Institutions: Financial institutions may be required to make an annual return giving the names and addresses of customers who have received interest payments on their accounts or who have accrued profits on other products. State bodies will also be obliged to make annual returns in respect of services they purchased during the year, the measures announced in yesterday's Finance Bill.

The Revenue and the Department of Finance will now consult the financial institutions on how best to implement the reporting regime on a phased basis. The provisions will apply retrospectively from 2005.

The Irish Bankers Federation, which represents the State's financial institutions, said it was happy to begin consultation with the Revenue on this issue, which was recommended by the Revenue Powers Group.

Concerns about its duty in terms of customer confidentiality will be aired during this consultation.

If implemented, the measure will further strengthen the Revenue's powers in tackling tax evasion and aims to maximise tax compliance, according to the Minister for Finance, Brian Cowen.

Similar measures have already been adopted in a number of other EU states. Taxpayers are already obliged to disclose such earning in their tax returns.

At the moment the Revenue can only seek details of accounts and payments if it has evidence to suggest that an Irish citizen may be using accounts or other products to evade tax.

The Revenue must first apply to the High Court to compel the institution to release that information. It has frequently used this measure, particularly in relation to its investigation into the evasion of Deposit Interest Retention Tax (DIRT).

Financial institutions are already required to deduct DIRT and other tax due on accounts or policies that return a profit to their customers. This payment is made to the Revenue but does not name the customers.

As well as disclosing the names and addresses of these customers the financial institutions will also have to state the amount of money these individuals have been paid in interest or profits during the previous 12 months.

By disclosing the amount of interest or profit they made during the 12-month period, the Revenue will also be able to calculate the amounts invested or deposited originally in these accounts by Irish citizens.

The Minister for Finance said the measure was designed to phase in such coverage of financial institutions' customers.

The consultation process with the financial institutions will allow for an evaluation of the costs and benefits arising from automatic reporting.

It will also facilitate consultation on the logistics of implementing the system in the different sectors.