Tax officials had faced real dilemmas when it came to inspection, the chairman of the Revenue Commissioners, Mr Dermot Quigley, said yesterday in his closing submission to the DIRT inquiry.
The power simply to examine declarations of non-resident accounts was "superficial and unsatisfactory". It may even have exposed the inadequacy of the Revenue's powers and "encouraged further evasion", Mr Quigley suggested.
On the other hand, if the Revenue had acted in a manner that "damaged the economy", and as a consequence reduced the overall tax yield in the years under review, it would have been severely criticised, he said.
Neither were dilemmas of the Revenue's own making - as far back as 1976, the Revenue had sought the power to enter business premises (including banks) to audit books and records.
The 1976 Finance Act gave tax inspectors power to carry out on-premises inspections, but bank premises were specifically excluded from the scope of these powers.
In 1981, the Revenue had requested that deposit interest reporting be amended to include interest paid to non-residents. There was no change in the law.
In 1985, the Revenue had urged that the only way to tackle the bogus non-resident problem was to have full disclosure - by doing away with the "Form F" procedure. There was no change in the law.
In 1986, the Revenue had submitted that the Government decision to abandon interest reporting would "deal a crippling blow" to their efforts to tackle tax evasion.
In the lead-up to the introduction of DIRT that year, it requested that the reporting of deposit interest would form part of any new retention tax, while expressing lack of confidence in the proposed monitoring arrangements for non-resident accounts.
"Despite Revenue's very strong representations on this," said Mr Quigley, "reporting of deposit interest was abandoned in the DIRT legislation." Monitoring arrangements for non-residents were restricted to a "surface examination" of the declaration forms.
In 1997-98, following the McCracken report, the Revenue recommended greater powers to police financial institutions. Its proposals were accepted and legislated for in the 1999 Finance Act.
They included the power to police DIRT properly and to do on-premises audits of banks, as well as to gain access to bank accounts. In relation to the controversial SIM 263 internal instruction that prevented inspectors from examining declaration forms, Mr Quigley said this was issued in a transitional period in 1986 - the "Form 37" procedure did not come into effect until the following April. As such, it was "entirely understandable". There was nothing to suggest that any political influence had been brought to bear.
At the same time it was not entirely clear, he conceded, how the Revenue was "directly" influenced by concerns about capital flight postponing indefinitely the examination of declarations.
There was no basis for the allegation that a deal had been done with AIB in 1991 to write off tax, the Revenue chairman insisted. DIRT was a self-assessment tax. The law required that it be deducted and remitted without any intervention by the Revenue. Finally, no "amnesty" for arrears of DIRT could possibly have been given without legislation.
AIB had claimed that "it had an amnesty from DIRT" for interest paid before April 6th, 1990. That would mean that DIRT on interest paid from April 6th, 1990 "and before bogus non-resident accounts were reclassified" was payable by the bank.