The Revenue Commissioners only entered into settlement negotiations with former Taoiseach, Mr Charles Haughey, after he successfully challenged its original assessment for tax arising from the McCracken tribunal.
The Moriarty tribunal heard yesterday that in the wake of the McCracken (Dunnes Payments) tribunal, Mr Haughey was served with a Revenue assessment of £1.164 million which he successfully appealed to the Appeals Commissioners.
The decision in that case was announced in December 1998 and Revenue applied to have the matter reheard in the Circuit Court.
The matter was listed for hearing on April 4th, 2000. In late 1999 Mr Haughey's agents made an approach to the Revenue. On February 8th, 2000, Mr Paul Moore, acting as an agent for Mr Haughey, wrote to the Revenue making a formal offer of £1 million, subject to a number of conditions.
"I should also like to explain that this offer is being made by my client for purely personal reasons which are above and beyond the legalities involved. The offer is made in a spirit of total co-operation by my client, to the best of his ability in the circumstances of this time," Mr Moore wrote.
At a meeting between the two sides in March, the Revenue officials informed Mr Moore that prosecution was not likely. A memo of the meeting noted: "As far as prosecution is concerned, Revenue indicated that because of evidential difficulties they were not in a position to initiate prosecution proceedings in respect of the payments currently assessed to Gift Tax and interest."
The Revenue informed the agents that if it thought a case for a criminal prosecution existed, it would have initiated such a prosecution. At a later date Mr Haughey's agents sought to "establish definitively the position in relation to publication on the defaulters' list" and other matters, before finalising on the settlement.
Mr Brian McCabe, of the Revenue's Capital Taxes Division, said "the publication issue was a major issue for the client". However the matter of the defaulters' list was not so important as part of the settlement agreement was that the details of the agreement would be made public.
The eventual settlement was for £1,009,435 and involved an admission by Mr Haughey that he had a Revenue liability. However, that did not imply an admission that he had "knowingly and wilfully" failed to file returns in relation to the payments.
Mr Jerry Healy SC, for the Moriarty tribunal, said in an opening statement that there was a "qualitative difference" between the nature of the relationship between Mr Haughey's advisers and the Revenue after an appeal determination in December 1998 effectively reduced his tax liability of £1.165 million to nil.
In a meeting prior to this ruling Revenue officials had refused to say to Mr Haughey's agents that a prosecution was ruled out. Also the Revenue refused to enter settlement negotiations with Mr Haughey's agents.
Mr Healy said the tribunal was not at this stage proposing to examine certain aspects of the respective continuing relationships between the Revenue and Mr Haughey and Mr Michael Lowry in any detail.
The tribunal adjourned until Wednesday at 10.30 a.m.