DIRT evasion was more than likely taking place in a number of financial institutions since its introduction, the Fine Gael deputy leader, Mrs Nora Owen, claimed.
During a debate on the Magill revelations relating to alleged tax evasion in Allied Irish Banks (AIB) she said: "DIRT tax was introduced in 1986 by the Fine Gael-Labour government. The government changed in early 1987 and it would appear from all evidence that once the tax became a liability for people with savings accounts, the banks and other financial institutions clearly were discussing with their clients ways in which such taxes could be avoided."
Mrs Owen said it was a scandal that AIB made a deal with the Revenue Commissioners in 1991 to write off a tax liability of about £86 million owed to the State for DIRT. There was strong documentary evidence that the deal was done on the basis of no publicity and no prosecutions, and that a line would be drawn under any tax liabilities up to that time owed by the AIB on non-resident accounts.
She said that what made the situation even more scandalous was that the deal was done with a financial institution which consistently announced enormous annual profits and could well afford to pay the taxes due.
Mrs Owen said it was interesting to note that the current Government was the same coalition that was in power in 1991 when "this major tax evasion write-off was agreed."
The Minister of State for Finance, Mr Martin Cullen, said that his Department and the Revenue Commissioners were examining whether new powers were needed in tackling tax evasion.
He added: "This review of Revenue powers is a wide-ranging one and includes the question of the extent of Revenue's access to bank accounts.
"As is the case in other countries, Revenue do not have unfettered access to bank accounts and this whole question raises the issue of where the balance should be struck."
Mr Cullen said the report that there was a very sizeable number of bogus accounts in one or more of the main banks in the late 1980s and early 1990s gave rise to considerable and justifiable concerns.
"As the Minister pointed out last April in this House, the Government shares these concerns. It is totally against tax evasion and is determined to ensure that it is dealt with as firmly as possible."
The Labour spokesman on finance, Mr Derek McDowell, said the revelations confirmed what had been known for some time: that the firmament of Irish banking in the 1980s and early 1990s was rotten to the core.
He added: "There are two questions at the core of this matter. Did AIB make full disclosure to the Revenue Commissioners before the settlement was reached in 1991? If not, then the settlement cannot be allowed to stand and must be revisited by the Revenue Commissioners.
"If, on the other hand, the bank did disclose the fact to the Revenue, we are entitled to hear from the Revenue Commissioners as to why such a lenient settlement was reached."
He said that what was most shocking about the revelations was the sheer scale of the abuse. In 1991, AIB harboured some 87,660 non-resident accounts. Of these, at least 53,000 were bogus.
Mr Pat Rabbitte (DL, Dublin South West) said that in the late 1970s and 1980s hundreds of thousands of PAYE workers had marched on the streets of cities and towns arguing they were paying penal rates of tax because others were not paying their fair share. "They didn't know how right they were."
"One of the most astonishing details to emerge from the material obtained by Magill was that there were 14,251 non-resident accounts in the Tralee area, containing some £187 million."
Mr John Gormley (Green Party, Dublin South East) said that there had been no real urgency about dealing with tax evasion and fraud because the banks and the political parties enjoyed an extremely cosy relationship.
Mr Joe Higgins (Socialist Party, Dublin West) said it was time for the financial institutions to be taken "from the hand of an unaccountable greedy minority and put into public ownership so they can be used for social purposes for the good of our people and not to enrich a few faceless individuals who are a law unto themselves."