The use of bogus non-resident accounts to evade tax was an industry-wide phenomenon in the financial services sector in the late 1980s and early 1990s, according to the report of the Committee of Public Accounts on the DIRT inquiry.
However, the State, its agencies and the financial institutions failed to take a systematic or planned approach to combating this problem of tax evasion, adopting instead "an incoherent, spasmodic and ad hoc" engagement with the issue.
The report, which follows a seven-week public hearing into DIRT (Deposit Interest Retention Tax) evasion, is critical not only of the deposit-taking institutions but also of the three State agencies involved - the Department of Finance, the Revenue Commissioners and the Central Bank.
Compiled by a six-member committee chaired by Mr Jim Mitchell, it found that there was a particularly close and inappropriate relationship between banking and the State and its agencies. "The evidence suggests that the State and its agencies were perhaps too mindful of the concerns of the banks and too attentive to their pleas and lobbying," the report says.
It also dismisses the pervasive theory that tackling the DIRT is sue would have led to a flight of capital from the State, describing it as "indicative of an absence of rigorous analysis".
As regards the State agencies, the committee found that the relationship between the Department of Finance, the Revenue Commissioners and the Central Bank was defined by a certain informality as well as being characterised by features of territoriality.
The report notes that agendas were not kept for meetings of the management committee within the Department of Finance, for instance, while minutes were not recorded for most of the period under review.
It also accuses the Department of failing to inform ministers fully during the 1986-1998 period in relation to the problem of bogus non-resident accounts.
The report exonerates the various ministers for finance who held office during the period, including the present Taoiseach, Mr Ahern, noting that no official proposals for strengthening the law in relation to DIRT were made to any of them in the period.
"Claims of failure of political will are groundless as no official proposal ever reached the minister and the proposals by one minister to provide for full disclosure based on computerised returns of all bank accounts were not proceeded with because of official advice," it says.
The Revenue Commissioners and the Central Bank, however, do not fare as well in the hard-hitting report.
Of the Revenue Commissioners, the report says it is clear that the law was not applied equally between different categories of taxpayer over the relevant period.
In light of its conviction about bogus non-resident accounts, the Revenue's failure to take an industry-wide initiative to get the financial institutions to apply the law is described as "a serious lapse".
"There were well motivated officials in Revenue doing their best in an environment lacking overall professional management and strategic direction and consequently there were some quite inexcusable lapses," the report says.
It notes that the failure to tackle the DIRT problem contributed to the fiscal crisis of the time and delayed the process of restoring order to the public finances.
The report also found that bogus non-resident accounts were breaches of exchange control but the Central Bank, despite its responsibility for defending the exchange rate and protecting the integrity of the currency, took no action.
"The Central Bank had an inappropriate and outmoded approach to supervision, given the growing sophistication of banking and the changing role of banks in society," the report says.
"There was an insufficient concern with ethics and supervision other than from the standpoint of a traditional and narrow concern with prudential supervision in the Central Bank."
The report is also highly critical of the financial services industry.
Boards of directors of financial institutions are accused of generally betraying "an overly relaxed attitude" toward discharging their duties in respect of the operation of DIRT.
"Given the eminence of many of the members of the boards of directors of financial institutions, it is surprising that they did not bring a greater weight to bear on the enforcing of ethical standards, either within their organisations or the banking sector generally," the committee says.
It suggests that the role of the board and individual directors in financial institutions requires new guidance, vetting and checking by the Central Bank.
Meanwhile, industry representative bodies exercised no role in developing a code of practice that would have addressed ethics in banking.
The financial institutions' external audit function was found to have a number of serious defects and weaknesses which contributed to the continuance of the bogus non-resident problem. Among the accountancy firms to come in for particular criticism are PricewaterhouseCoopers, external auditors to AIB, and ACCBank's auditors, Ernst & Young.
Both banks were also found not to have any agreement with the Revenue to write-off DIRT arrears. That AIB believed it had such an understanding was due in part to the negligence of the Revenue Commissioners, the report says.
Regarding the State-owned ACC, the report found it "incomprehensible" that ministers for finance, as the sole shareholder, were not informed of the situation at the bank.
The report concedes that at senior level within Bank of Ireland, Ulster Bank and National Irish Bank, there was a commitment to compliance but this does not appear to have extended all the way down to the branch network where breaches were uncovered.