INCORRECT LEGAL ADVICE from the Revenue Commissioners resulted in the State taking expensive legal action which was ultimately defeated in the Supreme Court, a committee of TDs has been told.

The Public Accounts Committee heard yesterday that advice from the Revenue Commissioner about the application of VAT had been part of the State’s argument in cases against the operators of the National Aquatic Centre in Abbotstown.

Campus Stadium Ireland Development Ltd, a State-controlled company, had taken action against the Aquatic Centre’s operators Dublin Waterworld pursuing a VAT bill of €10.25 million.

After a six-year legal dispute, the Supreme Court ruled in 2010 that Dublin Waterworld was not liable for VAT under the Finance Act 2002.

The Taxing Master has not yet offered indication the final legal bill for the State’s unsuccessful pursuit of the spending, though the legal costs are expected to reach into hundreds of thousands of euro.

The committee yesterday heard that the Comptroller & Auditor General had advised the State to drop the case years previously – but that the State had pursued the claim based on “guidelines” from the Revenue Commissioners.

Committee chairman John McGuinness said it had become “quite clear that the Revenue Commissions gave regulations which were acted upon, and which caused millions of euro to be lost.

“The Revenue Commissioners were wrong in their interpretation of the regulations, which led to all of this,” he said. “There was quite a litany of poor advice in this instance, and advice that thereafter was followed by the Department leading to the loss of huge amounts of money.”

The disclosures came as the PAC met to ratify Chapter 31 of the Comptroller and Auditor General’s 2010 annual report, which dealt with spending at the National Sports Campus.

The committee deferred signing off on the chapter, and McGuinness said the committee would meet again in private session next week to discuss recommendations that can be made as a result of the dispute.

Fine Gael member Simon Harris said it was not only the Revenue Commissioners who had misinterpreted the Finance Act, but also the Department of Finance itself.

“This is not only worrying, it is utterly bizarre that both Revenue and the Department could incorrectly interpret tax law in this country for a number of years,” Harris said.

“This error will result in the Irish taxpayer having to pick up legal bills from the Supreme Court. Lessons need to be learned from this fiasco.”