Tax avoidanceNational Irish Bank used a series of bogus and fictitiously-named accounts to allow customers to evade Deposit Interest Retention Tax, according to the High Court inspectors' investigation.
The inspectors, accountant Mr Tom Grace and Mr John Blayney SC, established that NIB opened and maintained bogus non-resident accounts throughout its network.
They also found that a number of these were held in fictitious or incorrect names. The inspectors' report states that these encouraged and facilitated tax evasion. The accounts were largely used to evade DIRT. The bank is obliged to assess the amount owed, deduct or "retain" it and pay it to the Revenue Commissioners.
Non-resident accounts are not eligible for DIRT. However, to legally avoid the obligation, the holders have to complete a declaration form authorised by the Revenue Commissioners, otherwise they are deemed eligible.
The bogus accounts did not have the proper declarations, and so the bank should have collected and paid the tax.
However, Mr Grace and Mr Blayney found that NIB failed to account for the tax, calculate the liability and pay the Revenue Commissioners. This was despite the fact that senior management was aware that the bank's network held a large number of bogus non-resident accounts. Much of this detail has already emerged in the DIRT inquiry by the Dáil Public Accounts Committee.
Interest credited to special savings accounts (SSAs), was liable for DIRT at 10 per cent rather than the standard 15 per cent.
However, these accounts also had to have authorised declarations to be eligible. A number of SSAs held in NIB did not have these forms, and so were liable for DIRT at the standard rate. In this case, the inspectors also found that senior management was aware of this breach of the law, and that NIB took no steps to calculate its liability and pay the Revenue Commissioners.
In October 2000, the bank agreed to pay the Revenue Commissioners €6.7 million to clear its DIRT liability, along with the penalties and interest. Of this, €505,000 related to its liabilities over the SSAs. It made subsequent payments of €13,000 and €63,000 to cover DIRT, penalties and interest.
The report shows that an internal audit in 1994 discovered that the bank could be facing a serious DIRT liability.
However, senior management was reluctant to tackle the problem.
