Mr Kelly says the FAI should never have taken the money.
He says the payout was 'damaging to Ireland' and that it set a dangerous precedent.
The Ireland South MEP was speaking at the European Parliament in Strasbourg which will be debating the recent FIFA scandals this week.
“I think actually the 5 million should be given back because of the way it was given to us, and then given back to us as a grand which I think we'd be entitled to I think for the development of the stadium” he said.
“That would probably draw a link under it and clear it up for everybody”.
“Certainly a lot of people – even I saw Jose Mourinho and many more – were unhappy with the way it was done”.
“It probably reflects the whole way that Blatter operated at the top – and that has to change” he added.
