institution took "unprecedented" disciplinary action against the manager, which culminated in him losing salary increments. The funds were reclassified as resident deposits subject to DIRT from 1991 but a decision was taken that no arrears should be paid to the Revenue. Dr Farrell's successor, Mr Roy Douglas, said the Revenue was never told about the £5 million in bogus accounts.
He suggested that because the bank manager in Killarney had been "complicit" in setting up these accounts and had acted against the best interest of the Irish Permanent, it believed the society had no responsibility.
It was only when reports concerning bogus accounts at AIB emerged last year that the building society's executives decided to double check their reading of the Killarney situation, asking a senior counsel to advise. The advice that came back was that Irish Permanent should have paid the arrears to the Revenue in 1991 and should think about squaring its situation with the taxman now .
Irish Permanent has estimated that between 1986 and 1991 the arrears due to the Revenue were about £250,000 and it is negotiating on that figure. The Revenue will decide on the scale of the penalty on top of that.
While it has been argued that in facilitating bogus non-resident accounts, many employees were acting without the knowledge of their superiors, based on the Irish Life & Permanent's legal advice, however, financial institutions are liable for the actions of their employees who have been involved in knowingly opening such accounts.
On Monday the committee will ask the Irish Life & Permanent executives about the infamous Ansbacher deposits held at its Guinness & Mahon subsidiary. Between 1970 and 1989 £38 million was deposited by Ansbacher bank's Cayman Island's operation with Guinness & Mahon on behalf of Irish-based individuals. The deposits were not subject to DIRT and, significantly, many of the depositors were also hiding funds from income tax.
Irish Permanent has offered the Revenue £52,863.37 in DIRT on these deposits but this has not been accepted. The Revenue is holding the cheque pending a final settlement.
Bankers from the State-owned ACC are due before the committee on Tuesday and are expected to contest strongly the Comptroller & Auditor General's estimate that it has a potential £17 million liability for unpaid DIRT on bogus non-resident accounts.
National Irish Bank steps into the limelight on Thursday. It has DIRT liabilities arising out of bogus non-resident accounts and from investment bonds which some of its customers used to evade tax. NIB has made a £1 million provision for any liability.