The appeal commissioner who dismissed the tax assessment of £2 million against Mr Charles Haughey is a brother-in-law of the Taoiseach, the Dail was told.

The Democratic Left spokesman on finance, Mr Pat Rabbitte, asked: "Can I ask the Taoiseach if it is the case that when he was minister for finance he appointed the appeal commissioner concerned, without advertisement, and that he is his brother-in-law?

"Does he agree with me that it gives the wrong impression to the public, without in any way reflecting on the man's competence, that the brother-in-law of the present leader of Fianna Fail should adjudicate on the tax affairs of a former leader of Fianna Fail? Is that not an undesirable situation, and ought the man concerned not allow himself to be seized of this matter because of the impression it gives?"

Mr Ahern replied: "The individual concerned, the appeal commissioner, is my brother-in-law, Ronan Kelly, who dealt with this particular case. That has no involvement by me. He is in his professional job as an appeal commissioner in this case."

Later Mr Bernard Allen (FG, Cork North Central) challenged the Taoiseach to say how the appeal commissioner had been appointed. Mr Rabbitte asked if Mr Ahern had been aware that Mr Haughey's tax affairs were with the appeal commissioner.

Mr Ahern replied: "I had no knowledge. The first time I knew that my brother-in-law had anything to do with it was when I read it in this morning's papers."

The matter was raised on the Order of Business by the Fine Gael deputy leader, Mrs Nora Owen, who asked if the Taoiseach proposed under the Finance Bill to change the law on the identification of tax evasion by tribunals. "Is the Taoiseach aware of the public outrage about the story in today's paper that Mr Haughey's tax bill has been reduced to zero?"

Mr Ahern said the matter had come up overnight so he had nothing to say, but he understood it was being looked at by the Revenue Commissioners in terms of an appeal. He added that the Revenue Commissioners and the Department of Finance had been actively reviewing the existing powers which the Revenue had relating to tax evasion.

This involved looking at extra powers relating to access to bank accounts and examining the affairs of banking institutions. But he was not saying that this covered the issue raised by Mrs Owen. "This issue is more likely to be appealed by the Revenue Commissioners."

The Labour leader, Mr Ruairi Quinn, said the House had established the McCracken tribunal and it had found, as a matter of fact, that at least a sum of £210,000 had been given to Mr Haughey. "It is simply incomprehensible to the ordinary, compliant taxpayer how an appeals process can find that that was not a matter of fact.

"The recipient admitted to it. Accordingly, in order to restore some minimalist faith in the tax-collecting system of this country, would the Taoiseach arrange, as a matter of urgency, that the Minister for Finance consult with the Revenue Commissioners and that before this House adjourns, either today or tomorrow, the Minister make a statement on this matter of gross public concern? Otherwise, credibility and compliance in the entire tax system will simply disintegrate."

Pressing further for a ministerial statement to the Dail, Mr Quinn said Mr McCreevy should explain "in plain, understandable English how this incredible fiasco has come about. The ordinary citizen is bemused." While the Government was not responsible for what had happened, it was responsible for explaining it, he added.

Mr Ahern said there were procedures in the House to ask questions of the Minister. Calling for Dail time to be set aside for a statement, Mrs Owen said she was not saying the Taoiseach had anything to do with the decision. The Taoiseach should tell the House if there would be an appeal by the Revenue Commissioners.

Renewing his demand for a ministerial statement, Mr Quinn asked: "Where are the PDs in all this?"

Mr Quinn said that there was legitimate public outrage about what had happened. "Ask your own backbenchers, Taoiseach, for God's sake. There is outrage out there." After some further exchanges, Mr Ahern said the Minister would answer questions.