The Revenue was "acutely aware" of the weakness of its position when seeking to raise taxes from Charles Haughey, a senior Revenue official said at the Moriarty tribunal yesterday.
Norman Gillanders, assistant secretary at the Revenue Commissioners, told John Coughlan SC, for the tribunal, about seeking to raise taxes from Mr Haughey arising from millions of pounds worth of payments to Mr Haughey identified by the tribunal.
Mr Gillanders said that what might appear to be common sense to the general public might not be the case in tax law. "Different conditions mean different payments are subject to different taxes."
He said having considered the payments revealed in the tribunal, it was decided, with legal advice, that the payments did not give rise to income tax. Income tax is raised on income that arises from the conduct of a business or a profession, the rendering of a service, or income such as rent.
It was decided to seek to raise gift tax, or Capital Acquisitions Tax (CAT), on the money received by Mr Haughey. "If the money given to Mr Haughey was not amenable to gift tax, it would not be amenable to tax at all." In order for a gift to be amenable to CAT, it must come from a donor who is domiciled in the State or be property that is in the State. The Revenue needs to know who gave the gift and on what date.
"Given the money trails revealed by the tribunal, it was clear enough to me that demonstrating [ the payments eligibility to CAT] would be no easy task," Mr Gillanders said. He said the Revenue's prospects of success would be "limited to a minority of the payments revealed by the tribunal" if it had to go to court.
There had earlier been a "dramatic demonstration" of the risks involved when the Appeal Commissioners had ruled for Mr Haughey in relation to CAT on the payments identified by the 1997 McCracken (Dunnes Payments) tribunal.
He said the Revenue drafted a "worst-case scenario" from the point of view of Mr Haughey when going into negotiations, but knew Mr Haughey's agents would know such a settlement was not achievable. "You have to have a choreography of compromise," he said. In a "doomsday scenario" where the Revenue had to go to court against Mr Haughey, it was confident it could procure "maybe a little bit more than £2 million".
