The payment by Allied Irish Banks of £90 million to the Revenue Commissioners to discharge its DIRT liabilities is the largest sum paid to date in a tax settlement in this State. The scale of the payment comes as little surprise. Reports of DIRT evasion in AIB initiated the entire saga and the bank was one of the main offenders in maintaining bogus non-resident accounts. It has now agreed a settlement with the Revenue Commissioners on the basis of an underlying tax liability of £34.58 million and interest and penalties of £55.46 million. AIB still argues that it agreed what was effectively an amnesty of its pre-1991 DIRT liabilities with the Revenue Commissioners in the early 1990s. However the Public Accounts Committee, which examined the issue in depth, agreed with the Revenue that there was no amnesty and the payment is the result of a subsequent 15-month audit of AIB's files by the tax authorities.
The payment made by AIB is certainly substantial; the next highest DIRT payment made to date is £30.5 million by Bank of Ireland, although in terms of the scale of the institution involved, the sum of £17.9 million paid by ACC remains significant. The underlying tax liability involved is roughly what the bank itself put forward at the PAC hearings, though it is well below the £100 million figure estimated by its former internal auditor, Mr Tony Spollen, at the time.
As we are not privy to the results of the audit undertaken by the Revenue, or to the details of the negotiations it had with AIB, it is impossible to comment on whether the settlement is fair. Certainly it will not seriously affect AIB's financial performance, representing just five weeks profits.
In making the settlement, the AIB chairman, Mr Lochlann Quinn, apologised on behalf of the bank and said that it had decided that it was better to settle than to fight on. This judgement is certainly correct. If anything, the bank should have settled much earlier. The affair has damaged its reputation; the PAC was strongly critical of the way AIB handled its affairs at the time and of its claims to have had an amnesty. Had AIB decided to fight this issue through the courts, then the damage to the bank's standing could only have grown. And the fact remains that, whatever its amnesty claims, AIB was a central player in one of the most significant financial scandals of recent years - a widespread scheme of tax evasion in the late 1980s and early 1990s in which hundreds of millions of pounds were hidden from the Revenue.
It is easy, of course, to criticise the banks for their conduct. While they are culpable, we must remember that they owed DIRT tax on behalf of depositors who had knowingly opened bogus non-resident accounts. Now the Revenue must pursue the major offenders among the client base of AIB and the other banks. Whatever the DIRT liabilities involved, the depositors involved will owe many more millions of pounds in unpaid income and capital taxes.
The AIB payment is a further vindication of the work of the Public Accounts Committee, chaired by Mr Jim Mitchell and supported by the Comptroller and Auditor General, Mr John Purcell. More than £150 million has now been collected from financial institutions in unpaid DIRT, interest and penalties. It is a clear and measurable result. Whatever about the committee's other recommendations about further financial penalties on the banks, the most important target is being achieved. The tax is being paid.