The Irish Trade Union Congress in a submission to the Commission on Banking and Credit in 1936 said:
The present relation of the State to the banks is a most ignominious one for the State and the inevitable control which banks exercise on the mind of the Minister for Finance is not a healthy one for the State and hence for the people as a whole.
One can see how little things have changed.
The socially reckless attitude adopted by Irish banks in the late 1980s, which has been exposed in the case of AIB, should give cause for thought. To whom are the banks answerable? When AIB drove its business towards insolvency in the early 1980s, through ill advised adventures with the Insurance Corporation of Ireland, the ordinary, law abiding taxpayers had to foot the bill to bail it out. Those were straitened times and some demands on the Exchequer were not met because of the cost of sorting out the AIB/ICI debacle. In 1987, AIB was hurting the old, the sick and the handicapped.
If the State expected a show of appreciation for bailing out the bankers in 1985, it was to be disappointed. AIB almost immediately involved itself in a tax scam, the dimensions of which are only now coming to light. It is essential that the Committee of Public Accounts be unambiguously empowered by Dáil Éireann to pursue this matter as far as necessary. We must be assured the committee will act within its powers right to the end of this investigative process. We must also be assured that the committee is enabled to use its powers to compel the attendance of witnesses.
The DIRT fraud of the late 1980s was an inevitable result of lax controls in legislation. The amount of tax lost to the Exchequer could be £1 billion or higher. There is a danger that the investigation now under way will not deal with the political aspects of the case which are not matters for the Committee of Public Accounts but which will be debated when the report of the investigation is laid before the House.
A number of questions must be addressed if the public is not to lose even more confidence in the relationship between Government and business. The total loss of revenue to the Exchequer is higher than £1 million and could be as high as £2 billion. This is taking into account the entire banking sector and includes not only the DIRT which was underpaid for five or more years but also the unpaid taxes on the moneys on deposit, including interest and penalties. Responsibility for the non-payment of DIRT in this case lies with the account holders and the Government rather than with the Revenue Commissioners, the Central Bank or even AIB.
It was Government which gave the wink to the banks and to unscrupulous account holders in its handling of the issue after the 1983 budget. Arguably, the Governments of the day were accomplices in this fraud against the State in the signals being given both to the banks and to those who had money put away. Government has a responsibility to prevent fraud and abuse, not just to establish investigations and tribunals after the event.
This preventable fraud was allowed to grow out of control at a time when ordinary law abiding taxpayers were being squeezed for all they were worth. The system of declarations in the case of non-resident accounts, which was established by the Government in 1986, could be interpreted as a nod and a wink in the direction of tax evaders. The comprehensive political investigation which must follow the work of the Committee of Public Accounts must look at the role of the Department of Finance and of members of the Governments of the day in facilitating the culture of tax evasion in which AIB so enthusiastically participated.
It is understandable that branch staff could, in a few cases, encourage customers to disregard the law by claiming to hold an account as a non-resident one. However, the scale on which it was done can leave little room for doubt that management at every level knew about the misuse of the exemption from DIRT which applied to non-resident accounts.
The directors must account for their role. It must be asked whether branches were under such pressure to perform, as was the case in the NIB scandal, that officials encouraged customers to manage their financial affairs in a way that they would otherwise not have done. The bank's system of control appears to have been grossly inadequate in preventing such encouragement. It is not relevant to the scandalous abuse of its position in society by AIB that other banks were also breaking the same rules.
The estimate of £1 million outstanding DIRT liability by AIB might be seriously unreliable. In the absence of independent calculations the real figure may well be higher. It is necessary to establish how many accounts were recategorised in 1991 by AIB as a result of the review of non-resident accounts either because a declaration was not in place or because the residential status of the account holder was in doubt. It is necessary to confirm whether, even then, the bank confirmed the bona fides of non-residents by having the declarations countersigned by a member of management.
It will be necessary to establish whether the Revenue Commissioners established any system of audit in relation to the post 1991 regime or whether it was still left to individual banks, driven by the pursuit of profit to make the greatest possible return to their shareholders, to implement. We must establish whether April 1988 was the earliest date on which the Revenue Commissioners used their 1986 powers to check non-resident accounts. We must also establish the reason for the two year delay.
It is necessary to establish how, apart from being told by AIB, the bank's auditors verified that there was no further liability to DIRT in 1991. While it is accepted that AIB addressed the difficulties in the system, it must be established whether the group chief executive believes these were fully solved. Finally, it must be established that if AIB did not mislead the Revenue Commissioners on the extent of the problem, as has been claimed, whether this was simply because AIB did not take the trouble to quantify its extent.
The need to prevent the outflow of funds from the economy is not a mitigating factor for the bank or for the Government. Mr. Bulmer Hobson, another commentator on the work of the 1936 banking commission, said:
The bankers and other financial interests are, of course, very pleased to have the arranging of their profitable business the way they want it, without having to face any critical or informed analysis of how their actions affect the community as a whole. They appear to think that, as long as the trade in money is prospering, everything was all right for everybody else.
That situation cannot be permitted in the 1990s. It is a matter for the Committee of Public Accounts to use its powers to ensure that it will not obtain. I support the motion.
