The decision by ACCBank to reach a £17.9 million tax settlement with the Revenue Commissioners closes an unhappy chapter in the history of the State bank. The Public Accounts Committee hearings last year highlighted ACC as one of the financial institutions which had a serious problem of bogus non-resident accounts. At the time, senior executives of the bank estimated its DIRT liability at around £1.5 million; it has now settled with the Revenue on the basis of a £7.5 million underlying tax liability and interest and penalties of £10.4 million.
The ACC settlement shows that bogus non-resident accounts were widespread in the bank in the late 1980s and early 1990s. Its settlement is much more significant in proportion to the size of the bank than was Bank of Ireland's recent payment to the Revenue of £30.5 million. The payment has pushed ACC into a £9.3 million loss for the first half of this year and will leave it facing an estimated loss of £2 million to £3 million for the full year.
ACCBank is not now in a happy position. Following the collapse of its proposed merger with TSB, ACC is trying to reposition its business to make it attractive to another purchaser. Making a large payment which will wipe out its profits for one year makes the job of its management all the more difficult. On the positive side, they will hope that the DIRT issue has now been dealt with once and for all.
The extent of the bogus account problem in ACC is all the more alarming because the bank is state-owned. The bank's political and civil service masters have claimed they were ignorant of what went on. But clearly the extent of the problem raises serious issues about the control and monitoring of the bank by its management and board at the time.
Three banks - Bank of Ireland, ACC and Ulster Bank - have now settled their DIRT liabilities. The £53 million accruing to the Revenue reflects well on the work done by the Public Accounts Committee, chaired by Mr Jim Mitchell TD and by the Comptroller and Auditor General, Mr John Purcell, who assisted their work. Among the major banks, AIB and National Irish Bank have still to settle and should do so as soon as possible.
In particular, the State's largest bank, AIB, should realise that the bank's public image, already tarnished by the affair, will not be improved by a long-drawn out dispute with the Revenue on how much is due. Whatever AIB believes about an agreement it had with the Revenue on tax due before 1992, it had a serious bogus non-resident problem on which a substantial payment is now due.
Finally, it is important to remember that the banks owed the DIRT payments on behalf of depositors. Many of these in turn were hiding money on which no income tax had been paid. The Revenue will not be able to pursue each and every one of the depositors, but where it uncovers evidence of substantial tax evasion, it must pursue the matter and ensure that the due tax and penalties are paid in full.