The Revenue Commissioners were caught in a "no-win" situation between the banks and the building societies over the DIRT tax, according to an internal memorandum disclosed at the inquiry.
The memo, written in June 1991 by Mr Tomas Tiuit, a principal inspector at the time, stated that since DIRT was introduced in 1986 a "disturbing level of abuse" of non-resident accounts had emerged.
Mr Tiuit also said that a tax inspection on a Roscrea, Co Tipperary, trader resulted in the recovery of £65,000 in DIRT from the Bank of Ireland branch. The trader's bogus non-resident account had been opened "apparently with the very active complicity of an official at the bank".
It was a "reasonable assumption" that the building societies were at least as active in this area as the associated banks, Mr Tiuit said in his memo. They had received a complaint from Allied Irish Banks that an AIB manager in Tralee, Co Kerry, lost a £400,000 deposit account to a building society in the town which offered the depositor "non-resident" facilities.
The memo said the banks had protested that their officials were under strict instructions not to engage in malpractice. But where an offence was uncovered they would plead extenuating circumstances because "their man" was forced to fight back against abuses by his competitors in the "fiercely competitive small-town environment". The institutions then threw the onus back on to the Revenue Commissioners to enforce the legislation.
He commented: "We are in a no-win situation. If we do not move against the abuse, individual deposit-takers will continue to complain. If we do move, even in a limited way, it is almost certain that collectively the deposit-takers will protest."
