Special Savings Accounts provide "the greatest haven for tax evasion today", a senior tax inspector has told the Committee of Public Accounts.
Mr Tony Mac Carthaigh said the law which governed the accounts did not provide for them to be properly policed. "The law limits you to one account with an upper limit of £50,000 but the law does not provide for proper policing. I could have one in every institution and have £600,000 safely tucked away", he said.
"What's worse still is that the underlying capital on those accounts is outside the Revenue's reach . . . Special savings accounts don't even warrant a mention on your return of income, you're not required to make any reference [to them] at all."
He agreed with Mr Pat Rabbitte that the tax issues involved "could become the DIRT inquiry of 2009".
Earlier, Mr Mac Carthaigh had recalled his concerns at a "merit bonus" scheme which he believed was being operated by two banks.
He said individual bank managers were personally benefiting from the proliferation of bogus non-resident accounts set up for the purposes of avoiding DIRT. This was because whether the manager earned a merit bonus or not depended on the deposit base at their branch, incorporating the non-resident deposit base.
The claim by Mr Mac Carthaigh that special savings accounts are the greatest haven for tax evasion today has led to a new focus on these special deposits.
The accounts, which hold some £162.9 million, were set up in 1992 to ensure there would be no flight of capital from the State following the abolition of exchange controls.
According to the Comptroller and Auditor General there has been no inspection of the declarations required when opening an SSA undertaken by Revenue up to the end of 1998.
Under current legislation the accounts have a 20 per cent tax liability - the rate was increased from the original level of 10 per cent at the last Budget - which is deducted at source by the financial institution. Taxpayers have no further income tax to pay on interest received and do not have to return the income from these products on their tax returns.
Before an account is opened savers must make a declaration confirming that they satisfy the conditions for eligibility. The maximum savings limit is £75,000 for an individual and £150,000 for a married couple.
According to the Fine Gael spokesman on finance, Mr Michael Noonan, if these limits are breached or if taxpayers are exceeding these limits by the use of more than one special account, evasion is clearly taking place.
But according to a spokesman for the Revenue Commissioners, Mr Mac Carthaigh's claim was personal. He pointed out that in the C&AG's report the auditor found that "in general, compliance with conditions including notice periods and investment limits was good. Most institutions had some form of systems control to monitor compliance with such conditions".
The spokesman added that these accounts can also now be looked at as part of the new powers given to Revenue under the 1999 Finance Act.