Yesterday was the best day so far for the Committee of Public Accounts, with chairman Mr Jim Mitchell TD and his colleagues getting in behind the Revenue's first line of defence.
In the main, the various Revenue officials stuck to the line that they simply couldn't tackle bogus non-resident accounts until this year because the politicians didn't give them the necessary powers.
The committee did however, in the words of an earlier Revenue witness, "score" by dwelling on an internal report compiled in 1992 by a former senior tax inspector, Mr Sean Moriarty. The report, highly commended both by the chairman and Mr Pat Rabbitte TD, shows that Mr Moriarty had given a lot of thought to tackling bogus non-resident accounts. And although the Revenue lacked the power to inspect bank accounts at that time, Mr Moriarty agreed his recommendations offered a "pragmatic, feasible and workable" solution to the problem.
In his report, Mr Moriarty suggested bogus non-resident accounts was the problem area which "most lends itself to a possible solution." His report, circulated shortly after the Revenue had collected over £2 million in unpaid tax from the Bank of Ireland in Miltown Malbay, recommended that senior Revenue officials should initiate meetings with the chief executives of the banks to insist they immediately regularise all bogus non-resident accounts.
Bank of Ireland had been deeply embarrassed over the Revenue swoop and he believed the banks were beginning to view the bogus accounts as more trouble than they were worth. In a note to the Revenue chairman, Mr Cathal Mac Domhnaill, he states: "I feel that there is now some evidence available to the financial institutions that we have the power to penetrate, at least in some areas, the facade around bogus non-resident accounts and that the institutions might be receptive to a high-level approach demanding immediate regularisation."
Mr Moriarty suggested the bank chief executives should be directed to introduce tighter internal controls and an independent auditor retained to offer a "periodic opinion" on the effectiveness of these controls.
The Revenue could make it clear that prosecutions would be taken against institutions suspected of facilitating the setting-up of these accounts and against taxpayers using them.
A provision that any such discussions should be made in tandem with a tax amnesty was added to reflect current political thinking, he said. Mr Moriarty said the tax amnesty reference had been included in the hope it "might fly". Mr Mac Domhnaill rejected the report on the basis that the board of the Revenue was deeply opposed to a tax amnesty. In response to a suggestion from Mr Rabbitte, Mr Moriarty accepted his proposals could have been effective, even if the amnesty had been dropped.
Mr Mitchell suggested that despite Revenue's protestations about its lack of powers, it had shown itself slow or uninterested in using many of the powers it had.
When DIRT was introduced in 1986, the Revenue was given the power to inspect declarations made by the owners of non-resident accounts but for 12 years didn't bother to do this.
Mr Moriarty said he understood the reason for such inaction went beyond the Revenue, pointing to earlier evidence that the minister for finance, Mr Ray MacSharry, didn't issue instructions to the Revenue to exercise that power. "My perception at the time was that was not exclusively a call made by the Revenue."
The committee expressed surprise at the transfer of Mr Tony Mac Carthaigh, the official with most experience with the financial institutions, to dealing with tax evasion in the drinks sector when the Revenue was beginning to make substantial progress with the banks. It also questioned Mr Moriarty's move to his current position as head of human resources although this was some years after his report.
The inquiry will hear further evidence from the most senior Revenue officials next week, including the current chief revenue officer, Mr Dermot Quigley. He is likely to be closely questioned on the interaction between Government and the Revenue during the period under investigation.
After that the Revenue will have to apply itself to defending its position in relation to prolonged negotiations held with AIB in 1990 during which AIB claims it secured an amnesty on unpaid DIRT. The Revenue says it didn't.