He said he hired the best accountants in London to keep his books and prevent any tax problems.
Redknapp said: "I have always paid my taxes. I've always gone to the best available people... I have always paid too much tax rather than not enough."
When asked about the day he opened the account in the name of his dog, Rosie, Redknapp replied: "It would be a waste of time giving me forms, because I would have probably left them on a deck chair when me and Sandra went to the beach in the afternoon."
During three hours of questioning Redknapp, wearing a dark suit with black jumper, told prosecutor John Black QC it was not clear what the Crown was accusing him of.
"You have got three different bonuses," Redknapp said. "I think really and truthfully you are not too sure where you are going."
The ginger-haired Londoner said "I've never been greedy in my life" as he was asked about his disputes with Mandaric over bonuses at Portsmouth.
Redknapp said he and Mandaric hit it off within an hour of meeting.
"There was no-one in the world I would rather be with," Redknapp said.
"We had our ups and downs, I was a bit volatile perhaps. (But) even now I love his company."
Redknapp described how he and Mandaric spent hours on end together when he joined the club.
He said: "I would be like his chauffeur... we spent hours upon hours upon hours together, I didn't get involved at the football club, on the training ground with the manager, it was me and Milan everywhere."
Redknapp said he was reluctant when Mandaric suggested he opened a Monaco account at the centre of £189,000 bung allegations.
He flew out to an HSBC branch in the tax haven in 2002.
Redknapp said: "Met a man in the bank, took my wife, Sandra waited sat on the wall outside, and I went in."
Redknapp said he raised the Monaco dealings once with Mandaric - two years later after Portsmouth secured Premier League survival with an away win against Blackburn Rovers.
Mandaric "was cuddling me and telling me I was the greatest manager" before they shared a glass of wine in an airport lounge, he said.
"It was a great day for us all," Redknapp said. "I walked over and sat down. We had a glass of wine.
"We started to have a glass of wine and we were so happy I thought I'd ask ... 'So Milan how did the investments go in Monaco?'
"He said 'I lost millions and millions and millions, disaster. But don't worry we'll have another go'."
He said he joked about the investments with his coaching staff at Portsmouth.
Redknapp added: "Jim Smith looked at me and said 'are you thick, Harry or what - he probably never put any money in in the first place' and we all started laughing."
Redknapp said he believed Mandaric had "lost £17 million that year".
"It disappeared out of my head after that. It was the last time that I ever spoke to him about it."
John Kelsey-Fry QC, representing Redknapp, asked him about fall outs between the pair.
Redknapp said the dispute centred on a coach who Mandaric wanted to sack.
"I said 'if he goes I go' and it all got a little bit out of hand from there," Redknapp added.
Redknapp was on a basic salary of £300,000 not including bonuses, jurors heard.
He said he was owed 10% for the £3 million profit Portsmouth made on the sale of Peter Crouch.
But Redknapp was told "to get on with my job basically" when he raised the issue with then Portsmouth chief executive Peter Storrie.
Redknapp added: "Morally I was due the bonus, although, legally I wasn't - I always related it to that... It wasn't my Crouch bonus as it wasn't in my contract."
Redknapp said the initial signing of Crouch for £1.25 million from Queens Park Rangers "was a joint effort" and his first since agreeing terms to his job as director of football at Portsmouth.
Redknapp told the jury that Mandaric said "I don't like him, he's a basketball player".
Redknapp added: "I said 'I like him, he's a good player'.
"I said to him, 'he's a good investment, he's young, he's developing, he's getting taller'."
He said Crouch was not the sort of player Mandaric was brought up to appreciate.
"Crouchy at 6ft 7in was not his cup of tea," Redknapp said. "He said 'you'll owe me 10% instead of me owing you'."
The football boss added: "It was my first signing to the club and I don't think he was impressed by my judgment at that time."
When Crouch was sold on to Aston Villa for more than £4 million, Redknapp said he felt he was due 10%.
"I don't think I was being greedy," Redknapp said. "When it came around I thought 'I've done well here'. Not just me ... it was a good signing."
Redknapp added: "I spoke to Milan and he said 'Harry you are due 5% ... concentrate on the football ... get us promoted and get on with your job."
Redknapp told the court his only previous charge was for speeding.
There was laughter as Mr Kelsey-Fry said Redknapp's success in football was "much to the displeasure" of Mandaric's QC Lord Ken Macdonald.
Redknapp, looking over the rim of his glasses, said: "Well he's an Arsenal supporter isn't he?"
Mr Black QC alleged to Mandaric earlier that the tax dodge was "all about Mr Redknapp and he was greedy and wanted more money".
Mandaric, concluding his evidence, replied: "Absolutely not true."
Both former Portsmouth boss Redknapp, of Dorset, and Mandaric, 73, of Leicestershire, deny two counts of cheating the public revenue.
The trial was adjourned until tomorrow when Redknapp will continue giving evidence.