It is "unacceptable" that Irish Permanent paid no arrears of DIRT to the Revenue Commissioners, while one part of the testimony of its current chief executive, Mr Roy Douglas, was "astonishing and lacking in any credibility", the Public Accounts Committee has said.
A spokesman for the bank said last night that in hindsight certain decisions were flawed but insisted Mr Douglas's remarks were being misconstrued.
The committee commended the Irish Permanent's internal auditor, Mr David Kelly, for clamping down on bogus non-resident accounts in Killarney. But back-tax should have been paid after this incident, the PAC said, and given this and other breaches, the decision to abandon DIRT audits between 1992 and 1998 was "ill-judged".
"Where breaches of DIRT legislation were found in Irish Permanent and led to reclassifications, payment of arrears of DIRT were generally not made, nor was there disclosure to the Revenue," the PAC report said.
The report points out that when, in 1994, Irish Life & Permanent acquired Guinness & Mahon Bank, "it bought, if not a problem, at least an issue".
"Between 1986 and 1993 Guinness & Mahon had a particular group of customers, beneficial owners of funds amounting to some millions of pounds at the bank. The relationship between these clients and Guinness & Mahon was not straightforward. To begin with, these moneys were not placed in the normal way on deposit. The £37 million was formally placed on deposit at Guinness & Mahon by a foreign bank, Ansbacher Cayman," the report added.
"These accounts were also flagged DIRT exempt on the Guinness & Mahon system. They were classed as foreign currency deposits owned by a non-resident company, Ansbacher Cayman," the report said.
The committee was scathing in its criticism of Mr Douglas, the current chief executive of Irish Life & Permanent, who drew ire with his testimony on the late Mr Des Traynor's Cayman Islands tax evasion scheme.
"[His contention] that the Ansbacher device `is the simple straightforward set of relationships that exist between a depositor and a bank' is astonishing and lacking in any credibility," the PAC concluded.
Last night, a spokesman for the bank stressed that Mr Douglas was in no way trying to play down the tax evasion but was trying to explain that as the accounts were held by an overseas bank, no DIRT was liable.
He said that with the benefit of hindsight, certain other decisions relating to DIRT audits should not have been made.