The issue of possible Revenue penalties will now be crucial to negotiations in the months ahead between the Revenue and the financial institutions on any possible settlement of outstanding tax liabilities.

The report says the Revenue should seek full repayment of all tax due, with interest and with penalties. An audit of the financial institutions to establish what liability exists is already under way, but will take some months to complete.

The first issue for the Revenue will be to establish the extent of the tax liabilities on overdue DIRT, mainly relating to the years 1986 to 1991. Overdue payments must then be subject to interest payments, normally chargeable at around 1.25 per cent a month for much of the period since 1991. This could potentially treble the 1991 tax liability.

The financial institutions may be willing to make a settlement on the outstanding tax with interest. A key issue, however, will be whether the Revenue seeks to impose further penalties, a course open to it if it can prove that tax returns were deliberately fraudulent. This could substantially increase the bill for the institutions involved.