Senior civil servants have told the ail Oireachtas Committee on Public Accounts that politicians were firmly to blame for the failure to stamp out wide-scale tax evasion through bogus non-resident accounts.
Two former secretaries of the Department of Finance told the committee's inquiry into the administration of DIRT - Deposit Interest Retention Tax - that despite frequent proposals from the Civil Service, the various governments which held office in the 1980s showed no appetite for tackling tax evasion.
Mr Sean Cromien, who served nine governments during his term at the Department of Finance, said it was easier to persuade governments to deal with tax avoidance than tax evasion.
"The only way to deal with tax evasion was to give very strong powers to the Revenue Commissioners but governments always balked at this. They feared the Revenue would use these powers to harass small taxpayers."
Mr Maurice Doyle, another former secretary at the Department of Finance and later Central Bank governor, accused the 1983-87 Fine Gael-Labour government of knowingly introducing "unworkable" legislation as an attempt to tackle tax evasion through non-resident accounts.
An anti-evasion clause in the 1983 Finance Bill, which would have required account-holders to sign an affidavit confirming their identity and address, was amended to give the banks the discretion to determine who the beneficial owners were. Mr Doyle said the government, led by Dr Garret FitzGerald, had decided "to emasculate" the proposal.
However, last night Mr Alan Dukes, who was Minister for Finance in 1983, said the financial services sector and all the parties in the Dail objected to the affidavit proposal. Mr Dukes told The Irish Times he was not happy at the decision to amend the legislation, but he had concluded "the proposal would not have been passed, which I still consider was a great pity".
He said the decision was "a setback for the tax system" but that in 1983 the pressure he was under to amend the proposal was among the greatest he had experienced. Mr Dukes is not listed among the witnesses to be called by the committee.
Former and current civil servants attached to the Department of Finance and the Central Bank were highly critical of the Comptroller & Auditor General's report commissioned by the committee which uncovered widespread use of bogus non-resident accounts and years of official inaction.
Mr Doyle noted the C&AG had not interviewed any politicians while compiling his findings. "Am I to believe that no politician had any association with anything that happened during that decade? It's news to me," he said yesterday.
Mr Jim Mitchell, chairman of the committee, and other members put it to the civil servants that the reason for the prolonged inaction in relation to bogus non-resident accounts was due to their fears that any move to clamp down on bogus non-resident accounts would trigger a flight of funds out of the economy.
Their major concern was that such a loss of capital would put further pressure on the currency, prompt large increases in interest rates and contribute to a worsening of already difficult economic conditions.
Between 1979 and 1987, Mr Doyle said the Republic had a higher foreign debt per head of population than Poland and a higher national debt than Brazil. These economies at that time were regarded as "basket cases", he told the inquiry.