Mr Gerard Scanlan, former AIB chief executive, leaving the inquiry at Kildare House, Dublin, in September. The sub-committee found it `extraordinary' he had no significant involvement in the DIRT issue in 1991. Photograph: Eric Luke
The PAC report has dismissed AIB's claim that it received an effective tax amnesty from the Revenue Commissioners in 1991 in respect of unpaid DIRT on bogus non-resident accounts. As a result, the Republic's biggest bank could be facing a tax demand of tens of millions of pounds.
AIB estimates its maximum DIRT liability would be £35 million but its former internal auditor, Mr Tony Spollen, estimated at the time that it could run to £100 million. With the committee saying interest and penalties should be levied on overdue tax, the bank could be facing a substantial tax bill if the Revenue can prove the liability through an audit of AIB's books.
The report has definitively concluded AIB did not have a deal with the Revenue to write off DIRT liabilities arising between 1986 and 1991 but concedes the bank's "misunderstanding" was partly due to the Revenue's failure to collect the arrears.
The sub-committee found: "There was no deal, agreement or amnesty involving the write-off of tax. The fact that AIB was allowed to persuade themselves that they may have an understanding to this effect is due in part to the negligence of the Revenue Commissioners."
The report adds the Revenue Commissioners have similarly offered "no justification" for its failure to follow-up on the negotiations it held with the bank in relation to bogus non-resident accounts in 1991.
The sub-committee also said it found it "extraordinary" that AIB's then chief executive, Mr Gerard Scanlan, had no significant involvement in the DIRT issue at that time.
An AIB spokesman refused to comment on the findings yesterday. He said the report was very comprehensive and the bank would fully examine its contents.
Throughout the PAC's investigations AIB insisted it had secured a DIRT amnesty, providing notes and records of phone-calls with the Revenue in 1991 as evidence of its position.
The sub-committee found that at no point did any of the contemporaneous notes or oral evidence constitute evidence of a tax write-off deal.
Crucially, the sub-committee ruled that nothing which transpired at the meeting of February 13th, 1991 could be construed as a deal.
"There is nothing in the Revenue letter to AIB of February 15th, 1991, signed by Mr Tony Mac Carthaigh, that can be construed as a deal to write off arrears of DIRT. In fact, it makes clear that any cases discovered prior to June 30th, 1991 would be the subject of a DIRT payment."
The bank had claimed an ensuing telephone call to Mr Mac Carthaigh provided further clarification for the bank of what had been agreed at that meeting. The report, however, states that "no reliance whatsoever" can be placed on AIB's note of that conversation.
The report further established AIB did not make full disclosure to the Revenue of the scale of its DIRT liabilities. It also dismisses the assurances provided to AIB's board of directors by its then head of taxation, Dr Donal de Buitleir, on what had been agreed with the Revenue in respect of its bogus non-resident accounts in 1991.
And the report criticises AIB's auditor's, PricewaterhouseCoopers, for failing to seek any independent assurances from the Revenue on the status of the deal before signing off its annual results for 1991. It provides some support though for AIB's audit committee's decision to accept PricewaterhouseCooper's opinion that the bank did not have a DIRT liability back to 1986.