Revenue queries bank data on bogus accounts

The Revenue is investigating whether banks gave false information about the extent of bogus non-resident accounts when making secret multi-million pound tax settlements in the early 1990s.

If this proves to be so, further penalties may be imposed.

It is understood confidential information about the knowledge of Allied Irish Banks and other banks concerning the bogus accounts problem at the time of the settlements was given to the Revenue late last year or earlier this year. This led to the review.

Deposit Interest Retention Tax (DIRT) was introduced in 1986 and obliged financial institutions to retain a proportion of the interest due on all deposit accounts other than non-resident accounts. It is generally accepted that by the early 1990s many banks had many millions of pounds on deposit in non-resident accounts which they knew or suspected to be bogus.

An AIB spokeswoman said last night that in response to a Revenue initiative in 1991, a review of all non-resident accounts was conducted and this led to additional payments of £9 million in DIRT tax for 1990/1991, and £5 million for 1991/1992. Revised procedures for ensuring tax compliance regarding DIRT were then put in place.

But a report in Magill magazine, published today, quotes letters from AIB bank executives estimating that the size of the outstanding DIRT bill in 1991 may have been about £100 million. It is not clear if the Revenue was aware of this figure at the time the settlements were agreed.

Magill says a settlement of £14 million was agreed at the time and the conditions included an undertaking that neither the bank nor any of its officials would be prosecuted and the settlement would be kept secret.

A letter quoted by Magill and dated February 15th, 1991, from Mr D.A. Mac Carthaigh, senior inspector of the Revenue Commissioners, to Mr Jimmy O'Mahony, AIB group taxation manager, invites the bank to re-examine all non-resident accounts and have each branch manager certify that as of June 30th, 1991, as far as they are aware, all non-resident accounts are genuine.

A letter from Mr O'Mahony dated February 28th, 1991 states: "We are being offered a way out of a very difficult situation which I believe will meet the needs of both the Revenue and other financial institutions without it being publicised - this being very much in the interest of the bank."

On the Magill report, a Government spokesman said: "The alleged irregularities are being investigated and [the] Revenue [Commissioners] will take all appropriate action in this matter".