The £90.05 million settlement between AIB and the Revenue Commissioners arising out the DIRT tax affair is the largest in the history of the State, but the equivalent of little more than five weeks' profits at the bank.
The settlement, £34.58 million in unpaid DIRT and £55.46 million in interest and penalties, brings to £157 million the total amount collected by the Revenue from five financial institutions arising from the affair.
But AIB repeated last night that it had secured a DIRT tax amnesty from the Revenue despite findings by the Dail Public Accounts Committee (PAC) that this was not the case and said it had agreed the settlement because it was "sensible" to put the issue behind it.
The deal follows 15 months of audits arising out of bogus non-resident accounts opened by AIB for customers to allow them to evade tax in the 1980s and 1990s.
The Revenue Commissioners will also be pursuing those customers on the source of those funds and says it will be applying income tax, penalties and interest where warranted.
The AIB settlement is shy of the £100 million estimated by the bank's former internal auditor, Mr Tony Spollen, in an internal memo in 1990 which brought about an inquiry by ail the PAC. There was also speculation that the bank could face a DIRT bill of between £150 million and £200 million given the extent of the abuse of non-resident accounts with which it was involved.
AIB's chairman, Mr Lochlann Quinn, apologised yesterday for the bank's past shortcomings in the administration of DIRT. "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," he said.
Speaking to The Irish Times, Mr Spollen said: "At the end of the day, for everybody involved, it was an appalling time. It was a crisis and everybody reacts differently in a crisis. AIB chose to react in one way."
The £90.05 million settlement is three times as large as AIB's own estimate to the inquiry of £35 million. Five financial institutions - ACCBank, Ulster Bank, Bank of Ireland, Irish Life & Permanent and AIB - have paid the Exchequer £157 million in unpaid DIRT tax, interest and penalties.
DIRT audits and discussions between the Revenue and 31 other institutions are continuing. The Revenue's chairman, Mr Dermot Quigley, is due to report to the PAC on all the tax settlements in November.
Mr Quinn said AIB was reasonably happy with the outcome of the audit and had taken a practical decision to pay the £90.05 million demanded. "On balance it is in everyone's interest to get it behind us. It was 10 years ago. It was the sensible thing to do."
As part of the settlement, AIB has undertaken to bear the cost of the DIRT tax, penalties and interest due on bogus non-resident accounts between 1986 and 1992, which amounts to £87.15 million. AIB reclassified all its non-resident accounts after that and has sought the additional £2.89 million contained in the settlement from customers who held the remaining accounts.