After all the talk of amnesties and High Court challenges, AIB has made the biggest tax settlement in the history of the State, writing a cheque for £90.04 million (€114.33 million) to the Revenue Commissioners in full payment of its DIRT liabilities.
It is £90.04 million more than it should have paid if it had secured the tax amnesty it continues to claim it had. But the figure is considerably less than most observers had expected the bank to pay in the light of evidence given to the DIRT inquiry.
It is in fact the amount of money that AIB believes will make the entire DIRT fiasco go away. In AIB chairman Mr Lochlann Quinn's words, it was the "sensible" thing to do. "We still believe we had an amnesty, but it was not in anyone's interest, either the bank's, customers' or taxpayers', to spend another three or four years fighting it in court."
AIB made it clear that it was prepared to fight its claims of an amnesty in the courts. This was important both to uphold the reputation of the bank's senior staff who negotiated the amnesty with Revenue officials and to contain its potential financial liabilities, it claimed.
Its resolve was probably most severely tested by the findings contained in the report of the Public Accounts Committee (PAC) which investigated the DIRT affair and which was scathing in its criticism of AIB.
The PAC dismissed the bank's claims of a tax amnesty on pre-1991 tax liabilities, questioned the reliability of one of its key internal documents submitted as evidence and directed the Revenue to start trawling through its accounts and collect what was owed on bogus non-resident accounts.
The £90 million figure falls short of the £100 million DIRT liability estimated by AIB's head of internal audit, Mr Tony Spollen, which was the basis for the PAC's inquiry. And as the bank was viewed as being the main offender when it came to opening bogus non-resident accounts, the expectation was that its eventual tax bill could be as high as £200 million.
AIB consistently rubbished the £100 million figure as wholly without foundation and initially was slow to make any stab at what it could theoretically owe in unpaid tax. The PAC committee sent it away to come up with a figure and Mr Quinn subsequently furnished an estimate of £35 million as its maximum liability. As it turned out, after 15 months of audits, the Revenue Commissioners calculated that AIB had an underlying DIRT liability of £32.9 million and levied a further £54.23 million in interest and penalties.
The bank is keen to emphasise that its misdemeanours relate back to a different era and have long since been rectified. It will now be hoping the settlement brings an end to the sorry saga and that it is seen to have apologised for its sins.
And while Mr Quinn insists that the affair did not have any commercial impact on the bank's business, it undoubtedly dealt a severe blow to its reputation both at home and overseas.
With the DIRT issue out of the way, it is now free to focus on repairing this damage.
The result is a further vindication of the work of the Dail Public Accounts Committee, which has so far resulted in the recovery of £157 million in unpaid DIRT, with the eventual tax take expected to be substantially greater.
Following the PAC's DIRT inquiry, the Revenue undertook audits in 37 financial institutions which have resulted in five settlements so far. Its chairman, Mr Dermot Quigley, is due to outline the various settlements to the PAC next month and is likely to be closely questioned on individual institutions.
So far the Revenue has been consistent in levying hefty penalties and interest on the underlying tax liability, which in each case have amounted to around 60 per cent of the total settlement.
After AIB, the biggest payment has been by Bank of Ireland. It made a settlement of £30.5 million, of which £17.75 million was interest and penalties. The State-owned ACCBank paid £17.5 million, including £10.4 million in interest and penalties.
The PAC chairman, Mr Jim Mitchell, pointed out yesterday that its inquiry, which cost £1.8 million, has more than paid for itself.
