The Revenue Commissioners announced last night that they have agreed to accept 5m from Mr Haughey in settlement of his outstanding tax liabilities.
The assessment relates to a series of secret payments totalling more than €10m which the Moriarty Tribunal has discovered was paid to Mr Haughey during his time in politics.
They included contributions from several high-profile businessmen including financier Dermot Desmond, (€444,000); property developer, Patrick Gallagher (€381,000); the late hotelier, P V Doyle (€381,000); and the Arab horse breeder, Mahmoud Fustok (€63,000).
Although, Mr Haughey's advisers have argued that the Moriarty Tribunal double-counted large sums of money which had passed through accounts at Guinness & Mahon bank, the €5m bill would suggest that the figure produced by the inquiry's legal team is accurate.
The latest tax bill consists of €2.47m in gift tax plus a further €2.53m in interest and penalties. Gift tax, which was introduced in 1994, is calculated at 20% of the full value over a tax-free threshold of €19,000 for recipients unrelated to the donor.
Yesterday, the Revenue said the settlement, as well as terms and conditions governing the payment, had been recorded in a formal written agreement which was signed yesterday.
Although Mr Haughey's advisers who include his accountant and personal friend, Des Peelo insisted on a strict confidentiality clause in the agreement, it is believed he may be allowed to pay off his tax bill in staged payments.
No spokesperson for the Revenue or Haughey family could be contacted for comment last night.
It is the second major tax settlement which the former Fianna Fáil leader has reached with the Revenue in recent years.
In April 2000, he also agreed to pay a €1.28m assessment which arose over revelations at the McCracken Tribunal. It established that Mr Haughey had received four payments totalling 1.65m from the former supermarket boss, Ben Dunne, between 1988 and 1991.
Although Mr Haughey's 250-acre Abbeville estate at Kinsealy in north Dublin is estimated to be worth over €25m, it is believed his family does not have large cash reserves to meet the latest €5m demand from the Revenue.
The former Taoiseach is understood to have sold part of the estate to the property company, Treasury Holdings, for €8m in 2000 to settle his earlier tax bill.
Mr Haughey, 77, who is suffering from prostate cancer, is unlikely to face any more tax bills arising out of his controversial financial history unless any new payments are uncovered by the Moriarty Tribunal.