Non-resident accounts are a taxation issue and do not come within the remit of the Central Bank, its governor, Mr Maurice O'Connell, has told the Public Accounts Committee DIRT hearing.
In an opening statement, he said the problem with such accounts "did not at any time compromise monetary policy; neither did it represent a prudential concern which might have been addressed under the banking supervision legislation".
"Taxation policy and implementation does not come within the remit of the Central Bank," he stressed. "The Bank has no knowledge nor access to the tax position of individual customers of financial institutions. It does not have contact with the Office of the Revenue Commissioners. Any sharing of information would be unlawful, indeed criminal. This is the law."
The assistant secretary of the Department of Finance from 1990 to 1994, Mr O'Connell told the six TDs conducting the inquiry into bogus non-resident bank accounts that the Central Bank participated in discussions about the taxation of interest on deposits and non-resident accounts.
It believed there was a problem regarding false statements of non-resident status but had no direct knowledge of the amounts that might have been involved. "Its only role in relation to taxation of interest was consultative. In general its view was that issues concerning the taxation of interest were sensitive so far as capital outflows were concerned."
He said that in 1991 AIB informed the Central Bank that it was in negotiation with the Revenue Commissioners in regard to a DIRT liability. "There was no reason for the Bank to take action as the stated amount did not raise any prudential concern and it was clear that the appropriate authority - the Revenue Commissioners - was dealing with the tax aspect. In the circumstances it would have been quite inappropriate for the Bank to intervene in any way.
The Secretary General of the Department of Finance, Mr Paddy Mullarkey, said DIRT "has been an important source of revenue for the State from the time of its introduction, yielding over £2.5 billion up to the end of 1998".
He told the inquiry that the economic and budgetry situation at the time of the introduction of DIRT was "far removed from the enviable position of the past four or five years".
The fear at the time of capital flight was "not an esoteric concern with financial markets. The implications for the community and for the Government of a flight of capital were only too readily apparent."
He said "the effects would have been direct and real on investment, employment and funding for business. There would have been consequences for the taxpayer through higher debt service costs, higher social welfare payments and a lower tax base because of higher unemployment." He said it was only around the middle of this decade that employment growth took off in a significant way. The Government Secretary, Mr Frank Murray, told the committee that a thorough search of records had been carried out in the Department of the Taoiseach and all documents relating to DIRT had been disclosed. "There are no known documents which have not been released."
