Minutes of Evidence and Reports

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December 1999
15 December 1999
Adobe PDF format documentPARLIAMENTARY INQUIRY INTO D.I.R.T. First Report [Volume 3 Parliamentary Debates Official Report - Verbatim Transcript]
Sub-Committee on Certain Revenue Matters Examination of the Report of the Comptroller and Auditor General of Investigation into the administration of Deposit Interest Retention Tax and Related Matters during 1 January 1986 and 1 December 1998.
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15 December 1999
Adobe PDF format documentPARLIAMENTARY INQUIRY INTO D.I.R.T. First Report [Volume 2 - Relevant Documents and Closing Submissions]
DÁIL ÉIREANN COMMITTEE OF PUBLIC ACCOUNTS Sub-Committee on Certain Revenue Matters Examination of the Report of the Comptroller and Auditor General of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998.
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15 December 1999
Adobe PDF format documentPARLIAMENTARY INQUIRY INTO D.I.R.T. First Report [Volume 1 - Report of the Sub-Committee]
DÁIL ÉIREANN COMMITTEE OF PUBLIC ACCOUNTS Sub-Committee on Certain Revenue Matters Examination of the Report of the Comptroller and Auditor General of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998.
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15 December 1999
Adobe PDF format documentPARLIAMENTARY INQUIRY INTO D.I.R.T. First Report [cover page]
DÁIL ÉIREANN COMMITTEE OF PUBLIC ACCOUNTS Sub-Committee on Certain Revenue Matters Examination of the Report of the Comptroller and Auditor General of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998.
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15 December 1999
DIRT Inquiry First Report Page 1 of 1
Examination of the Report of the Comptroller and Auditor General of Investigation into the administration of Deposit Interest Retention Tax and Related Matters during 1 January 1986 and 1 December 1998. These PDF files were previously published on CD ROM by the Committee of Public Accounts on 15 December 1999.
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October 1999
12 October 1999
DIRT Inquiry 12 Oct 1999 Page 10 of 10
Chairman: Okay, thank you very much indeed, Mr. Quigley. Ba mhaith liom a rá cupla focail scoir before bringing these proceedings to an end. I'd like to point out that although today is the last scheduled day for public hearings, it is open to the inquiry to call further public hearings later, should that necessity arise. However, this would only happen if the circumstances were of sufficient importance to warrant it. Many new precedents have been set by this inquiry. Indeed, it is not an exaggeration to say that history has been made and that many will study and comment on these proceedings and their genesis for a long time to come. The inquiry so far has been in two principal phases. One, the Comptroller and Auditor General's investigation on behalf of the committee and the sub-committee's own public hearings. Of particular significance is the fact that neither phase has been interrupted by a legal challenge of any sort. I hope this fact can be taken as a positive commentary on the painstaking preparations undertaken by the committee to ensure that the full requirements of natural and constitutional justice were met, especially as detailed by Chief Justice Cearbhall Ó Dálaigh in the in re Haughey judgment. A principal objective of the sub-committee was to reconcile these fundamental requirements with the procedures, modalities and speed of a parliamentary committee. That we have concluded our public hearings on schedule after 26 sitting days and 142 witnesses and without encountering legal challenge would suggest that this objective has been met. I want to emphasise that this objective was greatly assisted by the fact that legal representatives for the parties involved were, at the preparatory stage, invited by the committee to engage with our own legal counsel in teasing out the procedural and other legal issues in advance and it is only fair that I put on record that all parties to this inquiry have fully co-operated with it from the beginning and we express our gratitude for this.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 9 of 10
Chairman: Thank you very much indeed, Mr. Gleeson. We now turn to the final closing submission on behalf of the Revenue Commissioners which will be delivered by the Chairman of the Revenue Commissioners, Mr. Quigley. Mr. Quigley: Thank you very much, Mr. Chairman. I would like to thank you and the Members of the sub-committee for the opportunity you are affording me to make a closing submission on behalf of the organisation which is my privilege to represent, the Office of the Revenue Commissioners. I have submitted in full the text of my closing submission. I would like, Mr. Chairman, in view of the time factor to abbreviate it perhaps here and there, possibly to add a small piece, but essentially covering the same ground as the submitted written documentation. I would like in this submission, Chairman, to cover three broad areas. First of all, the question of the discharge by the Revenue Commissioner of their responsibility to administer the DIRT tax system. Secondly, I would like to deal with the suggested deal or amnesty involving retrospective DIRT which was foregone as alleged by AIB. I would like to deal with that allegation. Finally, I will want to touch on some issues relating to the governance of the Revenue Commissioner's accountability and independence which have been topics which have been aired in this sub-committee. Mr. Chairman, I would-----I feel I should, at the very outset and break my sequence, just to say that I have heard the comments which have been made by distinguished senior counsel and I would just like to say that Mr. MacCarthaigh had his constitutional rights, which he is fully entitled to, and which have not been mentioned in the submission just made. Certain allegations about Mr. MacCarthaigh have been made in the course of the proceedings - a very strong attack has been made to him, against him. He has been subjected to vigorous cross-examination on these issues but he is entitled to his constitutional rights and it is up to the sub-committee to decide on the validity of the arguments and the documentation which have arisen here. It is not my job to advise the sub-committee on the conclusions that should be drawn, but I simply want to put it on the record, that there are two sides to every story and that each participant in these proceedings, each witness, is entitled to be heard and to have the sub-committee assess the position in accordance with law and in accordance with the rights of the people concerned.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 8 of 10
Chairman: Thank you very much indeed, Mr. Gallagher. I should say, before we go to the last two oral closing submissions, that we have received a written closing submission from Irish Life & Permanent and that will now be read into the record and from Ernst & Young which is also being now read into the record and from Mr. Daniel Roddy, which is now also being read into the record. In respect of Irish Life & Permanent, it also covers Guinness & Mahon. We now turn to the closing submission on behalf of Allied Irish Bank Group. Mr. Gleeson, accompanied by Mr. Brian Sheridan. Mr. Gleeson: That's right, sir. Mr. Chairman and Members of the committee, can I say, at the outset, that it's no part of the submission which I'm making on behalf of the bank to contend that Allied Irish Banks is beyond criticism. It is part of this process that the bank would have to expect criticism. What it asks is that if it is to be criticised, that that criticism should be fair and that if it deserves commendation that that should happen as well. I suppose if you were to conduct a poll of the slogan least likely to appear on any election poster in the next general election it might be, 'fair play for the banks'. But there is a curious sense, Mr. Chairman, in which that is the test of the efficacy of the processes that you are charged with here. You have said, rightly, that this process is a litmus test for the capacity of parliamentary inquiries to handle issues such as this. And it is, particularly, the capacity with which evenhanded judgments can be discharged, sometimes against popular sentiment, that the true mettle of the process falls to be tested. I don't envy you your task. I don't envy you - on top of the exhausting six weeks and reading of endless papers, burning of midnight oil and so on - the difficulties of assessing the issues, figuring out the precise remit of the committee, the key issues which you have to decide and reaching conclusions. It would be churlish of me not to acknowledge the enormous volume of work which has been put into this process performed by the committee and its staff and, indeed, the expedition with which the process has been completed, and I do acknowledge that. There are some costs in expedition. Some of the costs are ones that I would raise on another occasion perhaps, but I acknowledge that it is a considerable achievement to finish this process on schedule, sir. It would be, on the other hand, a dereliction of my duty if I were not to draw to your attention certain aspects - and some of them are legal aspects - to the task which the committee faces and which I acknowledge to be a complex and difficult task. And while the committee has intimated its concern not to be overburdened with legal interventions, I have never understood it to be the committee's position that the law isn't, in fact, intimately involved with the matters you're concerned with, intimately involved in the process and intimately involved in the substance of what you are here concerned with. For that reason I make no apology and have no embarrassment in referring to a number of legal issues. By and large, Chairman, I have committed them to the written submission because I think they are better presented in that format and, no doubt, you will be taking the advices and considerations of your own lawyers into account when they are considered by the committee.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 7 of 10
Chairman: Thank you very much, indeed. Now we turn to the ACC Bank - Mr. Paul Gallagher, senior counsel. Mr. Gallagher: I was going to use the small lectern but if it's not------ Chairman: It's available, yes. Mr. Gallagher: Thank you. Chairman: You are accompanied by Mr. Maurice Collins, I believe? Mr. Gallagher: That is correct, Chairman. Thank you. If the Chairman and the committee don't mind I'll stand as I deliver the submissions on behalf of ACC, if I may. The committee already has ACC's written submissions and what I would like to do is to emphasise certain aspects of those written submissions. I don't propose to read them out or go over them but there are some matters that I want to particularly draw to the committee's attention. The ACC first, before it makes any closing submissions, wishes to make quite clear to the committee what its position is. It fully and unreservedly accepts that there were serious failures in the part of its operation of the DIRT regime. It failed to comply with statutory duties that were imposed on it. It has accepted that and it has fully co-operated with the Comptroller and Auditor General and fully co-operated with this committee, and will fully co-operate with the Revenue in discharging every item of liability that properly falls on it as a result of its failures. And I don't wish anything that I would say to the committee to in any way attempt to reduce ACC's responsibility for what it did wrong. The chairman and the board of directors of ACC are very concerned that this committee would not interpret what we have said to the committee in evidence and what we say in our submissions and what I now say as seeking to be an attempt to say there were... we didn't do things wrong or that we don't fully accept our responsibility.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 6 of 10
Chairman: Thank you very much, Mr. Mullarkey. We now turn to the closing submission on behalf of the Central Bank, which will be delivered by the governor, Mr. Maurice O'Connell. Mr. O'Connell: Chairman and members, arising from the evidence presented to the committee, the Central Bank has focused on the following questions. Did liability for DIRT tax have implications for the solvency of our banking system? Are there matters of governance, conduct and compliance which require greater attention and are standards of regulation up the best international practice? I can say categorically that, even in the most extreme assumptions, DIRT tax liability did not at any time pose a threat to institutions supervised by the Central Bank. Figures have been mentioned about potential or hypothetical liability. Even if such liability were realised in full, it did not constitute a threat. The Central Bank is concerned that Irish banking should have the highest possible standards of compliance. There is regular and extensive contact with other regulators around the world. Our current standards are in line with best international practice. Apart from legal requirements relating to money laundering banking supervisors do not, as a rule, have any role in relation to taxation. There is, however, an international effort to counter laundering of the proceeds of criminal activities which are now estimated to exceed 1,000 billion euro a year, and this effort is reflected here in the Criminal Justice Act of 1994. In Ireland, in contrast to the position in several other countries, money laundering is taken to include tax evasion. I believe there is a genuine commitment among the financial community to fulfil its obligations in this respect. The large number of reports made to the gardaí in recent years supports this view. In a report earlier this year, the OECD acknowledged that arrangements in Ireland to deal with money laundering were very good.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 5 of 10
CLOSING SUBMISSIONS Chairman: We now move on to Session N, the concluding session, closing submissions. The first closing submission will be on the behalf of the Department of Finance, its Secretary General, Mr. P. Mullarkey. Mr. Mullarkey: Mr. Chairman and members of the Sub-committee, I'd like to take this opportunity to make a number of concluding remarks concerning particular issues discussed and examined by the Sub-committee over the past few weeks. The matters I wish to deal with specifically are the issue of capital flight, the position regarding the inspectability of non-resident accounts, the issue of Revenue powers and measures to counter tax evasion and the Department's role in relation to ACC. I would also like to take the opportunity to indicate briefly where perhaps the Department has learned lessons for the future. In the discussion of the fear of capital flight, it appears from the questions and comments of members of the sub-committee that they may have the view that the relevance and importance of this concern had been overstated by the Department. There are a number of points I would make in this regard further to the evidence we have given earlier. One, there is a major difference between capital flight due to exchange rate pressure and capital flight due to concerns about taxation. Capital flight due to concerns about taxation is likely to be permanent whereas speculative flows are normally temporary. Experience abroad supports this view.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 4 of 10
Mr. Fitzsimons: Were there meetings held? Mr. J. O'Mahony: Yes, there would have been meetings held. Mr. Fitzsimons: And who was sitting around the table at these meetings? Mr. J. O'Mahony: Well, there would have been a number of regional managers----- Mr. Fitzsimons: Yes. Mr. J. O'Mahony: -----and possibly Mr. Pat O'Mahony, to discuss the overall implementation of doing what had to be done. Mr. Fitzsimons: Everyone armed with Mr. MacCarthaigh's letter of 15 February? Mr. J. O'Mahony: Not necessarily. Mr. Fitzsimons: Well, wasn't that why you were meeting them? Mr. J. O'Mahony: I think the meeting of 5 march would have addressed the problems to a major extent on how we should progress, on how to look at the authenticity of accounts, which we had agreed we would do with the Revenue. Mr. Fitzsimons: In any event you told us that you waited 'til the 26 March to make this telephone call. Mr. J. O'Mahony: Yes. Mr. Fitzsimons: 26 February, I beg your pardon, and we see that at H.29.
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 3 of 10
Mr. Fitzsimons: And there's no reference to the fact that there was nothing in writing from the Revenue. Isn't that so? Dr. de Buitléir: That's correct. Mr. Fitzsimons: And there's no reference to the fact that Mr. O'Mahony had advised that there should be nothing in writing. Isn't that so? Dr. de Buitléir: That's correct. Mr. Fitzsimons: And there's no reference to the fact that the Revenue Commissioners, in any case of non-disclosure, even if there are agreements, can come again. There's no reference to that either. Dr. de Buitléir: That's ... that's right. Mr. Fitzsimons: Why didn't - sorry, go ahead. Dr. de Buitléir: That's what I think that the, the suggestion in the first sentence of H.40, when I say there can be no certainty about the final outcome, it clearly implies that ...
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12 October 1999
DIRT Inquiry 12 Oct 1999 Page 1 of 10
Cross Examination of Witnesses (contd.): Morning session: Mr. E. Fitzsimons, SC, representing the Office of the Revenue Commissioners (contd.) - Dr. D. de Buitléir, Group Manager, Office of the CEO, AIB Group Mr. J. O'Mahony, former Group Taxation Manager, AIB Group Mr. P. Monaghan, Solicitor, representing Bank of Ireland - Mr. S. Moriarty, Assistant Secretary, Office of the Revenue Commissioners Closing Statements Afternoon session: Mr. P. Mullarkey, Secretary General, Dept. of Finance Mr. M. O'Connell, Governor, Central Bank of Ireland Mr. J. Gordon, SC, representing Ulster Bank Group Mr. P. Gallagher, SC, representing ACC Bank Mr. D. Gleeson, SC, representing AIB Group Mr. D. Quigley, Chairman, Office of the Revenue Commissioners Also Present: State Bodies Dept. of the Taoiseach: Mr. D. Morgan, Principal Officer Mr. J. Kennedy, Assistant Principal Dept. of Finance: Mr. N. O'Gorman, Second Secretary Mr. L. Murphy, Principal Officer Mr. C. Breslin, Principal Officer Mr. M. McGrath, Assistant Principal Mr. A. O'Connor, Assistant Principal Mr. D. Doyle, Assistant Secretary Central Bank: Mr. H. O'Donnell Office of the Revenue Commissioners: Mr. M. O' Grady, Assistant Secretary Mr. P. O' Shaughnessy, Assistant Principal Mr. J. Reid, Principal Officer Mr. E. Dwyer, Assistant Principal Mr. P. Ó Duinn, Inspector of Taxes, Higher Grade Office of the Comptroller and Auditor General: Mr. J. Furlong, Senior Officer Financial Institutions Irish Life & Permanent / Guinness & Mahon: Mr. G. Griffin, Partner, PricewaterhouseCoopers
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 10 of 10
Mr. Fitzsimons: Well, you stuck in unwritten extra-statutory amnesty. They're your words. They're nobody else's words. Isn't that so? Ms Fullen: But I wasn't taking it word for word from the meeting notes. I mean, that's essentially what we understood we had. Mr. Fitzsimons: This is a report - and I don't want to repeat it all over again - an important report and you are representing that these things were said or agreed at this meeting when----- Ms Fullen: I wasn't representing that those words were used. Mr. Fitzsimons: Sorry? Ms Fullen: I wasn't representing that those words were used. I was representing our understanding of the situation at the time. Mr. Fitzsimons: But these things never happened at the meeting of 13 February. Ms Fullen: No. I take your point.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 9 of 10
Chairman: The sub-committee on certain revenue matters is now in public session. We are now moving on to cross-examination on behalf of the Revenue Commissioners. Mr. Eoin Fitzsimons, Senior Counsel; Mr. Aston, Senior Counsel; and Mr. D. Sherlock, Solicitor, are with us. You're welcome. Mr. Fitzsimons: Thank you, Chairman. If I could start by putting some questions to Ms Fullen? Chairman: Okay. Mr. Fitzsimons: Ms Fullen, you were tax compliance manager since 1989. Did your appointment as tax compliance manager coincide with the appointment of Dr. de Buitléir to the tax department? Ms Fullen: I think it was in or around the same time. I can't remember now for definite, but I think it might have been----- Mr. Fitzsimons: Did Dr. de Buitléir come into the tax department over Mr. O'Mahony's head? Ms Fullen: Well, he would have come in as head of group taxation, yes.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 8 of 10
Chairman: The sub-committee is now in resumed public session. Mr. Fitzsimons: Mr. Chairman, just if I could mention a matter, I mentioned it to Mr. Gleeson. The witness, Mr. MacCarthaigh, in the course of his evidence just some moments ago stated that a Mr. Ó Duinn took over the particular file. For reasons that I needn't concern the committee about, I want to correct that. That did not happen. Mr. Ó Duinn did not take over that file, Mr. MacCarthaigh is wrong in that. So I mention it at this stage so that Mr. Gleeson can cross-examine him about that, if necessary. There is a particular reason for this interjection which wouldn't be the norm, but I prefer not to go into that. Thank you, Mr. Chairman. Chairman: Okay, thank you Mr. Fitzsimons. Mr. Gleeson: Mr. Fitzsimons has been good enough to explain to me the reason for the interjection. I accept it and I accept what he has just said. Mr. Ó Duinn was not involved. Chairman: Okay. So, are we all finished? Mr. Gleeson: No, not quite. We're nearly finished. I won't be long more, Chairman. Chairman: Okay, plenty of time, Mr. Gleeson. Looking at some of the follow-up documentation after the meeting, Mr. MacCarthaigh, could I have a look at the meeting of 17 May, H.42, Comptroller and Auditor General's report? Mr. Gleeson: The 17th of May, H.42, H.42 Comptroller and Auditor General's report, Chairman.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 7 of 10
Mr. Gleeson: When you came to change the date on the 26th June, four months later, it was because the deal was being performed on both sides. Isn't that right? Mr. MacCarthaigh: At that stage, in so far as it went. Mr. Gleeson: So you agree there was a deal? Mr. MacCarthaigh: I agree there was a deal, a proposal with regard to interest, a reasonable amount of interest, with regard to no penalties, with regard to no publication and with regard to payment of tax. Mr. Gleeson: At least we've got that much out of the way. Mr. MacCarthaigh: But that was never in dispute. Mr. Gleeson: So, there was a deal, it was done, it was accepted, it was being performed and then its closing date, if I can use that shorthand, had to be shifted back to September for various reasons, some of which may not be----- Mr. MacCarthaigh: That's quite precise, yes.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 5 of 10
Chairman: The Committee of Public Accounts Sub-Committee on Certain Revenue Matters is in resumed public session. We are dealing with cross-examinations, session M. Mr. Gleeson, senior counsel, is now questioning Mr. MacCarthaigh of the Revenue Commissioners. Mr. Gleeson: Thank you, Mr. Chairman. Mr. Chairman, this morning I sought to introduce an excerpt from the journal of the Statistical and Social Inquiry Society of Ireland. Perhaps I'm being unduly formal in terms of introducing it via a witness. Really I just want it to be available to the committee and I don't plan any comment. So, I'm happy that it would be taken on board or rejected as you may see fit in due course. It's not by any means a key document but I did introduce it on that. Chairman: We are happy that at the end of the document that should be introduced. Mr. Gleeson: I'll take it as introduced and won't any further refer to it until submissions. Mr. MacCarthaigh, before we went to lunch, we were discussing a number of things and maybe we could just agree that ordinary resident is a concept that has... is not really just straight forward, that it has its complexities. Mr. MacCarthaigh: Indeed, Chairman, and if I may, this morning I wasn't of much assistance in this area and, indeed, I couldn't even confirm if documentation was available within the Revenue. I am sure Mr. Gleeson will be very happy to hear that any doubtful citizens or people who had doubts about their own status could have had a benefit of a Revenue document published in October 1987. Mr. Gleeson: Right, it hasn't been discovered, has it? I'm not making any objection on that account but I'm just wondering has it been discovered. Mr. MacCarthaigh: It was discovered by me at lunchtime.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 4 of 10
Mr. Gleeson: You also said in paragraph 8, now this is not the paragraph 8 I referred to earlier but an earlier paragraph 8, if I can put it that way. Perhaps I can just read it for you as it doesn't seem to be in the published version. "Amounts held in bogus non resident accounts may be very substantial." Mr. Moriarty: Yeah. Mr. Gleeson: And that was your view. Mr. Moriarty: Yes. Mr. Gleeson: The whole exercise that you had----- This is a substantial piece of work involving I'm sure burning of midnight oil and effort and so on. You weren't do it because of some small concern, it was because of a large concern to use no other language. Mr. Moriarty: I agree. Mr. Gleeson: Was that concern shared by your colleagues who were co-operating in the production of the paper? Mr. Moriarty: I would think so Mr. Gleeson, yeah.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 3 of 10
Mr. Gleeson: What was the process by which SIM 263 was overridden or set aside when inspections began or were intimated at the start of January, I think, 1998, we were told? What happened? Did someone take it down in its folder and put a red line through it or issue a new SIM or what. What's the system for cancelling an old SIM? Mr. Clayton: One doesn't so much cancel an old SIM but would make amends or decide to override it with actual operations or with another instruction. Mr. Gleeson: Well, wait a second now. All over the country we have diligent inspectors of taxes who, in theory, at least have all their SIMs at their fingertips or the ones relevant to their work and they know what they're supposed to do and what they're not supposed to do. And one of the things that they know that they're not supposed to do is carry out inspections until they hear from someone again at headquarters on foot of paragraph 72 of SIM 263. Isn't that right? Mr. Clayton: I-----
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 2 of 10
Sub-committee on Certain Revenue Matters. Chairman: The Committee of Public Accounts, Sub-committee on Certain Revenue Matters is in resumed public session. Before we move into the next session, the cross-examination session, I wish to read a statement at the request of National Irish Bank: At the request of one of its retired officials, National Irish Bank wishes to clarify a response given by it in the course of the Public Accounts Committee hearing on 21 September 1999. In response to a question posed by the Public Accounts Committee, the bank stated that the person who was responsible for compliance in 1996 was Mr. John McLaughlin who reported through another officer of the bank. Mr. McLaughlin has asked the bank to clarify this response. Whilst Mr. McLaughlin's job title in 1996 was compliance officer, the bank wishes to confirm to the committee that Mr. McLaughlin's responsibilities did not extend to DIRT compliance. End of statement. Okay, we now move on to cross-examination section. I wish to make it clear that the committee reserves its right to seek clarification at the end of each session of clarification. Witnesses' attention is drawn to the fact that, as and from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, grants certain rights to persons who are identified in the course of the sub-committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee, either in person or through a representative, the right to make a written and oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the sub-committee. I'd also like to draw attention to the fact that this session, like all before it, are bound by the restrictions imposed by Standing Orders. Thank you. Now we move into cross examination. Mr. Gleeson. Mr. Gleeson: Thank you Chairman. I propose, with your permission Chairman, asking Mr. Clayton some questions in the first instance.
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11 October 1999
DIRT Inquiry 11 Oct 1999 Page 1 of 10
Cross Examination of Witnesses Morning Session Mr. D. Gleeson, SC, Representing AIB Mr. C. A. Clayton, Chief Inspector of Taxes and Deputy Secretary, Revenue Commissioners Mr. S. Moriarty, Assistant Secretary Human Resources Division, Revenue Commissioners Mr. D. A. MacCarthaigh, Senior Inspector of Taxes, Revenue Commissioners Afternoon Session Mr. D. Gleeson, SC, Representing AIB Mr. D. A. MacCarthaigh, Senior Inspector of Taxes, Revenue Commissioners Mr. E. Fitzsimons, SC, Representing the Revenue Commissioners Ms D. Fullen, Tax Compliance Manager, AIB
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 10 of 10
Deputy Rabbitte: And since these hearings commenced, Mr. Spollen, have you had discussions with anyone about the subject matter of this inquiry? Mr. Spollen: Anybody in... witnesses or anything like this? Deputy Rabbitte: Yes, anybody like that. Anybody at all, other than your legal adviser. Have you discussed it with anybody? Mr. Spollen: I talk to my wife, who is taking a keen interest in the whole thing, as you might imagine. But in terms of generally have I come out... no, I haven't, I don't believe I have. Now, it would be amazing if I wasn't sitting down and say - somebody saw old Tony at the Public Accounts Committee. Deputy Rabbitte: Ah, no. I don't mean any casual or anything like that. Thank you very much, Mr. Spollen. Chairman: Thank you very much indeed, Deputy Rabbitte. Does anyone in AIB want to comment? Mr. Keogh, do you want to comment on anything that Mr. Spollen has said? I mean, you've already given your evidence. Mr. Keogh: I have. Chairman: But-----
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 9 of 10
Deputy Rabbitte: Well, in terms of one of the critical questions that is before us, Mr. Spollen, and that is whether there was or there was not an amnesty or whether there was or was not an agreement of whatever character, what is your submission on that critical point? Mr. Spollen: My whole sense of the thing is that there was not an amnesty and my reason for that is I felt that if this was totally bona fide, genuine we could have got some sort of letter. I've never seen----- You know when you looked at the magnitude of the sums and so forth I would have thought that to get one little note just saying "Dear AIB, On receipt of your cheque for £5 million or £10 million, this matter is at an end" but my concern was even if that had happened when I saw the extent of the scale of the problem, as you know the Revenue always have the right to go back. If you declare your income as £x and the Revenue decide, find later on that you totally understate it they can re-open the case. Now I'm not an expert on tax but at least I know that bit. Deputy Rabbitte: So, I mean, could we not say that Mr. O'Mahony was right, though, that to have an amnesty in that formal sense would have required legislation? To get that piece of paper that you wanted would have been a very confrontational, formal demand. Mr. Spollen: Well, I needed something in writing. I had to have something. Now if you said to me, you know, give me the form of words or whatever it was I'm not exactly sure, you know, what I would write myself, but the gist of it would be "Look this is a problem which we need to have resolved and if you give us £x then effectively that's the end of the matter". Deputy Rabbitte: But if there wasn't a formal agreement, if there wasn't a formal amnesty I mean might there have been an informal agreement to leave well enough alone and to look to the future?
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 8 of 10
Chairman: Okay, the sub-committee is in resumed public session. We now turn to the last section of Session J, and that is general questioning. Deputy Durkan. Deputy Durkan: Thank you, Mr. Chairman. Mr. Cunningham, can I just bring you back for a moment? We were discussing last evening an element in relation to the review, initial review of group final accounts dated 6 May 1991. It's in this supplementary book, at tab 2 and it's AIB.013.20. I just want to ask you a couple of questions relating to that particular reference which is on the screen now and, in particular, I want to refer again to the reference which says that: Mr. Cunningham confirmed that he was aware of these issues [which were the accounts, elements in the accounts] and was satisfied with the way they had been treated in the accounts. Mr. Keogh advised that the management too were satisfied in this regard and he confirmed that there had been no changes in accounting policies. Can you just tell us, in relation to your dealings with the internal audit, you had previous experience with the internal audit of the bank? Mr. Cunningham: I had worked with the internal audit department over the previous two or three years, yes. Deputy Durkan: How many years? Mr. Cunningham: Well, from ... I became involved with the audit of AIB in 1989, so from '89 to this point in time I had worked with internal audit.
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 7 of 10
Deputy Rabbitte: Ms Walsh. At the bottom of the page you'll see the chunk of the re-write of her file note, right? You'll see down in the penultimate paragraph "... after publication of the original story in the Irish Independent [it should be Sunday Independent] they had had discussions with Revenue." And all I'm asking you----- Please, Mr. Brennan, don't answer me a question about meetings. Answer me a question about what's in the sentence - "... they had discussions with Revenue and thought the matter had been satisfactorily resolved." Mr. Brennan: Yes. Deputy Rabbitte: You agree with that? Mr. Glennon agreed with that but I don't want that to influence you. Mr. Brennan: Can I attempt to explain, Deputy? Deputy Rabbitte: Well, that's a matter for the Chairman. I would have thought it----- Six weeks later I would have thought it's capable of an answer. Mr. Brennan: I'm trying to assist you. I'm not trying----- Chairman: Hold on a second. Mr. Brennan, the answer is you have, you may answer the question, uninterrupted. Mr. Brennan: Thank you, Chairman. The meetings that we had with Revenue did not result - or the discussions that I had with Revenue - did not result in my coming to a conclusion that the matter had been satisfactorily resolved. I spoke, during the course of the time between the final piece of correspondence and October, with Dr. de Buitléar. From my discussions with Dr. de Buitléar, I concluded that the matter had been satisfactorily resolved.
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 6 of 10
Chairman: The Sub-committee is in resumed session. Ms Walsh, did you have time to peruse the transcripts? Ms Walsh: I didn't receive this morning's transcript yet, Chairman. Chairman: But the transcript----- Ms Walsh: That you asked me to find the reference to when I first became ...
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 4 of 10
Deputy Doherty: Thank you, Mr. Chairman. Mr. Brennan, good morning. You heard Ms Walsh's evidence yesterday evening and this morning and, in the course of her evidence, she indicated that you phoned her a few days ago concerning the note that has been referred to as having been given to her ... a record in so far as she believed it was accurate at the time because of what was said to her. Now, what day did you phone her? Mr. Brennan: I can't recall the day specifically, Deputy, but it would've been probably two or three days after the publication of some article in The Irish Times which seemed to allude to this matter and I think it was subsequently repeated. I think it might have been last weekend so it would've been some stage after that. Deputy Doherty: Last weekend, and it was prompted, you say, by an article that appeared on some of our national newspapers. Mr. Brennan: Well, if I could explain, Deputy? I had read in - from memory it was The Irish Times-and subsequently reread a similar story in the weekend newspapers which referred to this general issue of there having been meetings with Revenue where it seemed that the matter had gone away and then, that subsequently, the new chairman of the Revenue Commissioners, Mr. Quigley, had phoned the bank and informed them that this wasn't the situation. I was quite puzzled by this because I had no knowledge of what it meant and it puzzled me for a number of days. On rereading through the files that had been made available to us as part of the process for this committee, I read - probably for the first time or maybe it was the second time - the AIB external file, which included Ms Walsh's file note, and suddenly it struck me that the construction of events that was put in the file note seemed to follow closely what had been reported in the newspaper. So I picked the phone up and I rang her and said that I felt that her file note wasn't totally accurate in its content, that I hadn't kept notes of the meeting, because it was a meeting where I was giving information to Ms Walsh rather than she giving information to me, but that my clear recollection of events was that we had not had a meeting with the then chairman of the Revenue Commissioners in April 1998 but there had been a meeting between Dr. de Buitléir and Mr. Quigley around the time of the Public Accounts Committee in October 1998. But I did tell her that we had had, that I had had and, indeed Dr. de Buitléir, together with a representative from Bank of Ireland - I can't remember if I told her about the Bank of Ireland representative at the time or not - but that we had a meeting in January or February 1998, in early 1998, with the then chairman of the Revenue Commissioners in connection with the whole issue of the inspection of non-resident declarations for the first time. I think I referred to that here yesterday. Deputy Doherty: Now, you have been aware of AIB.020.226 - I don't have the tab number Mr. Chairman - it was the------ Chairman: Tab 66, we'll publish it now.
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 2 of 10
Chairman: The Committee of Public Accounts, Sub-committee on Certain Revenue Matters is now back in public session, resuming Session J. Ms Walsh, last night we adjourned on the point where you submitted a revised text of what you believed to be now an accurate minute or report of the meeting which was held on the - was it on 31 October 198----- Ms Walsh: The thirtieth, in fact. Chairman: Thirtieth of October, 1998. Okay. I want you to take us through this carefully. First of all - I know some of these questions will have been asked before, but just so that we get this in sequence - this minute, AIB 020226, was written, you have told us, a few days after the meeting which you attended. Is that right? Ms Walsh: Yes, it was written on--- The meeting was on a Friday and it was dictated and typed on the Monday. Chairman: On the Monday. Okay. And that was 2.11.1998? Ms Walsh: Yes.
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09 October 1999
DIRT Inquiry 9 Oct 1999 Page 1 of 10
Witnesses called and examined: Morning Session Ms M. Walsh, Partner, PWC, External Audit, AIB Mr. P. Gardiner, PWC Mr. N. Glennon, Chief Manager Corporate Tax, AIB Mr. P. Brennan, Head of Group Taxation, AIB Mr. C. A. Clayton, Chief Inspector of Taxes and Deputy Secretary, Revenue Commissioners Afternoon Session Ms. M. Walsh, Partner, PricewaterhouseCoopers, contd. Mr. G. Scanlan, former Chief Executive Officer, AIB Group, contd. Mr. N. Glennon, Chief Manager, Corporate Tax, AIB Group, contd. Dr. D. de Buitléir, General Manager, Office of the CEO, AIB Group, contd. Mr. Dermot Quigley, Chairman, Office of the Revenue Commissisoners, contd. Mr. T. Tiúit, Principal Inspector of Taxes, Office of the Revenue Commissioners, contd. Mr. P. Brennan, Head of Group Taxation, AIB Group contd. Mr. R. Murphy, Head of Group Internal Audit, AIB Group Mr. C. Clayton, Chief Inspector of Taxes and Deputy Secretary, Office of the Revenue Commissioners, contd. Mr. C. MacDomhnaill, former Chairman, Office of the Revenue Commissioners, contd. Mr. D. A. MacCarthaigh, Senior Inspector of Taxes, Office of the Revenue Commissioners, contd. Mr. W. Cunningham, Partner, PricewaterhouseCoopers, contd. Mr. J. Culliton, former Chairman, AIB Group, contd. Mr. A. Spollen, former Head of Internal Audit, AIB Group, contd. Mr. J. Keogh, Group Finance Director, AIB Group, contd. Mr. D. Walsh, Inspector, Group Internal Audit, AIB Group Mr. S. Moriarty, Assistant Secretary, Office of the Revenue Commissioners, contd.
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 3 of 11
Deputy Ardagh: Yeah. So: Don Walsh has informed me that one-third of the Form 264 accounts sampled in Northern Ireland branches were not bona fide Form 264's. He currently estimates that the size of the Form F problem in the Republic of Ireland could run into hundreds of millions of pounds. Now this seems to be a nice chatty meeting with Mr. Spollen on the whole issue of the ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 10 of 11
Deputy Doherty: You have great composure. That's all I'll say. Mr. Cunningham: Sorry? Deputy Doherty: You have great composure when you're just only surprised, but you were surprised? Mr. Cunningham: I was, yes. Deputy Doherty: And surprised at the size of the amounts involved or the methods of calculation? Mr. Cunningham: Well, I was surprised at the figure; the ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 9 of 11
Deputy Rabbitte: Well, in terms of the committee, you understand the task we're facing, Mr. Mulcahy. Mr. Mulcahy: I appreciate that. Deputy Rabbitte: To lose one group internal auditor might be unfortunate but to lose two creates a dilemma for the committee. Mr. Mulcahy: Well in fact, again, in anticipation of such an inquiry I think it's fair to say that since the group internal audit function...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 7 of 11
Deputy Durkan: My question was, though, to your knowledge has there been any situation where a member of staff, at any level, would have got themselves into some kind of difficulty, either with the bank or with the Revenue Commissioners, because of following bank instructions or bonus-related instructions, not necessarily for this year? Mr. Mulcahy: In relation to DIRT? ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 6 of 11
Chairman: The sub-committee is in public session. We were dealing with Mr. Howley, the head of branch and clearing operations. Mr. Howley, we will leave it at that for now. We may ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 5 of 11
Chairman: Thank you very much, Ms Walsh. Mr. MacDomhnaill, you've seen this note of this meeting. Would you like to make a comment on it? Had you any contact, directly or indirectly, with anybody in AIB on this matter around this time? Mr. MacDomhnaill: Chairman, I can agree with the evidence given here today that I didn't discuss any aspect of this settlement with anybody in AIB at any time. ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 4 of 11
Deputy Doherty: Does Mr. Quigley exist? Chairman: Hold it. Sorry, Mr. Glennon, will you answer my question? Are you saying then that this note is doubly incorrect? Mr. Glennon: As I tried to outline, Chairman, earlier, we were trying to outline a series of circumstances from...in relation to the report of 1991 prepared by Mr. Spollen, what had happened in April on publication of parts of ...
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 2 of 11
Deputy Rabbitte: You saw we didn't make much progress yesterday with group taxation in terms of their knowledge of it. They knew the fact that inspections weren't going on but they didn't know there was non-inspectability. Do you recall that? Mr. P. O'Mahony: That was yesterday, yeah. Chairman: Sorry, I didn't hear your reply to that, Mr. O'Mahony. ...I
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08 October 1999
DIRT Inquiry 8 Oct 1999 Page 1 of 11
Chairman: The Committee of Public Accounts, Sub-committee on Certain Revenue Matters, is in resumed public session. Mr. Pat O'Mahony is the witness before the committee. Good morning, Mr. O'Mahony. Deputy Durkan. Sorry, before we go to that I just want to clarify something in relation to the evidence before the committee in relation to the ACC and with particular reference to the evidence of Mr. Philip Halpin as given to the committee on Tuesday, 21 September last. Sorry ... ACC ... its NIB. The committee wishes to make it clear that it has considered the transcript of Mr. Halpin's evidence and accepts Mr. Halpin's assurance that there was a genuine misunderstanding on his part with regard to his evidence relating to his letter to the Revenue of 12 February 1998. Good morning, Mr. O'Mahony. Mr. O'Mahony is before us ... Deputy Durkan. Deputy Durkan: Thank you, Chairman. Mr. O'Mahony just last evening from your colleague I was trying to ascertain the thinking and the culture within the bank in relation to the application of the DIRT rules. Your responsibilities were for branch management----- Mr. P. O'Mahony: In the Republic of Ireland. Deputy Durkan: -----in the Republic of Ireland. From what period? Mr. P. O'Mahony: From 1989 until I left the bank in 1995. Deputy Durkan: And you have taken up another appointment since with the bank? Mr. P. O'Mahony: No, no, I'm completely left AIB. I started up a small business in tourism myself. Deputy Durkan: Then you got into a different business. And the branch system reported to you? Mr. P. O'Mahony: Yes, from '89 until '95 ... in the Republic.
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