THE TRIBUNAL RESUMED ON THURSDAY 21TH DECEMBER AS FOLLOWS:
MR. HEALY: I propose now, Sir, to make a very short opening statement dealing with two further matters which have to be mentioned in connection with the Revenue Commissioners and at these sittings in any case.
And those two matters are the following:
Firstly, the manner in which the Revenue Commissioners dealt with Residential Property Tax in respect of Mr. Haughey’s residence at Abbeville, Kinsealy. That’s something I have mentioned in passing in the course of questioning Mr. Clayton a moment ago.
Secondly, the manner by which the Revenue Commissioners approached Mr. Haughey’s liabilities for tax under Schedules D and E, in other words, his ordinary Income Tax, whether as a PAYE taxpayer or alternatively his Income Tax under Schedule E; that is to say, the profits from his non-PAYE activities, in his case, farming.
Firstly, with regard to Residential Property Tax. It would appear that with the exception of one year, Mr. Haughey, through his agents, duly made his Residential Property Tax returns for every year during which that tax applied between 1983 and 1996. Now, as we have learned from the various Revenue witnesses, Residential Property Tax was collected on a self-assessment basis. In other words, the initial assessment to tax was based on the taxpayer’s own evaluation or self-assessment of the market value of the property in question.
Now, the returns which were duly made, with one exception in Mr. Haughey’s case, were, nevertheless, incomplete in that the questions on the return form to support the opinion of the taxpayer as to the assessed or self-assessed market value were left unanswered or incomplete. And the Tribunal will wish to know whether there was anything unusual, by comparison with the returns of other taxpayers in general and the Revenue’s response to them, in the Revenue’s acceptance of these forms year after year without pursuing or without pursuing intensively, the question of the failure to provide information upon which to evaluate the credibility of the taxpayer’s own valuation of his own property.
The following appeared to be the valuations which were returned for each of the years from 1983 to 1996 on the self-assessment Residential Property Tax return forms relating to Abbeville:
The same for 1985, 1986, for 1987, for 1988. A small uplift in 1989 to 262,50.
1990 the same.
Likewise ’91; likewise ’92, ’93, ’94.
A small uplift again in 1995 to £272,500 and a further uplift in 1996 to £295,000.
Now, it seems that the failure of Mr. Haughey to furnish fully completed returns was, in fact, raised with him, as I mentioned I think a moment ago in questioning Mr. Clayton, by letter of the 9th April of 1986 from an official of the Revenue Commissioners, Mr. Nolan. That letter requested information to facilitate the Revenue Commissioners in their consideration of the market value returned.
Now, the questions on that letter (it will be on the overhead projector in the course of the evidence). Reflect in the main, the type of inquiries which are incorporated in the Residential Property Tax Return Form. The letter of the 9th April 1986, in addition, requested information to facilitate the Revenue Commissioners in their consideration of the question as to whether Inishvickillane Island ought to be included in the Residential Property Tax returns. Reminders were sent on the 19th May 1986 and on the 3rd July 1986. By letter of the 21st July 1986, Messrs. Haughey Boland indicated that they will reply to outstanding queries within a further three weeks. This did not happen and reminders were again sent on the 26th August 1986 and the 14th November 1986. There was further correspondence in connection, as far as I can see, in 1988. As by February of that year the Revenue Commissioners had received no response to any of their various queries. And by letter of the 25th February 1988, Messrs. Haughey Boland were asked again to clarify the position of the Residential Property Tax on Inishvickillane.
There appears to be no progress in relation to the matter and it next seems to have been taken up in or around June of 1990 and this appears from a memorandum, an internal memorandum of that date from Mr. Molloy, an official of the Revenue to Mr. Carroll, another official, in which Mr. Molloy requested instructions as to what action should be taken on the matter. This request was in turn referred by Mr. Carroll to a Mr. Walsh, a principal officer; that referral occurred in October of 1990. There is nothing on the file, so far as the Tribunal can ascertain, and it may be that in the light of the evidence, some information will come to light, but there is nothing on the file to indicate what decision, if any, was made in relation either to the ownership of the dwelling house in Inishvickillane or any other Residential Property Tax implications raised with Mr. Haughey until by letter of the 30th January 1992 from Messrs. Haughey Boland to Mr. Christopher Clayton, it was indicated that the matter of a possible benefit in kind would be addressed by Messrs. Haughey Boland.
So far as Abbeville is concerned, and leaving aside any question of the potential liability of Mr. Haughey to either Residential Property Tax or some other liability to Income Tax in respect of Inishvickillane, it would appear that there may have been an inspection of Abbeville by the Valuation Office, but if there was, it did not result in any change of the valuation submitted by Mr. Haughey and apparently accepted by the Revenue Commissioners. The Revenue Commissioners had referred the matter to the Valuation Office and it would appear that the Valuation Office approved of or indicated some acquiescence in or assent to the valuations being submitted by the taxpayer, at least up to 1989. Post 1989, there appears to have been no independent initiative taken either by the Revenue Commissioners or the Valuation Office to vouch or evaluate the credibility of the valuations.
Now, I think these valuations should be viewed in the context in which it seems ultimately after the McCracken Tribunal, the matter was revised and new valuations were then agreed in respect of the period from 1988 to 1996 and the new valuations were as follows:
In 1988 £300,000, which is higher than any valuation submitted by the taxpayer in his own RPT form in respect of any period from 1983 to 1996.
In 1989, there is an uplift to £350,000.
In 1990, £400,000.
In 1991 £400,000.
’92, a 25% uplift to £500,000.
In 1993 again £500,000.
In 1994 a 20% uplift to £600,000.
Another uplift in 1995 to £700,000.
And ultimately in 1996 a valuation of £1.3 million, which is, of course, at least four times, if not indeed more than four times the valuation submitted by the taxpayer for that year. And I should say both in fairness to the taxpayer and to the Revenue Commissioners and to the Valuation Office, that what is being valued here is merely the residence and presumably some amenity lands and not the lands of Abbeville, meaning something in excess of 250 acres or thereabouts.
What has attracted the attention of the Tribunal in relation to these Residential Property Tax returns is that during the entire period up to the post McCracken Tribunal intervention, the Revenue Commissioners never sought to compel Mr. Haughey or his tax agents to provide them with the information which they were entitled to expect as part of the self-assessment return form. And as I mentioned in the course of Mr. Clayton’s evidence, a question which arises is as to whether this further, if you like, failure or omission to give information on the part of the taxpayer ought to have been taken into account as part of the overall profile of Mr. Haughey’s taxation affairs, ought to have been taken into account as one factor in combination with the other factors which I have already mentioned, such as the 1980 deal with the Gallaghers, the circumstances in which that deal was made and the subsequent non-response of the taxpayer to queries concerning the deal and the other matters mentioned in evidence by Mr. Clayton today.
Now, I want to deal with the question of Income Tax. I have already alluded to the fact that at no time did Mr. Haughey’s return of income disclose any of the payments mentioned in the course of the McCracken Tribunal or mentioned in the course of evidence to this Tribunal. It would appear that farming income was returned up to the 1979/80 tax year when the Revenue Commissioners were informed by Mr. Haughey that he had ceased to operate a farming business from the 14th December 1979. The business had, at that stage, according to Mr. Haughey, been transferred to his daughter, Eimear. Farming income, therefore, did not figure in Mr. Haughey’s returns until sometime, once again, after he left office. For the bulk, therefore, for the years 1979 to 1996 the sole income returned by Mr. Haughey to the Revenue Commissioners was his State salaries and pensions.
Now, apart from the evidence of the Revenue Commissioners, which we have heard since Monday of this week, the Tribunal will hear evidence, hopefully tomorrow morning, from Mr. Pat Kenny of Messrs. Haughey Boland, the tax agents retained by Mr. Haughey during the 1970s, indeed eighties and part of the nineties. And without summarising all of Mr. Kenny’s evidence, I think it will appear from Mr. Kenny’s evidence that he did make efforts during the period from 1984 onwards to obtain information from Mr. Haughey in response to the Revenue’s invitations to him to disclose the existence of the 1980 transaction. His efforts did not, however, meet with a lot of instant success and indeed it was sometime before any information could be obtained by him from Mr. Haughey to enable him to respond to the Revenue’s invitation to disclose the 1980 transaction.
It will also appear from his evidence that although from the evidence of Mr. Haughey, the Tribunal has been informed that the 1980 contract was prepared by Mr. Michael McMahon of Messrs. Haughey Boland, no copy of that agreement was to be found in any file in Messrs. Haughey Boland and no evidence of the agreement or any dealings with the agreement was to be found in that firm’s offices, although Mr. McMahon, or the late Mr. McMahon, was known to be a most meticulous accountant and a most meticulous tax adviser.
Lastly, there is one further matter which will be mentioned tomorrow and which has already been referred to in opening statements of the Tribunal and that is some additional evidence concerning the arrangement mentioned by Dr. John O’Connell in his evidence whereby Mr. Fustok gave him £50,000 to be transmitted to Mr. Charles Haughey and which, according to correspondence from Mr. Fustok, was by way of payment for a horse. Evidence has already been given by Mr. Haughey about the matter and his daughter, Mrs. Eimear Mulhearn may be able to throw some further limited light on the matter in the course of her evidence tomorrow.