The revelations about offshore bank accounts marketed by National Irish Bank (NIB) are unsettling. Since 1992 the bank has been selling a product which allows its customers to take out an insurance policy with an Isle of Man company, Clerical Medical International (CMI). Many of the customers have chosen to have the money held in a deposit account linked to the insurance policy and in turn CMI has deposited the bulk of the funds back with National Irish Bank.
Since the lifting of exchange controls, Irish residents have, of course, been allowed to invest money overseas and in turn the economy here has benefited from substantial inward investment in Irish institutions and financial instruments. The mobility of investment capital is now a fact of economic life and many Irish residents hold legitimate investments outside the State.
Some of NIB's account holders may have chosen the Isle of Man accounts for investment purposes and as a means of deferring tax liabilities for some years, until the money is returned to the State. And many Irish investors will have invested money in overseas funds marketed by CMI and other similar companies, attracted by the prospect of a capital gain.
However, some aspects of the investment scheme which has now been uncovered are unusual. On the face of it, there would be little attraction in the scheme for Irish residents, apart from hiding funds from the Revenue Commissioners. The deposit funds would not - by their nature - offer an attractive return, unlike an investment in, say, an overseas equity fund, which would be a more normal vehicle for an investor wishing to accumulate funds overseas. And depositors would have to pay a commission to NIB to open the accounts. It is thus legitimate to ask how much of the £23 million now lying in the deposits has been declared to the tax authorities?
Several investigations are now under way. NIB's parent, National Australia Bank, has sent a team to examine the situation and the initial reaction from NIB is that it does not, as an institution, condone tax evasion. The bank must thoroughly investigate the way the accounts were marketed and whether, as has been alleged, it was used as a vehicle to move funds from older accounts not known to the tax authorities.
The Central Bank is also looking into the issues raised and wasted little time in sending a team to NIB's headquarters over the weekend. The Central Bank will, no doubt, want to ensure that exchange control rules and those covering the movement of money were adhered to. Meanwhile the Tanaiste, Ms Harney, has indicated that she is keeping a watching brief for any indication of breaches of company law.
Finally, the Revenue Commissioners have said they are examining information on the accounts. This form of words is important, as a Revenue examination is still a step away from a full-scale investigation. And as the Revenue may not know the names of the deposit holders, it may not, under current tax law, be able to undertake a general trawl of the accounts. It faces similar constraints in examining the Ansbacher deposits.
Given the legitimate public interest and the suspicion that both the Ansbacher deposits and the NIB accounts were used by some to evade tax, there is a strong argument to give the Revenue the powers to undertake a general trawl of specific bank records in such cases. The Minister for Finance, Mr McCreevy, should consider including such a measure in the forthcoming Finance Bill.