A major conflict has arisen between AIB Bank and the Revenue Commissioners over whether the bank had an "amnesty" on tax arrears due before 1991 on bogus non-resident accounts. It follows a five-hour meeting of a Dail committee yesterday, which has demanded that both sides produce documentary evidence to back up their claims.
The Dail Committee of Public Accounts meets again next Tuesday to inquire further into the controversy. Yesterday, AIB maintained that talk of £100 million in DIRT arrears was "off the wall". Although its chief executive claimed AIB had detailed minutes of meetings and phone calls between it and the Revenue, it angered committee members by maintaining it could still not put a figure on outstanding arrears.
Documents from both sides concerning the alleged deal are to be sought by the Dail committee before its hearings resume. The AIB chief executive, Mr Tom Mulcahy, and the chairman of the Revenue Commissioners, Mr Dermot Quigley, are likely to be recalled to give further evidence. Both will get transcripts of the other's evidence.
Mr Mulcahy claimed yesterday that the Revenue board had authorised the deal. "It was an industry-wide arrangement," he said. "State banks were involved." He said the Central Bank, the Department of Finance, ministers for finance and successive governments, all knew of the problem.
But a Government spokesman expressed doubt last night about the claim, saying the Revenue was disputing that any deal on arrears was agreed. The Revenue chairman, who listened to Mr Mulcahy's evidence, insisted last night there "was a lack of information provided to the Revenue by the bank" in 1991.
But Mr Mulcahy was adamant that an "amnesty" was agreed regarding arrears due between 1991 and 1986, when DIRT was introduced. The move to tighten procedures so as to deal with the "cancer" of bogus non-resident accounts, had only worked because it was industry-wide, he said.
After the meeting, Mr Quigley told journalists there was a direct conflict of evidence between the two on whether there was a deal on DIRT arrears. On Tuesday, Mr Quigley had said the Revenue was pursuing the bank for taxes due from the period.
Mr Mulcahy said yesterday that a 1991 estimate by the former AIB Group Internal Auditor, Mr Anthony Spollen, that the bank's DIRT arrears were about £100 million at the time, was not Mr Spollen's own and was never intended as a precise measurement of the situation. The estimate was "off the wall", he said.
He said Mr Spollen's figures were based on data produced by Mr Jimmy O'Mahony, AIB's group taxation manager. "Mr O'Mahony has described them as an off-the-cuff estimate to get people's attention," he said. Mr O'Mahony had arrived at the £100 million figure to "fire up the organisation about the issue".
The chairman of the committee, Mr Jim Mitchell, said he found it "hard to accept that you disown your own man's figures" and yet come up with no alternative. Mr Mulcahy denied they had "rubbished" Mr Spollen.
He said the bank had not estimated the size of the arrears at the time because it understood from the Revenue that the arrangement it was entering into was "forward looking". An exercise to calculate the amount owing had begun this April but was not complete.
Mr Mulcahy said it was the bank's position that even when this calculation was completed, it would not have to pay the arrears because of the arrangement it had agreed with the Revenue in 1991. But if it emerged that it did have to pay, the funds would come from the bank's resources and the customers concerned would not have to pay, he said.
Mr Philip Brennan, AIB Head of Group Taxation, told the committee that the bank had no document from the Revenue con firming a deal on the non-payment of arrears. But he said the bank had contemporaneous notes taken by bank officials during the negotiation of the details of the initiative.
Mr Mulcahy told Ms Beverly Cooper-Flynn TD that the then chairman of AIB, Mr Peter Sutherland, and the rest of the board, were kept informed of developments during 1991. Mr Sutherland confirmed in a statement read for him to the committee that he had established a committee of non-executive directors who considered arguments made by Mr Spollen regarding the potential tax liability. But they had not agreed with his view.
