Former Smurfit chief Gary McGann loses tax appeal

DUBLIN (From news reports) -- Businessman Gary McGann has lost an appeal against tax treatment on two payments totalling €2.3 million which he claimed were a gift from SmurfitKappa's shareholders during his time as chief executive.
The Tax Appeals Commission ruled that Mr McGann, chairman of Flutter Entertainment (the company formed by the merger of Paddy Power and Betfair) and Arytza, was paid the money in 2011 as a result of his employment with Smurfit Kappa.
The commission said Mr McGann failed to discharge the burden of proof that Revenue had wrongly assessed the payments as liable for income tax by showing they had arisen from a source other than his role as the group's chief executive.
Commissioner Lorna Gallagher said she was satisfied the payments were for Mr McGann's "exceptional services" which had added $350 million in value for the group's shareholders.
"It is not possible to separate [Mr McGann's] individual excellence from his role as CEO in circumstances where the means of demonstrating his excellence was by being CEO, by acting as CEO and by delivering exemplary results as CEO," said Ms Gallagher.
She said it was "fundamentally incorrect" for Mr McGann to argue that section 112 of the Tax Consolidation Act, which taxes emoluments arising from employment, did not apply to the payment.
"One simply cannot separate the success from the employment and characterise it as a personal quality separate to the employment," said Ms Gallagher."Irish jurisprudence which has tested and measured the scope of section 112 and its equivalents over the past 100 years supports no such proposition."
The commission heard that Mr McGann had paid €596,350 in September 2011 in capital acquisitions tax but that Revenue subsequently assessed the payments as liable for income tax.
Mr McGann (69) is an accountant by profession. He claimed the payment was not subject to income tax as it was made in respect of his personal qualities and was for "gratitude, appreciation, admiration and friendship".But Revenue claimed the money was paid in recognition of Mr McGann's significant contribution to the successful reflotation of Smurfit Kappa.
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