So far this week the responsibility for the policing of bogus non-resident accounts has been skilfully passed from the Department of Finance and the Central Bank to politicians and ultimately to the Revenue Commissioners. Judging by the opening evidence from the Revenue, the buck is on its way back to the politicians again.
In their evidence yesterday, senior Revenue officials repeatedly told the Oireachtas committee that they simply didn't have the powers to examine bank accounts during the 1980s and 1990s. The first taste of that kind of power had come only in the 1999 Finance Act and is now used as an aid to its current day-to-day operations.
Mr Tony Mac Carthaigh, senior inspector of taxes and former officer with the Revenue investigation branch, plainly stated that when it came to dealing with the taxman the banks were in a different league than every other business in the State. If he had had the same powers to tackle tax evasion in the banks as he had when it came to confronting shopkeepers, Mr Mac Carthaigh indicated he would have used them with some relish.
"Banks were put in a different position than any other business. A number of businesses would have had the pleasure of meeting me unexpectedly at their hall door but that was not open to me with the banks. We didn't have the powers," he explained. Mr Mac Carthaigh suggested that he pursued "imperfections" in the banking sector with some vigour for many years. Based largely on anecdotal evidence, he believed there was widespread abuse of the procedures for opening non-resident accounts throughout the financial institutions. But when it came to investigating the matter, the Revenue always "fell at the first fence".
The Revenue couldn't turn up at a branch of any bank and demand to see documents on foot of suspected tax evasion. Any queries had to be made to a designated official at head office. And even when the bank agreed to release requested documents, it could nominate where this would occur.
Mr Mac Carthaigh recalled a "courtesy" visit he made to an AIB branch in Galway. Shortly afterwards he received a call from the bank's tax manager in head office and was told if he should "stray" again the matter would be brought to the attention of the Minister for Finance.
He admitted to a particularly difficult relationship with AIB but had also uncovered irregularities at some Bank of Ireland branches. He suggested the banks were actively encouraging their staff to promote the use of bogus non-resident accounts to their customers. He was particularly incensed to learn a merit bonus was offered to managers as an incentive to increase their deposit base.
In his contribution, the former senior inspector at the Revenue special investigation branch, Mr James Livingstone, explained that DIRT was a fairly small component of the overall tax take and the Revenue had been focused on wider tax fraud during the period being investigated by the committee. In the days before computerisation detection rates were fairly low because catching tax evaders was the result of painstaking hours of sifting through thousands of documents. Mr Livingstone said each investigation involved following a long paper trail and it was "great when you score".
He told the committee he saw little merit in instructing the Revenue to go to bank branches to inspect the declarations made by non-resident account holders at that time. "I knew the futility of examining 20,000 declarations to try and find a Mr John Murphy of 1 Main Street, Manchester. That wasn't sufficient to tackle it."
The special investigation branch examined a lot of taxpayers' files, he said. "We weeded them out in small numbers and they admitted to their delinquency." One such operation led to a £2 million tax haul at the Bank of Ireland branch in Miltown Malbay, Co Clare, in the 1980s. Certain "trading patterns" had given rise to concern within the Revenue, leading it to confront a number of individuals in the town. In their "shocked" condition, Mr Livingstone said, they handed over their bank statements which allowed Revenue to unearth a non-resident account they also held at the bank. They insisted the local bank manager had invited them to open this account - and at least one other financial institution had chased their business.
The Revenue will continue giving its evidence today. It seems clear from the opening statement presented by its chairman, Mr Dermot Quigley, that its defence will be spirited. He has told the committee the Revenue discharged its responsibility "reasonably" in regard to bogus non-resident accounts. He also stressed the Revenue had been totally opposed to the tax amnesties, which were inspired by politicians. But the Revenue's performance - and how it reacted to Government policy - will be a crucial element as the hearing continues.