The Revenue Commissioners may seek to raise unpaid taxes from thousands of people who hid money in bogus non-resident accounts during the 1980s and 1990s.
A decision on the matter has not yet been taken but the origins of the money in bogus non-resident accounts is an issue which will arise in the course of the Revenue audits currently under way into financial institutions, according to sources. "A decision will then be taken at the highest level" of the Revenue.
The amount of DIRT not paid by the financial institutions has been estimated to be at least £200 million but the figure owed by the persons who owned the accounts could be multiples of that amount.
In 1991-92 during a Revenue investigation in Miltown Malbay, Co Clare, it was discovered that a number of traders had bogus non-resident accounts in the local branch of the Bank of Ireland.
"In the majority of cases the non-resident bank accounts were utilised to shield undisclosed income from Revenue," according to a report compiled in July by the Comptroller and Auditor General, Mr John Purcell, for the Public Accounts Committee.
The Miltown Malbay investigation resulted in the Bank of Ireland settling with the Revenue for £200,572. But a further £1.8 million in tax was raised from the nine individuals involved.
"In the Miltown Malbay case the bulk of the tax collected came from examining the circumstances of the traders. That's where the real loss of liability is," said a Revenue source. "I don't believe this can be walked away from."
The Revenue is currently conducting an audit of the financial institutions, during which it is deciding which non-resident accounts are bogus and therefore liable for DIRT. The question then arises as to whether the Revenue will seek to identify the owners of accounts which have been reclassified so as to investigate their affairs.
At present the Revenue's focus is on raising assessments against the various financial institutions, rather than pursuing the owners of the accounts.
The Revenue audits, which began a number of months ago and are to be completed by September of next year, go back to 1986 when DIRT was introduced. The former AIB head of internal audit, Mr Anthony Spollen, estimated in 1991 that up to 60 per cent of his bank's non-resident accounts might be bogus, making for a DIRT liability of £100 million. Other senior executives disagreed with Mr Spollen and estimated the bank's liability for the period 1986 to 1991 as a much lower £35 million. The bank has 91,000 non-resident accounts.
"There is a massive issue coming down the tracks," said a private sector tax expert. "The politicians have been bashing the institutions, which is easy, but this is the real hot issue coming down the tracks because of the thousands of people involved."
The same source also pointed out that up to 1992, people on high incomes owed tax in addition to DIRT on the interest earned on their deposits. DIRT was raised at the standard rate and the individual who owned the account then had to settle for the difference between the standard rate and the appropriate higher rate. In the tax year 1991 to 1992, the standard rate of income tax was 30 per cent and there were two higher rates, 48 per cent and 53 per cent. Since 1992 DIRT raised at the standard rate has satisfied the entire liability for income from interest on deposits.
Meanwhile the Central Bank has decided to seek a report each year on tax compliance from every authorised financial institution in the State. It will also enforce a code of ethics in the financial sector from next year. Both initiatives are to be voluntary, without any basis in law.