Family concerned about tax bill

The Dunne family was concerned in the 1980s that the accumulated value of their family trust could lead to a tax bill equal to half the value of the Dunnes Stores group.

They were also concerned that in order to settle any such bill they would have to float or sell off a portion of their retail outlet chain, said Jacqueline O'Brien SC, for the Moriarty tribunal.

The Dunne family trust was set up in 1964 by the late Bernard Dunne and his wife the late Norah Dunne, with the trust holding the shares in the holding company of the Dunnes Stores group. The beneficiaries of the trust were the six Dunne children.

If during the 21 years of the trust's lifetime the value of the trust was not given to the beneficiaries, it would be given to them at the end of the period (March 21st, 1985). Ms O'Brien SC said the Finance Act 1984 introduced the Discretionary Trust Tax, a form of taxation of discretionary trusts such as the Dunne family trust.

The size of the tax bills raised by the Revenue were related to the value the Revenue put on a trust's assets.

Discretionary trust tax assessments were raised against the Dunnes trust in September 1986 based on a valuation of the Dunnes group of £100 million.

The assessment was appealed to the Appeal Commissioners and settled on the day of hearing on the basis of an agreed valuation of £82 million. If, at the end of 21 years, ownership of the Dunnes Stores group had been transferred to the Dunne children, it would have led to capital gains tax bills for the trustees and capital acquisition tax bills for the Dunne children, Ms O'Brien said.

"It appears the Dunnes interests reckoned that the total exposure to taxation would be in the region of 50 per cent of the value of the shares.

"In other words, 50 per cent of the value of the entire Dunnes enterprise would have been payable in capital taxes to the Revenue."

As the life of the first trust came to an end, the ordinary shares in the Dunnes holding company were transferred to a new trust. However the Revenue decided that this move was a disposal of the shares to the new trust, and raised a capital gains tax bill of £38.8 million.

The trustees appealed the bill and the Appeal Commissioners ruled in their favour. The matter was not taken any further by the Revenue and no capital gains tax was paid.

Following his retirement as head of the Revenue in September 1987, Ms O'Brien said Séamus Paircéir provided advice to "the Dunnes interests and initially was retained for the purposes of advising in relation to the appeal against capital gains tax assessment" which had been the subject of meetings between Ben Dunne and Mr Paircéir when Mr Paircéir was still head of the Revenue.

Ms O'Brien said the tribunal would inquire into whether "Mr Haughey did any act or made any decision in his capacity as taoiseach to confer any benefit on the Dunnes interests or procured any other person to do such act and make any decision in relation to the tax liabilities of the Dunnes interests."

Ms O'Brien said that in the two years prior to Mr Paircéir being asked by Mr Haughey to meet Mr Dunne, Mr Paircéir had been meeting with trustees of the Dunnes trust who could have requested Mr Paircéir to meet Mr Dunne.

Trustee Frank Bowen spoke with the then minister for finance Mr Alan Dukes in 1985 and Mr Dukes said a meeting could be arranged with the Revenue to discuss the trustees' concerns. Mr Paircéir and officials met with trustees and a formal record of the meeting was drafted.