Revenue official admits Dunnes error

A SENIOR tax official has admitted he was wrong to think the Revenue Commissioners had an agreement that Dunnes Stores would not be liable for any future tax on the group’s family trust.

Tadhg O’Connell of the Revenue’s anti-avoidance unit told the Moriarty Tribunal yesterday he was mistaken in forming the view that another Revenue official had accepted that such an agreement had been reached. Dunnes Stores accountant Noel Fox informed the tax authorities in 1996 that the trustees would not be liable for tax as a result of being paid a dividend of £2.2 million. He claimed they were not exposed to income tax as the former Revenue chairman, Seamus Paircéir, had made an agreement with the trust that no further similar tax liabilities would arise as a result of a tax settlement in 1987.

The tribunal is investigating how the Dunnes Stores trustees had their bill for capital gains tax reduced by £22.8m in 1987 following a meeting between Mr Paircéir and supermarket owner Ben Dunne, which was held at the request of then Taoiseach Charles Haughey.

The inquiry heard yesterday that Dunnes Stores paid the trustees an annual dividend in order to meet their liability for discretionary trust tax.

“I was convinced that this agreement had been accepted,” said Mr O’Connell. However, he acknowledged that such an impression was wrong.

Tribunal barristers revealed that the trustees were liable for £700,460 in income tax for being paid dividends to meet a £22.5m bill for discretionary trust tax between 1984 and 1997.

The Appeals Commissioners upheld the tax assessment in 2000 in favour of the Revenue but ruled they did not have the jurisdiction to make a ruling on the existence of an agreement with Dunnes Stores, as claimed by Mr Fox. Dunnes Stores appealed this judgment to the Circuit Court. However, a settlement was reached with the Revenue although its terms remain unknown to the tribunal.

Meanwhile, another former Revenue chairman, Cathal MacDomhnaill, said he could not be certain why the Revenue did not inform the earlier McCracken Tribunal about the meeting between Mr Paircéir and Mr Dunne. Mr MacDomhnaill explained that a note which contained a reference to the meeting may have been missed or kept in file which was not examined by the McCracken team.

He also said there was nothing unusual about the decision of the Revenue not to appeal a ruling by the Appeals Commissioners in 1988 which reduced the Dunnes Stores capital gains tax bill from £16m to zero.