Bring the banks to account
BY ROBBIE MacGABHANN
£7.5 million from Irish Life and Permanent, £17.9 million from ACC Bank, £4.2 million from Ulster Bank, £30.5 million from the Bank of Ireland - these are just the first batch of payments from Irish banks found to have systematically and deliberately avoided paying tax on thousands of their customers' deposit accounts. The banks perpetrated this tax fraud by claiming the accounts were for customers not resident in Ireland. AIB and National Irish Bank have yet to settle their unpaid tax bills with the Revenue Commissioners.
In the case of AIB, it is believed that their tax liability could be as high as £100 million. AIB estimates that they only owe £35 million. However Irish Life and Permanent told the DIRT inquiry they only owed £250,000 and ended up paying £7.5 million. BoI, who ended up paying over £30 million, had initially estimated their liabilities at £2.8 million, so it is not hype to put AIB's unpaid tax bill at the £100 million mark.
The media comment on the banks' tax settlements with the Revenue Commissioners has been muted, with the stories only getting comment on the business pages of newspapers and brief reporting on television and radio bulletins.
Irish banks are the silent partners in the extensive political corruption uncovered by the three tribunals
The significance of these payments has been overlooked, as has the whole role of the banking sector in the spectrum of scandals that have disgraced Irish politics and disillusioned thousands of voters in the 26 Counties.
Next to coverage of the peace process, political corruption has topped the headlines over the past few years. There is a growing consensus that all the politicians involved should be publicly censured. At the very least, they should be barred from political office, be made to make financial restitution in terms of tax owed and be forced to return any money received. Many people think that any politicians found guilty of political corruption in the McCracken, Moriarty and Flood tribunals should be jailed.
What has been overlooked is the role of the Irish banking sector. Irish banks are the silent partners in the extensive political corruption uncovered by the three tribunals.
Over the past three years, Irish banks have been found guilty of a variety of misdemeanours from illicitly taking money from their customers in the case of National Irish Bank to opening illegal offshore accounts by Ansbacher, to allowing thousands of customers avoid paying tax on their deposits.
The NIB, Ansbacher and DIRT scandals show a highly corrupt two-tier banking sector at work. Some in the banking community want us to believe that these were just isolated incidents when they are in fact just the publicly known glimpses of a very warped and elitist business sector.
HAUGHEY'S AIB LOAN
Take, for example, the case of Charlie Haughey's huge unpaid loan at AIB. For years he ran up debts with the bank before he finally paid them £750,000. How many other AIB customers who had difficulties with their loan repayments over the same time period had their accounts foreclosed, maybe their homes repossessed or their struggling businesses closed down? How many people had their requests for overdrafts, credit cards and small loans turned down over this same time period?
We will never know, because the banks take little notice of the millions of small accounts that earn them money. They are more interested in what is called a high net worth individual in the banking community. To be deemed a high net worth person you need to have at least £500,000 in disposable income, then for you banking queues become a thing of the past. You will have your own special branch to visit. Dublin's Fitzwilliam Square is home to Bank of Ireland and Anglo Irish Banks' elite branches for the super rich. You get the same range of banking services plus nice touches like a gold credit card and larger cheques, along with the personal banking service and investment advice.
At the same time, Bank of Ireland is closing down branches in rural locations while in some of the newer less well off urban suburbs there are a dearth of banks and ATM machines. AIB, the most profitable of Irish banks, closed the most branches in Ireland last year. They shut down 11. BoI closed 2, First Active is closing 25, while NIB closed 5.
This has happened in the most profitable environment in Europe to do banking. Just look at the profits made by banks in Ireland last year.
glo Irish Bank's profits grew by 56% to £70 million, First Active was up 5% to £36.9 million, Ulster Bank were up 6% to £165 million sterling, Irish Life and Permanent were up 18% to £245 million, BoI were up 10% to £724.5 million. Even this year, AIB has made £480 million in the first six months of the year; that's over £2.6 million a day.
Most of these profits were made by banks who were in the same year using the introduction of the euro to raise foreign exchange charges to customers. This begs the question: Where were the Dublin Government and the Central Bank regulators for the banking sector at this time. What were they doing?
GOVERNMENT DO NOTHING
The response of the Dublin Government and the Central Bank is the usual mix of do nothing and then absolutely nothing. The DIRT inquiry found that successive ministers for Finance had ``little awareness'' of what was happening. They found that the Central Bank ``had an inappropriate and outmoded approach to supervision given the growing sophistication of banking and the changing role of banks in society''.
It is now more than eight months since the DIRT inquiry's findings were made public. Banks are still making more and more profits while still closing branches. They are being dragged by the Revenue Commissioners into finally paying their DIRT liabilities but there are still many more outstanding issues not even begun to be dealt with.
The Government could easily restore public confidence by taking a range of measures such as barring any directors of banks during the time of the DIRT scandal from being directors of a company again.
They could act on the report on regulating the financial services sector now gaterhing dust on government shelves. The report calls for the establishment of a new financial regulator. Most importantly, they could move on the forgotten proposals to create a vibrant dynamic state bank. Charlie McCreevy, like most of the coalition, is probably still on his holidays, but this should be top of the pile when he comes back to work.