By Andrew Bushe
DUBLIN — A political row has blown up after a tax assessment by the Revenue Commissioners of about £1.8 million against former Taoiseach Charles Haughey for the cash gifts he received from supermarket magnate Ben Dunne was reduced to zero by an independent appeals commissioner, who is a brother-in-law of Taoiseach Bertie Ahern.
There were angry scenes in the Dail when the matter was raised by the opposition parties and a special debate took place.
The row has caused tensions in the coalition, with the Progressive Democrats expressing their disquiet and being noticeable by their absence in the chamber for most of the debates.
Labor leader Ruairi Quinn describing the situation as "a fiasco" and said it was "simply incomprehensible to the ordinary compliant taxpayer."
He said the credibility of the tax system was at stake as a result of the "old fat cat Mr. Haughey who seems to have, Houdini-like, escaped once again."
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Fine Gael leader John Bruton said it was time Fianna Fail demanded that Haughey apologize for "demeaning" the political profession.
The words of New York hotelier Leona Helmsley that "only the little people pay taxes" was quoted by several furious TDs. In March 1992 she was sentenced to four years in prison for tax evasion.
The tax assessment was made against Haughey by the Revenue Commissioners after a tribunal headed by High Court Judge Brian McCracken last year satisfied itself "beyond all reasonable doubt" that he had received payments totaling £1.3 million between 1987 and 1991.
Ahern said the appeals commissioner involved was his brother-in-law but he had not been aware of the situation until he had read details in the morning papers.
Democratic Left spokesman Pat Rabbitte had raised the question of the identity of the commissioner concerned.
"Is it the case that when he [Ahern] was minister for finance that he appointed the appeals commissioner concerned without advertisement and that he is his brother-in-law?"
Rabbitte questioned was it not an "undesirable situation" to have a brother-in-law of the present leader of Fianna Fail adjudicating on the tax affairs of a former leader of the party.
Confirming the commissioner involved in the case, Ronan Kelly, is his brother-in-law, Ahern said: "That is no involvement of me in it but he is in his professional job the appeals commissioner in this case."
The Taoiseach is separated from his wife Miriam and said Kelly was "not particularly close to him". He rejected suggestions that Kelly had acted with anything less than "total integrity."
Ahern expressed grave concern and deep unhappiness about the decision and said "the slant or construction that the opposition may have put on the story was deeply embarrassing to me."
Haughey would make no comment on the tax decision which reduced his liability to zero.
At the McCracken tribunal the now former supermarket tycoon Dunne said he gave Haughey the money and the former Taoiseach admitted he received the five payments.
At the time he made the gifts, Dunne had been joint managing director of the family owned supermarket chain founded by his father in 1943.
The payments followed an approach to Dunne on behalf of Haughey from an accountant who said they were seeking to put together a consortium of about half a dozen people to contribute £150,000 each to deal with a "significant problem, a business problem" related to the former taoiseach.
Dunne said: "I think Haughey is making a huge mistake trying to get six or seven people together. . . . Christ picked 12 apostles and one of them crucified him." He agreed to pay the entire amount himself.
In his report, McCracken said the tribunal was "satisfied beyond all reasonable doubt" that all the monies paid by Dunne were received "by or on behalf of" Haughey.
McCracken said it appeared Dunne was an "impetuously generous person" who may have been simply trying to buy the friendship of Haughey. He found no evidence of any favors asked for by Dunne or given by Haughey.
Haughey himself put his hands up last July: "I now accept that I received the £1.3 million from Ben Dunne and that I became aware that he was the donor to the late Mr. Traynor [Haughey’s former accountant who is now dead] in 1993 and furthermore I now accept Mr. Dunne’s evidence that he handed me £210,000 in Abbeville [his home] in November 1991."
On the basis of the tribunal report, the Commissioners are understood to have served Haughey with a tax bill of about £1.8 million.
In addition to capital acquisitions tax, plus interest, due on the Dunne money, the assessment may also have included penalty payments.
A spokesman for the Commissioners said it was not their practice to comment on the affairs of an individual taxpayer but it is certain that they will appeal to the Circuit Court in the New Year when they will be allowed enter new evidence.
Whatever the outcome of that hearing, the case could then be appealed by either side to the High Court and finally the Supreme Court.
The spokesman said it was "standard practice where considerable tax is at risk or where points of tax principle are involved to vigorously pursue such liabilities and matters through the courts."
Haughey has also been charged with hindering and obstructing the inquiry. He had initially denied receiving any payments from Dunne and the case will be heard next year.
It is believed Haughey appealed against the tax assessment on technical grounds about inadequate proof of where the money came from and if it was paid by someone domiciled within the State. Much of the Dunne money was diverted through offshore accounts before Haughey received it.
Tax liability on gifts depends on the tax domicile of the person making the gifts and where the donated assets were based.
Tax experts describe it as the "money from America" principle. It arises from times when many families had relatives in America who regularly sent home cash to help them cope. It was not liable to tax provided the "American" relative was not living in Ireland.
Another tribunal headed by Judge Michael Moriarty is investigating possible other payments Haughey may have received during his long political career