AIB has pledged to pay any outstanding DIRT arrears which arose between 1986 and 1991 from its own resources and not to levy the customers concerned. However, it is insisting it had an agreement with the Revenue Commissioners that no DIRT tax was payable on bogus non-resident accounts for the 1986 to 1991 period.
The bank does not know when it will be able to quantify how many bogus non-resident accounts it had during that period, the Dail Committee of Public Accounts was told yesterday.
The bank's chief executive, Mr Tom Mulcahy, said AIB is "working on" a figure, but refused to speculate on the potential size of any liability.
Senior officials of the bank dismissed the claim by AIB's former internal auditor, Mr Anthony Spollen, that the bank had a potential DIRT liability of £100 million in 1991.
They told the committee that the £14 million paid to the Revenue Commissioners in DIRT arrears at that time was recouped from the relevant customers' accounts.
However, Mr Mulcahy said any future DIRT payments relating to that period will be paid by AIB itself. But he insisted that as far as the bank was concerned it had an agreement with the Revenue that outstanding DIRT arrears prior to 1991 would not be pursued.
He said the agreement - which Revenue denies existed - was made between "consenting adults" and the bank was not prepared to pass on any additional liability to its customers. "Whatever we have to pay, we will pay it and will not seek to recover it from the customers," he added.
The bank was not asked to estimate its potential pre-1991 DIRT liability until April this year, Mr Mulcahy told the committee. He said establishing the number of bogus non-resident accounts was a complex procedure, but the figure of £100 million was "off the wall".
Mr Philip Brennan, head of group taxation, said many records from before 1991 would now be lost and there was a danger of doing "a back-of-an-envelope calculation". Committee members expressed surprise that the bank had not produced a figure for its DIRT liability in six months of talks with the Revenue Commissioners.
Mr Mulcahy said the practice of holding bogus non-resident accounts was "widespread in the financial sector" and grew "like a cancer" in the 1980s and early 1990s.
He said if any bank had tackled the issue alone, "it would have gone out of business". He added that worries about funds flowing out of the State did influence some of the decisions made by financial institutions at the time.
The Governor of the Central Bank, Mr Maurice O'Connell, told the committee that AIB informed the Bank in October 1990 that it was in discussions with the Revenue about a potential DIRT liability of £5 million. He said the Central Bank did not seek the internal audited material which referred to a potential liability of £100 million and had no knowledge of that figure. Since 1995 such audits are systematically assessed by the Bank.
