Proper monitoring of non-resident bank accounts was complicated by the fact that the funds in "genuine" accounts belonged to Irish people based abroad who were trying to hide them from foreign tax authorities.
Revenue wanted people based abroad to be able to hide money here from foreign tax authorities as this benefited Irish financial institutions and the economy generally. Revenue was also aware that any move which caused tax evaders resident here to move funds offshore would be damaging to the economy.
The Revenue was asked by the Comptroller & Auditor General, Mr John Purcell, why it did not opt for more information being required in the declaration forms people had to fill in when opening non-resident accounts.
"Further information requirements could have been off-putting for genuine non-residents who feared exchange of information to the tax authority in their country of residence," the Revenue told Mr Purcell, according to his report.
The requesting of further information, such as a foreign tax reference number, was "a very sensitive area", according to the report.
A paper, Tax Evasion - The Role of Concealed Deposit Ac- counts and other Forms of Investment, prepared by Mr Sean Moriarty, assistant secretary in the Office of the Chief Inspector of Taxes in 1992, also referred to the fact that demand for "genuine" non-resident accounts came from people hiding funds from other tax authorities.
"A particular factor was likely to have been the increasing number of expatriates created by emigration in 1986-1991, who tended to save and invest through Irish financial institutions (sometimes to evade taxation in other jurisdictions)," Mr Purcell stated in his report when outlining the content of the paper.
The sensitive issue of tax law and competition between jurisdictions for the lodgement of funds is also referred to. In his paper, according to Mr Purcell, Mr Moriarty referred to it being "particularly dangerous if Ireland were to act unilaterally in this area".
Mr Moriarty told Mr Purcell he wrote the paper on his own initiative and that its content was based on "his own perceptions and those of other experienced people in Revenue who worked in the area". He felt it was "relatively easy for those who had made the wealth to actually shelter it because of the absence of powers on the Revenue's part".
Mr Moriarty made a number of proposals for encouraging tighter regulation by the financial institutions of non-resident accounts, in order to reduce the number of bogus accounts. The proposals were rejected by the then chairman of the Revenue Commissioners, Mr Cathal MacDomhnaill, and Commissioner Mr Dermot Quigley, the current chairman.
The tension between wanting to keep funds invested on deposit in this jurisdiction, while at the same time having a vigorous Revenue authority, still exists and may be one of the issues investigated during public hearings of the Dail Committee of Public Accounts, due to begin next September.
