Ulster Bank has paid £4.2 million (€5.3 million) to the Revenue Commissioners in settlement of its liability for unpaid Deposit Interest Retention Tax over the years 1986 to 1999, together with interest and penalties. Made up of £1.7 million in unpaid DIRT and £2.5 million in interest and penalties, the settlement announced yesterday is twice the bank's original estimate of its liability. At the Public Accounts Committee hearings into bogus non-resident accounts in the Irish financial institutions, Ulster Bank chairman Sir George Quigley had estimated that the bank's back tax liability would be considerably less than £900,000 before interest and penalties.
The Ulster settlement follows a £30.5 million settlement agreed by Bank of Ireland last month and is ahead of expected settlements by at least two other banks in coming weeks.
The Bank of Ireland settlement was made up of £12.75 million in unpaid DIRT and £17.75 million in interest and penalties. At the PAC hearings Bank of Ireland had estimated its DIRT liability before interest and penalties at between £1 million and £1.5 million. Its eventual settlement was between 8.5 times and 12.75 times that estimate.
Ulster had a 3.46 per cent share of non-resident deposit market by value, according to a report prepared by the Comptroller and Auditor General for the PAC, while Bank of Ireland had 5.4 times that share with 18.65 per cent of the market. But with Bank of Ireland's unpaid £12.75 million DIRT bill some 7.5 times that of Ulster's £1.7 million bill, Bank of Ireland appears to have had a more serious problem with bogus non-resident accounts.
In a statement yesterday, Ulster said that its DIRT liability on business done through its branches "fell within the expected range". But it added that "certain aspects of performance elsewhere within the group proved to have been weaker than the bank's earlier internal enquiries would have suggested, where deficiencies in communication led to failure in some cases to identify changes in the status of what had originally been properly classified as non-resident accounts".
Ulster Bank group chief executive Mr Martin Wilson said that failures of communication between units of the bank and not adhering to its own policies and procedures was responsible for some of its liability. But he insisted that there was "no evidence of systemic problems within Ulster on the authenticity of non-resident accounts. I am still happy that Ulster as an organisation did not have an underlying problem that people accepted resident deposits as non-resident deposits".
Ulster has made a number of changes to ensure that this will not happen again, Mr Wilson insisted. "We have changed out systems, reviewed and reissued our documentation, centralised the administration of non-resident accounts and put a limit of £5,000 on the amount that we will accept in a new non-resident account. We want to put this behind us and go forward," he said.
Mr Wilson said he could not disclose the number of bogus non-resident accounts or customers discovered by the Revenue in its audit of the 13 year period. He declined to discuss the Revenue demand following the audit but said there was "some discussion" afterwards.
"Where we could stand over things that the Revenue had identified as a problem they accepted our arguments. Where we couldn't, we accepted their arguments," he said. The audit was carried out through a sampling exercise. Mr Wilson said the vast majority of Ulster's accounts by value were audited.
Expressing "disappointment" that Ulster's liability was ahead of its expectations, Mr Wilson said the group accepted its responsibility to collect tax as an agent of the Revenue and to discharge any liability in respect of unpaid DIRT.
