The Committee of Public Accounts' Sub-committee on Certain Revenue Matters is now in public session. I wish to commence the proceedings by making a statement.
The Committee of Public Accounts was first established in 1868 at Westminster, following the enactment of the Exchequer and Audit Department Act, 1866, promoted by the then Chancellor of the Exchequer, Mr. William Gladstone. On achieving independence, Dáil Éireann established as one of its earliest actions a Committee of Public Accounts for the new State. Every successive Dáil, almost immediately after each general election, appointed a new Committee of Public Accounts which, therefore, has existed in unbroken succession since the foundation of the State. It is now a required Standing Committee of the Dáil.
The committee works closely with the Comptroller and Auditor General whose Office has a similar background, longevity and continuity. Moreover, the Comptroller has been a constitutional officer since the adoption of the Constitution in 1937.
The committee, again by unbroken tradition, is chaired by a member of the Opposition to emphasise its independence from Government. However, it does not involve itself in policy issues and invariably works in an all-party manner. The committee does, from time to time, consider the consequence of policy decisions, the manner of their implementation, their statutory basis and, where relevant, the background to policy decisions.
The members of the committee are not subject to party Whips in relation to their membership of, or actions in, the committee. This is of particular significance in the present investigation. The members of the committee cannot take instructions from, or be influenced by, any outside source, political or otherwise, and this is acknowledged by the Whips. The committee hopes that other members of the Houses of the Oireachtas will understand the nature of the inquiry now embarked upon and will restrict their political comments as the inquiry proceeds and await the report of the committee.
The committee has, for the purpose of this investigation, appointed this sub-committee, to which it has delegated all its powers and functions in relation to this matter. Before appointing the sub-committee, all members of it were subject to detailed examination by the legal assessors to ensure that no conflict of interest, or no bias of a subjective or objective kind - as defined by the Supreme Court in the Carroll case - arose and all six members of the sub-committee have signed declarations accordingly.
The senior civil servant, usually the Secretary General, in a Department or agency is also appointed its "Accounting Officer". As Accounting Officer he or she is independent of the Minister and is accountable directly to this committee. Most Accounting Officers are called before the committee at least once a year but often several times.
The background to this investigation is as follows: 1. The committee has been concerned for a number of years that the Revenue Commissioners have not been sufficiently active in prosecuting suspected tax evaders. This issue has been raised several times in the past few years. 2. The then Chairman of the Revenue Commissioners, who is also its Accounting Officer, was scheduled to appear before the Committee on 28 April 1998. Just before his appearance the Sunday Independent carried a story concerning alleged problems within the Allied Irish Bank Group in relation to deposit interest retention tax, otherwise known as DIRT. The report carried only an outline of the problems but it prompted this committee to question the Accounting Officer in considerable detail on the matter when he appeared before it on 28 April 1998.
During the first week of October 1998 Magill magazine carried a more detailed report on this same matter. I brought this report to the attention of the committee at its normal meeting on Thursday, 8 October. The committee was perturbed by the report, especially in view of its hearings in the previous April, and decided to call a special meeting for the following Tuesday, 13 October, and to direct the new Chairman of the Revenue Commissioners to appear before it on that day. The Governor of the Central Bank was also directed to attend before the committee for its meeting of Thursday, 15 October 1998.
Arising from its meeting on 13 October and the overwhelming publicity leading up to it and during it, a request was received from AIB during the course of the meeting that they be allowed to give testimony to the committee as soon as possible. The committee agreed to hear the AIB and they were invited to attend the following Thursday, 15 October.
Having considered the matter, the Committee of Public Accounts decided that its existing powers would not be sufficient to further its investigations into the matter. Accordingly, on 20 October in a report to Dáil Éireann, it made a series of recommendations about how best to proceed which included a recommendation that the Comptroller and Auditor General should be requested by resolution of Dáil Éireann to prepare a report and be empowered to conduct an investigation. On receipt of his report, the committee would then continue its examination of the key issues, using enhanced powers under the compellability legislation and make recommendations on further action. The recommendations included several changes to the law and the hearings of the committee on the issue were suspended pending decisions on its recommendations.
On 21 October 1998, the Dáil passed a resolution asking that the Committee of Public Accounts examine and report to Dáil Éireann, inter alia, on any purported settlement between financial institutions and the Revenue Commissioners in respect of undeclared DIRT and information known to the financial institutions and regulatory authorities concerning the use of bogus non-resident accounts. By means of that resolution, Dáil Éireann also undertook to facilitate the Committee of Public Accounts in its investigations.
On 8 December 1998, the Government initiated a Bill entitled the Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Bill, 1998, to give effect to the recommendations of the Committee and the Bill became law on 16 December 1998. On the following day, a Dáil resolution requested the Comptroller and Auditor General, in essence, to carry out an investigation into the operation of DIRT by the Revenue Commissioners and the financial institutions in the period 1 January 1986 to 1 December 1998; to ascertain if there was a shortfall in the amounts of DIRT paid by the financial institutions and the reasons for and the circumstances of the shortfall; to ascertain the information known or which might reasonably be expected to have been known or available to the financial institutions, the Revenue Commissioners, the Department of Finance and the Central Bank of Ireland concerning the practice of using bogus non-resident accounts for the purpose of evading DIRT and the use made thereof and to report his findings to Dáil Éireann.
The report of the Comptroller and Auditor General, entitled, Report of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998, was laid before the Dáil on 20 July 1999 and, as provided by Standing Orders of the Dáil, any report of the Comptroller and Auditor General automatically falls to be considered by the Committee of Public Accounts without further ado.
Further to the resolution of the Dáil of 17 December 1998 in the matter of the report of the Comptroller and Auditor General arising from said resolution, the sub-committee on certain Revenue matters, being a sub-committee of the Committee of Public Accounts duly formed by that committee under Standing Order 149 (4)(b)(i), having examined the aforementioned report, has decided to hear further evidence on the matters contained therein in accordance with the provisions of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, and the Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Act, 1998.
Having so decided, and in accordance with the "rules and guidelines for committees in relation to the conduct of proceedings which give rise to findings of fact or to conclusions which could adversely affect or impugn the good name of any person", the sub-committee, having the power to send for persons, papers and records, formally sought the permission of the sub-committee on compellability, it being the "appropriate sub-committee" as defined in the aforementioned Act of 1997, to exercise the powers conferred by the Act in respect of all witnesses, papers and records it sought powers to direct as contemplated in the aforementioned legislation in respect of its examination of the Comptroller and Auditor General's Report of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998 and connected issues. Such permission was granted by the sub-committee on compellability on 28 July 1999 in a letter to this sub-committee from its Chairman, Deputy Séamus Brennan, Minister of State.
We are very conscious of the fact that this is the first time on which the extensive powers contained in the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunity of Witnesses) Act, 1997, as amended by the Comptroller and Auditor General and Committees of the Houses of the Oireachtas (Special Provisions) Act, 1998, are being used by any Oireachtas committee. Indeed, we are particularly conscious that the Committee of Public Accounts is the only committee to which these powers have been granted.
The Act as amended clearly provides for fair procedures and that the requirements of constitutional and natural justice are observed. All the members of the Committee of Public Accounts, and in particular the members of this sub-committee, are fully cognisant of their duty to be fair and factual both in their procedures and in their findings. However, it is important that I point out at this stage that this is a parliamentary committee and not a court, a tribunal or a judicial body. The normal procedures of this committee and normal parliamentary procedures will be followed as closely as possible and will be amended only to the extent necessary to ensure full compliance with the Act.
It follows from what I have said that, while the Act provides for rights of cross-examination and representation by lawyers on behalf of witnesses, it is the desire of the sub-committee that the direct part played by lawyers be resorted to only where absolutely necessary. The sub-committee itself will observe this stricture as all the questioning on behalf of the sub-committee will be conducted by the members. All witnesses that come before the sub-committee, including those who ask to come before it, will be directed to appear under the principle of direct one, direct all. This ensures that all witnesses will be heard under oath and will be covered by privilege as provided by the 1997 Act.
The committee is conscious that the proceedings now in train have an importance for Parliament and for public accountability way beyond the limits of this committee's remit. We recognise that no precedents exist and the committee has had to establish both a process and a precedent for the future. We acknowledge the responsibility it places on our shoulders and, notwithstanding the onerous nature of the duty imposed on us by this task, we do not shrink from it but welcome it.
The nature and purpose of the proceedings are to address what, in the sub-committee's opinion, are conflicts of fact arising directly or indirectly from the Comptroller and Auditor General's Report of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998 or earlier proceedings of the Committee of Public Accounts.
The proceedings will be conducted in a manner which will allow findings of fact if necessary and appropriate - if necessary and appropriate - and conclusions in accordance with the aforementioned resolution of 17 December 1998 of Dáil Éireann and make recommendations.
Accordingly, it is proposed that directions pursuant to section 3 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, as amended by section 19(2) of the Special Provisions Act, 1998, be issued to all persons who, in the sub-committee's opinion, through the Comptroller and Auditor General's Report of Investigation into the Administration of Deposit Interest Retention Tax and Related Matters during the period 1 January 1986 to 1 December 1998 or earlier proceedings of the Committee of Public Accounts or submissions received have (a) a legitimate and significant interest in the proceedings and (b) evidence which it is felt to be material to the examination.
In respect of the proceedings, the sub-committee wishes to draw attention to (1) its terms of reference as passed by the Committee of Public Accounts at its meeting of 29 April 1999; (2) the procedures it intends to follow in conducting its proceedings which were formally adopted by the sub-committee at its meeting of 20 July 1999 and which take account of the guidelines issued by the compellability sub-committee.
To date, the following has occurred: (1) an advertisement appeared in three national newspapers on 20 July 1999 giving notice of the sub-committee's proceedings and inviting relevant submissions; (2) a letter was delivered on 20 July 1999 to all financial institutions involved giving notice of this committee's proceedings; (3) a letter was also delivered on 20 July 1999 to those individuals who were identified in previous proceedings of the Committee of Public Accounts in the matter, and who were previously notified of such identification, giving notice of the sub-committee's proceedings; (4) a financial adviser/assessor was appointed by the sub-committee for the purpose of advising it on technical aspects of financial and taxation matters and he has been directed by the sub-committee to examine the Comptroller and Auditor General's report with a view to advising the issues to be addressed by it; (5) a further letter was delivered on 20 July 1999 to the financial institutions - who have been supplied with a copy of the report in question - asking that they identify where they are in dispute with any evidence contained in the report; (6) a further letter was delivered on 20 July 1999 to the individuals indicated in (3) above, asking that they identify where they are in dispute with any evidence contained in the report, together with a copy of the report; (7) a letter dated 22 July 1999 was delivered to the financial institutions enclosing the following documentation: (i) "Rules and Guidelines for Committees in relation to the conduct of proceedings which may give rise to findings of fact or to conclusions which could adversely affect or impugn the good name of any person", these being the guidelines drawn up by the appropriate sub-committee of the Committee on Procedure and Privileges of Dáil Éireann within the context of subsection (1) of section 13 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997; (ii) memorandum of procedure on the conduct of proceedings by the Public Accounts Committee under the provisions of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act, 1997, as adopted by this sub-committee in accordance with the aforementioned guidelines.
Both of these documents are being made public today. All relevant letters were issued to the Department of Finance on 23 July 1999.
At this point I wish to emphasise that it is not the role of the Committee of Public Accounts, or of this sub-committee, to decide the amount of money owed by any taxpayer, including any corporate taxpayer, whether by way of tax due, interest due or penalties. These are matters for the Revenue Commissioners and remain so in this case. There are well established appeal procedures for dissatisfied taxpayers as set down in law and this sub-committee will not involve itself in second guessing that process. That is not to say that the sub-committee may not want to identify the overall magnitude of the problem.
The preliminary hearing today will consider the issues to be addressed and witnesses to be heard or documents to be sent for. Before so doing, the sub-committee acknowledges the committed co-operation of the Comptroller and Auditor General and his staff in completing his report and wishes to thank them for their dedicated effort. The sub-committee also acknowledges that all 37 financial institutions, and all the relevant State Departments and agencies have thus far co-operated fully with the investigation. It is our earnest hope that this continues.
In view of the magnitude of the Comptroller and Auditor General's report and in view of the shortness of time between its publication and today's hearing, the sub-committee will be open to receive further submissions from interested parties up to 21 August next. Moreover, the sub-committee recognises that as matters develop it should be open, where appropriate, to hearing supplementary submissions.
At this stage I would like to introduce the personnel of the committee. The members of the sub-committee are: Deputy Denis Foley, vice-chairman of the Committee of Public Accounts; Deputy Seán Doherty; Deputy Bernard Durkan; Deputy Pat Rabbitte; and Deputy Seán Ardagh. The clerk to the sub-committee and his supporting staff are: Mr. Patrick Timmins; Miss Pam McLoughlin; Miss Sinéad McCann; Miss Bernie Maguire; Mr. Dominic Purdue; Mr. Alan Guidon; and Mr. Aengus O'Hanrahan, who all sit to the chairman's left. Sitting there also is the committee's liaison officer, Mr. Larry Byrne. The research staff assigned to my office for this purpose are: Mr. Tony Carberry, Miss Pauline O'Dwyer and Mr. Eamonn O'Halloran. The sub-committee's legal adviser and assessors are: Mr. Frank Clarke, senior counsel, Miss Mary Irvine, senior counsel and Mr. Paul Gilligan, senior counsel. The sub-committee's financial and taxation advisers and assessors are: Chapman, Flood, Mazars who are represented by Mr. Eugene McMahon, Partner; Mr. Mark Kennedy; Mr. Bernard Barron; and Mr. Dera McLoughlin.
I now wish to read formally into the record the Comptroller and Auditor General's report of investigation into the administration of deposit interest retention tax and related matters during the period 1 January 1986 to 1 December 1998. I point out, however, that in so far as any of the matters therein identified remain matters of controversy, the sub-committee will consider those issues afresh in the light of the evidence to be presented before it.
As is provided for in the Memorandum on Procedure established by the sub-committee, the sub-committee will, at this public session, propose the issues which it believes arise under its terms of reference. Those issues are as follows. THE STATE AND ITS AGENCIES - under this heading the sub-committee will examine the Department of Finance, the Central Bank, the Revenue Commissioners and other relevant Departments or agencies, including former and present officials of these, under the following sub-headings: the extent of their knowledge of a problem in relation to bogus non-resident accounts and related matters and the scale of such problem; their powers and obligations in relation to such problem; the actions, if any, taken by them to deal with the problem; and the contacts and communications, if any, between them, and between them or any of them, or any one of them, on the one hand, and financial institutions, on the other hand.
FINANCIAL INSTITUTIONS: Under this heading, the sub-committee will examine the role of any relevant deposit-taking financial institutions, including former and present officials, under the following sub-headings: - (a) the extent of bogus non-resident accounts and related matters within the financial services industry generally, or, where appropriate, within individual institutions; (b) the extent of the knowledge of all appropriate boards, senior management, and external auditors of such problems; (c) the actions, if any, taken by the persons or bodies referred to at (b) to deal with such problem; (d) where any such persons or bodies were unaware of the problem or the scale thereof, the reasons for such lack of awareness; (e) the extent, if any, to which bodies representative of the sector contributed to the governance within that sector.
It is not part of the function of the sub-committee to determine the level of indebtedness, if any, of any institution to the Revenue Commissioners, which matter falls to be determined, if at all, through the Revenue Assessment and/or Courts process. However, in so far as it may be necessary for the sub-committee to reach conclusions in general terms as to the scale of the problem, and the relative incidence of the problem in various institutions, it may be necessary to look at the extent of bogus non-resident accounts and related matters in particular institutions at a general level.
REVENUE ARRANGEMENTS: Under this heading, the sub-committee will examine questions arising out of conflicts disclosed in the report of the Comptroller and Auditor General concerning whether, and if so, to what extent, formal or informal arrangements, or agreements, may have been entered into between the Revenue Commissioners and certain financial institutions concerning the non-collection of possible liabilities in respect of DIRT deriving from a period prior to such arrangements. Where any such arrangements or agreements are established, the circumstances to which same came to be arrived at will also be examined.
It is appreciated that in the relatively short time that the report of the Comptroller and Auditor General has been available, it has not been possible for all parties to state with precision the aspects of the report with which they agree, or disagree, and to indicate, where they disagree, the case that they would wish to make. The issues oulined are defined for the purposes of giving a shape to the sub-committee's proceedings. Subject to the views of the parties, the sub-committee proposes dealing with those issues in the order in which I have announced them. Written copies of those issues are available.
Second, it is proposed that prior to the first sitting of the sub-committee for the purposes of hearing evidence, further contact will be encouraged between interested parties and the committee's legal and financial assessors to attempt to define and refine the issues. The committee is mindful that it does not wish to waste important resources on dealing with aspects of this controversy which are not significantly in dispute. The sub-committee is grateful for the responses already received from interested parties which have assisted it in its task of attempting to define the issues as precisely as it can. It looks forward to the further cooperation of the parties to enable its formal proceedings to be conducted with the maximum efficiency. When the sub-committee has had the benefit of hearing what any of the parties may have to say concerning those issues, and the procedures which it proposes, it will meet again in private session to finalise both of these issues and its procedures today. It should be noted that its rules of procedure clearly provide for either the issues or its procedures being changed to meet circumstances as they develop. In addition, the sub-committee will compile a list of the witnesses under each issue heading who appear to it to be relevant. That list will be supplied to all interested parties who will be invited to comment on it in accordance with the rules of procedure which have already been circulated.
I now propose to call any interested parties. We have been notified by some that they intend to be present here today. Perhaps they would like to notify us. Those on the list of possible participants, if they wish they can come up to the seats here if they wish to say anything. On behalf of the Department of Finance - is anyone here representing the Department of Finance?
