The dismissed tax assessment against the former Taoiseach, Mr Charles Haughey, was prepared at the highest level by the Revenue Commissioners and was approved at all stages by outside legal opinion, according to sources.
They also said the figure involved was closer to £1.5 million than the reported £2 million. Capital acquisitions tax is charged at 40 per cent, and the amount of money given to Mr Haughey was £1.3 million. The money was paid between 1987 and 1992, and the tax assessment would have included interest and possibly penalties.
The Haughey assessment was considered by the Revenue to be one of the most sensitive and important ever to come before them and was dealt with accordingly, sources said. Legal advice was taken at every step. A number of investigations were carried out by the Revenue, but the assessment was based on the McCracken report. The Revenue's legal advice was that the evidence given to the McCracken tribunal would be enough to prove its case.
In the event, the appeal commissioner, Mr Ronan Kelly, decided arguments put forward on Mr Haughey's behalf were correct and that the basis for the assessment was flawed. He reduced the assessment to zero.
The argument made on Mr Haughey's behalf is understood to have been that the McCracken report did not identify precisely the source of the funds which were given to Mr Haughey. For gift tax assessment the precise identity of the donor and the "domicile of the assets" must be shown.
