The finances of former taoiseach Charles Haughey were "unique" in their level of secrecy and the structures that surrounded them, the chairman of the Revenue Commissioners, Frank Daly, told the tribunal.
He said the Revenue's position when seeking to raise tax from Mr Haughey was weak due to the fact that the payments at issue went back to the 1970s.
He told Jerry Healy SC, for the tribunal, that even after the payments had been identified by the tribunal, the question arose as to "how exactly we could pin a liability on the taxpayer".
It would have been the Revenue's preference to tax Mr Haughey for income tax, but the legal advice was that "if amenable at all" to taxation, the payments were only amenable to gift tax or capital acquisitions tax.
Mr Daly said that even with capital acquisitions tax, there were real difficulties in sustaining a case. "The only real prospect of getting money was to enter into negotiations."
When counsel for Michael Lowry, Rossa Fanning, said he presumed Mr Haughey had been cautioned in the way Mr Lowry had been, Mr Daly said he was "actually not aware of that". He said cautions were given when a taxpayer was being investigated with a view to a prosecution.
Mr Daly told Mr Healy that the Revenue was "on the back foot from the outset" in the Haughey case, and "that is what led us to negotiate" with Mr Haughey. The negotiations led to a €5 million settlement. Negotiations were usually conducted with the threatened use of the Revenue's enforcement powers in the background, but that in Mr Haughey's case the threat was "diluted", as his advisers would have known the weakness of the Revenue position.
Mr Daly said two figures stood out in his mind and emphasised the difficulties in going down the enforcement route. The maximum the Revenue felt it could enforce payment of was €1.9 million, and "we weren't sure of this".
This contrasted with the €5 million received through negotiation. Also, the negotiations included a method of collection whereas enforcement might not ensure actual payment of money.
He said the Haughey case was the only one he knew of that involved such secrecy and structures designed "to keep all this from our gaze".
Mr Healy asked if he would favour a law where, in cases where a taxpayer had kept undeclared receipts secret for a long time, there would be an onus on the taxpayer to show why income tax should not be charged, rather than an onus on the Revenue to show that income tax could be charged.
Mr Daly said that in the Haughey case "we were stymied. We would have preferred to tax [ the payments] as income tax because that is the highest tax".
To do so the Revenue had to show that the money was from "profits or gains" and the Revenue could not do that "and Mr Haughey didn't assist us".
Mr Daly said Mr Healy's proposal might "level the playing pitch" between the taxpayer and the Revenue, but would have to be used only in extreme cases.
The Haughey settlement included a cap of 100 per cent on the interest charge. That was the law at the time in relation to capital acquisitions tax and had since been changed, Mr Daly said. As a consequence of the Haughey case, the law had also been changed so that "tax-geared penalties" could be levied against capital acquisitions tax liabilities.
Mr Healy said Mr Haughey had the use of the money to invest over a long period of time but the interest on tax was capped at 100 per cent. "Whatever he did with the money, at the end of the day he had to sell his home and property to fund the settlement," Mr Daly said.