Vote 10 - Tax Appeals Commission

Mr. Mark O'Mahony(Tax Appeals Commissioner and Accounting Officer) called and examined.

We will be meeting with the Revenue Commissioners in the afternoon. We are joined by Mr. Mark O'Mahony, commissioner and Accounting Officer, from the Tax Appeals Commission. Is this his first appearance here?

Mr. Mark O'Mahony

It is.

He is very welcome. We are also joined by Ms Lorna Gallagher, Ms Brenda McVeigh, Mr. Brian Diskin, Mr. Paddy O'Keeffe and Mr. Ray Hogge from the Tax Appeals Commission and Ms Deirdre Donaghy from the Department of Finance. They are all welcome.

I remind members, witnesses and people in the Public Gallery to turn off their telephones completely or put them on flight mode. Putting them on silent is inadequate as it interferes with the recording system.

I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members of the committee are reminded of the provisions in Standing Order 186 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

While we expect witnesses to answer questions put by the committee clearly and with candour, witnesses can and should expect to be treated fairly and with respect and consideration at all times, in accordance with the witness protocol.

I ask the Comptroller and Auditor General to give his opening statement.

Mr. Seamus McCarthy

The Tax Appeals Commission was established on 21 March 2016, replacing the former Office of the Appeal Commissioners. The commission is an independent statutory body tasked with providing a modern and efficient appeals process for the hearing and adjudication of tax disputes. The 2016 appropriation account of the Tax Appeals Commission shows that the total spend by the commission in 2016 was €890,000. The amount provided for the commission for the year was €1.5 million. As a result, almost €600,000 was liable for surrender at the year end, reflecting delays in recruiting staff and underspending on the commission’s ICT system. The commission has been reliant on the Revenue Commissioners for many support services.

Chapter 9 is a short report examining progress by the commission in putting in place the necessary corporate governance arrangements and the management of overtime payments in 2016. While the commission was established formally in March 2016, we found that by September 2017 it was not yet fully compliant with its corporate governance obligations. The commission published a governance framework that outlined the proposed governance structures, including audit, assurance and compliance arrangements.

It had not, however, established an audit committee, did not have in place a formal risk management system, and had no formal risk management policy or risk register. An effective risk management process should assist the Tax Appeals Commission in achieving its objectives by allowing it to identify and manage threats to delivery in a timely and effective manner. The Accounting Officer will be able to update the committee on progress in developing its governance systems. We are examining them again in the context of the 2017 appropriation account.

The commission's 2016 Vote appropriation account records overtime payments of €65,400 to one employee, which was very substantial given the scale of the Vote. Because of the additional expense involved, Department of Public Expenditure and Reform guidelines require that overtime working does not occur unless it is both authorised and unavoidable. When the 2016 payments were examined by the audit, it was found that the records kept by the commission were not sufficient to substantiate the payments. The claims for payment of overtime went back a number of years and there was no record that the claimed overtime work had been authorised by a more senior official. The commission’s then head of administration was not involved in review or authorisation of the payments and only became aware of them when Revenue's payments section queried the amount of overtime being processed on behalf of the commission. Overall, the circumstances surrounding the overtime payments made in 2016 indicate a very weak control environment at the time.

I thank Mr. McCarthy.

Mr. Mark O'Mahony

I am the Accounting Officer of the Tax Appeals Commission, TAC. I am before the committee in response to matters highlighted by the report of the Comptroller and Auditor General in relation to internal controls in the TAC in 2016. As members are probably aware, the decision to establish the TAC was made following a lengthy process of consultation, consideration and review by a number of different bodies. It was established pursuant to the Finance (Tax Appeals) Act 2015 and commenced its activities on 21 March 2016. The TAC is an independent body with its own Accounting Officer and Vote, although under the aegis of the Department of Finance.

The legislation made clear that the commission was to be a new body whose independence was enshrined in statute and which would have the power to adopt flexible and active case management procedures with a view to progressing and finalising appeals as efficiently as possible. The former right of appeal to the Circuit Court was abolished and the TAC now makes findings of fact which are binding on the parties. The only right of appeal from the TAC is to the High Court by way of a case stated on a point of law. Perhaps because of this change, the Legislature also introduced a requirement for the Appeal Commissioners to give written determinations in every case, an obligation to publish those determinations and the right to apply those determinations to appeals which raise similar issues of law.

Ms Lorna Gallagher and I were appointed as Appeal Commissioners at the end of 2015, prior to the establishment of the Tax Appeals Commission, following a recruitment process conducted by the Public Appointments Service. We were then reappointed pursuant to the 2015 Act when the TAC came into being. We have been appointed for a seven-year term, which expires in 2023, and we may then be reappointed for one further term. In June 2017, Mr. Conor Kennedy was appointed as a temporary commissioner, primarily to deal with the legacy appeals received from the Revenue Commissioners in the second half of 2016. His appointment is for a two-year period, which may be extended by the Minister for Finance.

Following its establishment, the Tax Appeals Commission took over the operations of its predecessor, the Office of the Appeal Commissioners, working with the same staff and from the same premises. When I was first appointed the office had a staff of four, including a principal officer seconded from the Department of Finance to assist with the planned establishment of the TAC. The TAC now has a staff of 14.5, including a part-time official responsible for human resources and training and our current head of office who is not a permanent staff member of the TAC but rather a principal officer on secondment from the Department of Finance. One member of staff has been absent on sick leave since August of 2017.

The staff of the TAC work in three distinct units, namely, scheduling, case management and administration. Of the 14.5 staff, 11.5 of those were appointed in 2017 or 2018. The most senior member of our permanent staff is an assistant principal. While it is clear from the foregoing that there has been a growth in our staff numbers, particularly in the past 12 months, it has taken us a long time to recruit suitable people and we are still significantly short of the necessary staffing levels.

The workload of the TAC is considerable. We assumed the existing caseload of the Office of the Appeal Commissioners and in the second half of 2016 a total of 2,731 legacy appeals were transferred to the TAC by the Revenue Commissioners. The 2015 Act furthermore provides that all appeals are now made by taxpayers directly to the TAC, whereas under the previous regime appeals were notified to the Revenue Commissioners in the first instance. This has resulted in a significant increase in the number of appeals which the TAC is required to process. In 2016, the total number of appeals received was 901 but in 2017 that figure had jumped to 1,751. The TAC is currently receiving an average of 150 appeals per month. The TAC had approximately 5,500 appeals on hand during 2017 and we believe the total amount of tax currently under appeal is in the order of €1.6 billion. By contrast, our budget, at €1.6 million, is approximately one thousandth of the amount of tax under appeal.

In addition to the appeals received, the TAC receives a significant volume of correspondence on appeals, all of which has to be logged, filed and responded to. The TAC may receive as many as 100 items of correspondence per day. In addition, the TAC is now the first point of contact for many taxpayers when they are dissatisfied with a tax issue or if they have a query in relation to same. Queries that may formerly have been made to the Revenue Commissioners are now being made to the TAC. The committee will appreciate that all of this absorbs a great deal of staff time and resources.

In addition to the appeals and correspondence workload, the TAC also has to meet all the governance requirements of a Civil Service body. With regard to governance, the TAC is akin to a small Government Department, with all necessary obligations having to be discharged alongside our primary task of hearing and determining appeals. While a Department might have several sub-offices such as a press office, corporate office, accommodation unit, a Minister's office and so on, the position in the TAC is that many staff cover several dedicated areas of responsibility as the TAC does not have sufficient staff numbers to assign specific members of staff exclusively to specific roles.

Our recently published annual report for 2017 shows that we have made very significant progress, both in addressing our appeals workload and in meeting our governance obligations. Headline achievements during 2017 include closing 693 appeals; listing 106 appeals for hearing; conducting 89 case management conferences relating to 479 appeals; publishing 35 determinations; conducting a public consultation exercise on our procedures; producing new guidance notes for appellants; populating our case management database with quality checked data relating to thousands of individual appeals; establishing case management and scheduling units within the TAC; publishing a comprehensively revised code of governance; producing a three-year statement of strategy; and appointing internal auditors and established an audit group. We have closed a further 821 appeals to date in 2018. As of yesterday, that figure stood at 860 appeals.

We are proud of all that we have achieved with the resources available to us and Commissioner Gallagher and I take this opportunity to acknowledge the enormous commitment the staff has shown to date, the unrelenting pressure through which they have worked, the multitude of different tasks they have managed and the daily co-operation, assistance and support they continue to provide. Notwithstanding the progress made, however, we are very much aware that a great deal more needs to be done for our stakeholders, particularly appellants and the Revenue Commissioners.

On the matter of staff and resources, the Tax Appeals Commission faces a significant risk from corporate memory loss if staff choose not to continue under the current pressures they face. Also, as the TAC does not the resources or adequate levels of delegated sanction, staff operate in the awareness that the TAC cannot, as it stands, offer them a career path. Leaving aside for a moment the issue of sanction and budgets, staffing risks are higher and more critical in a small office such as the TAC, as it does not have either the capacity to absorb the memory loss or the time and resources necessary to continuously recruit and train in new staff.

In addition to the main business of the office - being the adjudication and determination of tax appeals - there are strategic and structural issues that need to be addressed in order for the TAC to operate optimally. In this regard, we have dealings with and rely upon the Department of Finance, the Department of Public Expenditure and Reform, the Revenue Commissioners and the Office of Public Works.

The report of the Comptroller and Auditor General for 2016 correctly highlighted significant governance and related issues in the TAC. We fully accept the criticisms made in the report and we accept the recommendations of the Comptroller and Auditor General. We have implemented those recommendations to the best of our ability with the resources available to us. I believe the TAC's annual report for 2017 clearly shows that a great deal of progress has been made. We fully accept that more progress needs to be made but we cannot do more without additional resources. We have formally reported to the Minister for Finance pursuant to section 21 of the 2015 Act on the issue of additional resources, and we have met the Minister and officials from his Department to discuss this issue. We have commissioned a resource review to obtain an independent analysis of resources and the Minister has recently appointed a retired Secretary General to carry out a resource review for his Department. We hope that both these processes will be completed in the very near future and will enable the Minister for Finance and Public Expenditure and Reform to make an informed decision on our requests for additional resources for the TAC.

An efficient and impartial tax appeals body is an integral part of a state's system of taxation of its citizens. To meet our statutory mandate, there are legislative amendments that could assist the TAC in operating in a more efficient and effective manner. In this regard, the TAC recently suggested certain legislative amendments for consideration by the Department of Finance.

Our statutory mandate requires us to put in place the independent, effective and efficient tax appeals system envisaged by the 2015 Act. However, this cannot be achieved without adequate resources and the level of independence needed to apply those where we identify the need. Our 2017 annual report shows how much more was achieved in circumstances where, although we remained under-resourced, our resources had improved from the very low base obtaining at the commencement of the TAC in March 2016. Appellants should not have to suffer undue delays in the hearing of their tax appeals, but we are currently unable to prevent delays in the system in circumstances where we remain so significantly under-resourced.

In order to improve the tax appeals system and deliver an independent commission that will process tax appeals in as efficient and effective a manner as envisaged, it is our duty to assess the needs of the commission, identify the assistance we require and communicate that information to the relevant Departments in the form of a request for additional resources. It is to be hoped that the relevant authorities accept that we are driven to provide the optimal service for our stakeholders and that we are best placed to assess our needs.

I am attending today to answer whatever questions the committee may have, and we will be happy to follow up with any information that we are not in a position to provide now.

Before I call Deputy Burke, it is clear that the TAC is not even remotely staffed and resourced to the scale required by the task at hand. I have never seen anything as bad as this at the committee. Some €1.6 billion of taxpayers' money is hanging out there when it should be in the State's coffers. Most of it probably will be once the cases are settled.

According to its report, the TAC received 1,751 appeals in 2017 and settled 693 of those. Its waiting list increased by more than 1,000. That anyone would need a retired Secretary General to say that the agency needed more staff is a joke. It is obvious. I hope the Minister is listening. By not resourcing the commission enough to do its job of efficiently collecting moneys due to the taxpayer, he is letting the taxpayer down. Given the size of its office, the commission has my sympathy in trying to cope with the tsunami of appeals. It is outrageous. We will get into further detail, but those were my initial comments. Whoever set up the office had no concept of, or did not adequately anticipate, the number of appeals. It should have been obvious after six months and was totally obvious after 12. Now a former Secretary General is being brought in to consider the staffing issue. Whoever made that suggestion still does not get it. I could not let the meeting commence without saying that. We are here to support the commission.

Mr. Mark O'Mahony

I thank the Chairman.

We are shocked by the scale of the task the commission has been given without the necessary resources to do that job properly.

I thank the witnesses for attending. The establishment of an independent appeals office was well flagged and was one of the recommendations for our tax code, but the Comptroller and Auditor General's report presents a chaotic picture of what has happened since the office's establishment in March 2016, for example, a haphazard approach to internal controls. The commission is seeking extra resources, so it is surprising that €596,000 was surrendered to the Exchequer in respect of 2016.

I would like to get a picture of how the commission is managing its existing resources. The first matter that comes to my attention is that of the commission's internal controls and overtime payments of €65,400 in 2016. Does that figure reflect nine months of the year?

Mr. Mark O'Mahony

Yes.

That is approximately €7,200 in overtime per month. Am I correct?

Mr. Mark O'Mahony

Yes. I apologise for interrupting the Deputy, but I am unsure as to whether he is aware that the overtime claim represented six years in total - 2010 to 2016, inclusive. It had a significant historical element. All of the moneys were paid in 2016 because that was the year in which the claim for overtime was made and processed, but the claim referred to a period long before Ms Gallagher and I were appointed.

Why would it be within the commission's remit to pay those moneys if they accrued prior to the commission's establishment?

Mr. Mark O'Mahony

The claim was made to the TAC in-----

For work not done in the TAC.

Mr. Mark O'Mahony

We believed that the overtime had been worked. We were told-----

That was not the commissioners' duty. They were responsible for a new entity. If someone made a claim for overtime that arose in a previous structure, surely that would not be the commission's responsibility, but the responsibility of the previous structure or employment.

Mr. Mark O'Mahony

Under the legislation, we took over all of the liabilities of our predecessor, the Office of the Appeal Commissioners. From a strict legal perspective, we were still responsible.

Did the commission get legal advice on that?

Mr. Mark O'Mahony

No. With the benefit of hindsight, I accept that it is something we ought to have considered, but-----

It seems strange for a new office that is trying to manage a new budget to make a payment without getting legal advice. Did the commissioners see an auditor's independent verification of the overtime that was worked? Did an auditor recommend to the commission that this money be paid?

Mr. Mark O'Mahony

I am somewhat limited in what I can say in response. The position-----

It is a straightforward question.

Mr. Mark O'Mahony

It is, but the matter was examined by our internal auditors. They recommended that a further investigation take place.

I thought the commission did not have an internal auditor initially. When did its internal audit function commence? I thought it had been delayed.

Mr. Mark O'Mahony

We appointed internal auditors in August 2017.

The commission did not have an internal auditor in 2016.

Mr. Mark O'Mahony

No.

In which case, it did not have one when the payment was made.

Mr. Mark O'Mahony

Correct.

From where did the commissioners get the audit advice that recommended this payment be made?

Mr. Mark O'Mahony

I am sorry if I was unclear. I am referring to the current position. The internal auditors recommended that a further investigation be carried out. It was not possible for the TAC-----

Subsequent to the payment.

Mr. Mark O'Mahony

Yes.

Go back to before the payment was made. I just want to get the commissioners' thought processes in terms of how they manage the commission's current affairs. Before they made this payment, what verification methodology was presented to them to vouch for the claim's authenticity and accuracy?

Mr. Mark O'Mahony

The system in the Office of the Appeal Commissioners, which carried forward into the TAC, was a two-step process. Formerly, one Appeal Commissioner would check the overtime claim and a second would approve it. In this case, Ms Gallagher checked the claims and they then came to me for approval. The claims were made through the payroll shared service centre, PSSC, online overtime system. In practical terms, an email would have appeared in my system telling me that the following claim had been submitted for my approval. If I double-clicked it, it would tell me about the following hours of overtime worked on the following dates. It did not specify the amount of overtime that was being claimed.

Over six years.

Mr. Mark O'Mahony

Yes.

Why would all of that come in at the one time? It seems illogical.

Mr. Mark O'Mahony

There was a particular reason for it, but I am advised that I cannot go into it at the moment. There are certain ongoing matters that I would hazard-----

Is Mr. O'Mahony satisfied with the payment?

Mr. Mark O'Mahony

I am awaiting the outcome of certain processes before I can make a final decision.

Just to be clear, without legal advice or an auditor's verification, this payment was made to an employee for work that was detailed on the software system to which Mr. O'Mahony referred.

Mr. Mark O'Mahony

That is correct.

Those are very weak internal controls. Does Mr. O'Mahony agree that governing a body in such a way is unacceptable?

Mr. Mark O'Mahony

It is undoubtedly the case that there were shortcomings. The Comptroller and Auditor General has pointed those out. We were aware of them before he-----

I am still not clear about how the commissioners set the tone and do their work. I would be concerned if the commission was this lax in the basic management of staff and payment of overtime.

Mr. Mark O'Mahony

We understood there was a system in place. We applied that system. It is not the case that no verification was carried out.

There were checks of work diaries and emails sent. It is not the case that we simply approved this without any verification process. We did what we believed was necessary to check the claims.

Did someone in the Revenue Commissioners give the TAC a recommendation to make the payment?

Mr. Mark O'Mahony

No.

Would it not have been appropriate to check with them? I assume management in the Revenue Commissioners were responsible for it before the appeals commission was established.

Mr. Mark O'Mahony

I do not know. The Deputy is correct that payroll services were administered for the Office of the Appeals Commissioners by Revenue but I do not think it would have been appropriate for us to go to Revenue. The reason for establishing the TAC was to have greater independence from Revenue.

Was the work was under their auspices?

Mr. Mark O'Mahony

No. It was under the auspices of the Office of the Appeals Commissioners prior to the establishment of the TAC. The staff member in question was technically an employee of the Revenue Commissioners, but she was always working for the Office of the Appeals Commissioners and it would not have been appropriate to go to Revenue..

What has the TAC learned from it?

Mr. Mark O'Mahony

We learned that the governance systems we inherited required a fairly drastic overhaul. We have done everything we can in that regard and we have addressed most of the issues highlighted by the Comptroller and Auditor General. We updated our overtime policy in February 2017 and again in June 2017 to make explicit reference to circular 14/2014, which is the Department of Public Expenditure and Reform guidelines on overtime. We took a step back and created a work environment where overtime does not take place. We are managing things so that nobody has to work overtime unless it is absolutely extraordinary and unusual and there have not been any overtime claims.

It is important that the office is seen to hold the highest standards because it adjudicates on the fairness of tax decisions made by the Revenue Commissioners and which have been contested by taxpayers. Assessments may be raised by Revenue where taxpayers have not kept proper books and, therefore, it is important the TAC, in leading the charge on transparency, ensures it gets the best possible advice and has the most robust structures in place before it makes payments of this nature. It is unfortunate that the office fell short in this regard. It is important that the commission be seen to lead.

There are delays in hearing appeals. Some appeals have been in the system for a long time and one case, with €60,000 in dispute, has been in the system for six and a half years. The potential is for that taxpayer to be hit with an interest payment of €30,000, half of the assessment under adjudication. Does Mr. O'Mahony think that is fair? There is a penal interest rate and the clock is ticking while the commission is doing its work. If the appeal takes so long, there is no incentive for a taxpayer to make an appeal within the 30-day period and they will be concerned at having to bear the cost of inefficiencies in the commission.

Mr. Mark O'Mahony

I agree and the Deputy makes a fair point, though I am not familiar with the appeal in question and cannot explain the delay. Often, delays are caused by our shortage of resources-----

Does Mr. O'Mahony think it is fundamentally fair that a taxpayer is left with interest charges if he or she is the subject of an adverse finding on appeal? There is an issue of fairness.

Mr. Mark O'Mahony

I would venture into the realm of policy if I were to comment on that . It is a matter for the Legislature to decide.

The Legislature can decide interest rates but this is due to a delay in the TAC. If cases go on for a considerable time, it exposes the risk of additional interest charges for the taxpayer involved. It is because of the inefficiencies of the office, not the policy.

Mr. Mark O'Mahony

There are two methods of dealing with it. The Legislature could decide-----

If there are resource and efficiency issues in the office, could Mr. O'Mahony not make a recommendation, given the problem is the office is taking too much time to process appeals and the taxpayer could be exposed as a result?

Mr. Mark O'Mahony

The approach we have taken is to cure the delays, rather than remedy taxpayers who have been exposed because of our inefficiencies. We have sought sufficient resources to do this.

I contend that there is an unfairness in this situation.

Mr. Mark O'Mahony

I cannot comment on that.

There are cases where taxpayers have waited between 16 months and 19 months from the date of the hearing to determination. Why was that?

Mr. Mark O'Mahony

There are a number of reasons. I do not want to sound like a scratched record but the first answer is lack of resources. It is not the case that my fellow commissioner, Ms Gallagher, and I have all day to sit down and consider determinations.

The TAC handed back €600,000 in 2016.

Mr. Mark O'Mahony

Yes, and I will come to that point in a moment. As regards delays in determinations, we had no support until the beginning of this year for preparing determinations. When we prepare a determination we have to sit down with a file which can run to ten bankers' boxes. We have a blank computer screen in front of us, on which we start typing. It is not satisfactory and is not an efficient use of our time. However, we have appointed case managers and we are trying to get them to start shouldering some of the more routine stuff, such as preparing summaries of the facts, printing out the relevant legislation and doing research on the case law, which we have been doing ourselves to date. It is not a clever way of doing our work. A judge does not go away to look for an Irish report but has an assistant to do it, speeding up the process.

The problem I have is that it is totally and inherently unfair on the taxpayer.

Mr. Mark O'Mahony

I cannot disagree with that. We would like to get our determinations out faster and we would like to satisfy taxpayers. We both came on board because we felt it was an exciting time to be involved in the tax appeals process. We have so much ambition and we want to do it properly but it is incredibly difficult when there are so many demands on one's time. We often deal with complicated cases that require a lot of thought. We are the sole arbiters of facts and, in fairness to Revenue and the taxpayer, we need to get it right. One cannot do a slipshod job or do something that is 80% correct.

Why did the commission hand back so much money in 2016?

Mr. Mark O'Mahony

We were not able to recruit the staff we wanted, though we did everything we could. We tried secondment and internship and we asked the Department of Finance if we could use its recruitment licence to get staff. We approached Revenue-----

Can the commission not recruit from the private sector?

Mr. Mark O'Mahony

No.

Mr. Mark O'Mahony

We do not have the authority to do so. We have had a recruitment licence since March this year, which was hard fought for, allowing us to recruit at grades up to the standard principal officer grade.

What exactly is a recruitment licence?

Mr. Mark O'Mahony

Previously, if we wanted to recruit staff, we had to go through the Public Appointments Service, PAS, which is under significant professional pressures of its own. In the last process in which we used the PAS, they said it would take 19 weeks, or five months, after which there would have to be a Garda vetting process and a notice period for successful candidates. It is hugely time consuming.

I do not say that as a criticism of the PAS. It is a fact of the system. We simply do not have that time. The PAS and the Commission for Public Service Appointments, CPSA, both said to us that we need the power to recruit directly. We applied for, and were successful in obtaining, a recruitment licence which means that we do not have to go through the PAS if we are looking for people up to principal officer, standard grade.

Has that improved the commission's recruitment time?

Mr. Mark O'Mahony

We do not have the sanction or budget for additional staff. Our current budget will be spent entirely on our staff bill for this year. We are crying out for a new ICT system. We have been in our new office for three weeks. We still do not have external telephone lines. We do not have chairs for-----

Say that again for the public.

Mr. Mark O'Mahony

We do not have a working external telephone line from our office.

What does that mean?

Mr. Mark O'Mahony

It means that we cannot phone out and people cannot phone in.

Sorry, this is the 21st century. Go through this again. Mr. O'Mahony had my sympathy before he started but this is getting into farce territory now. It is a serious issue.

Mr. Mark O'Mahony

It is.

Does the commission not have personnel to man it?

Mr. Mark O'Mahony

That is not a personnel issue. It is a separate issue that we are actively progressing with the Office of Public Works, OPW. Leaving aside working telephone lines, we need an IT system that works. Our temporary appeal commissioner had his PC go on fire approximately two months after he went. We need new computers. We have no money for them at the moment.

The commission was set up by somebody. This is awful for a new public body. Mr. O'Mahony has my sympathy. In that first year, why did the commission not just recruit some agency staff through some of the big houses? If the commission had a budget of €500,000, why did it not spend it on hiring in? Is it allowed to do that?

Mr. Mark O'Mahony

No. We do not have the statutory authority.

Will Mr. O'Mahony explain why the commission is not allowed to do that?

Mr. Mark O'Mahony

We need to be empowered by statute to do so.

Not for employment. What about going to some of the big firms like anyone else would to employ somebody on a consultancy basis, if the commission had the budget? Why did the commission not do that?

Mr. Mark O'Mahony

I am told that we do not have the authority to do so. We do not have the statutory authority to engage specialist contractors.

The commission's visit here is long overdue. We should have had it in last September because obviously nobody is listening to the commission, if people are talking about looking at its staff numbers at this stage. I do not say this in a pejorative sense. I am appalled at this money hanging in the system, not being dealt with efficiently. It is bad for Ireland to have such a bad system. I apologise to the Deputy for transgressing. We might have different views on that.

No, I concur. What IT system is the commission looking for? What does it work with now?

Mr. Mark O'Mahony

We have a system in place that we got three years ago. The office had a staff of four people at the time. We were told that we needed a new IT system. We asked the Revenue Commissioners, under our service-level agreement, to advise us about what we needed and what was appropriate. They did so, we got it and it does not appear to have been sufficient or appropriate. We have a project manager working for us on a contract basis who has significant IT experience and he has prepared a list of what he believes is appropriate and necessary for us to have. We hoped that we would have a procurement exercise completed for that in 2017 and that we would be able to use our 2017 budget for that. We were not able to complete it on time, so that money was unspent. I have explained the delays and difficulties we have had.

Who gives the commission approval for that?

Mr. Mark O'Mahony

The Office of the Government Chief Information Officer.

Does the office have to give approval for all expenditure?

Mr. Mark O'Mahony

Just for IT matters.

Mr. Seamus McCarthy

It is with that office as part of the Department of Public Expenditure and Reform. Generally, the constraints are sanction requirements from the Department relating to staff numbers, ICT and so on.

Is the commission under pressure with respect to other basic services?

Mr. Mark O'Mahony

We have been under severe pressure regarding accommodation. We moved to new premises on 9 June, which has eased matters, but depending on what additional resources we are or are not allocated following the outcome of the two resource reviews, there may be increased pressure on accommodation at that stage. The accommodation issue was a huge one for us. It got to the stage where, for the second half of 2017, we did not have any hearing rooms. We were going out to hotels in the area to book hearing rooms so that we could conduct hearings and case management conferences.

That aspect sounds like a nightmare. It is good that we can highlight that.

I have a technical question to finish up. When a taxpayer gets a notice of assessment and has 30 days to appeal it, the taxpayer can sometimes be in the dark about the methodology of how Revenue arrived at the assessment. At later stages, it is difficult to introduce new aspects to an appeal except in limited circumstances. Could more be done for taxpayers to highlight how Revenue arrives at certain figures in the notice of assessment or at the tax liability?

Mr. Mark O'Mahony

We are aware of that as an issue. It was a common complaint in a number of submissions received in our public consultation process. We are constrained regarding what we can do in looking at Revenue conduct. We do not have the statutory jurisdiction to do that. What we can do and have actively been doing, as the Deputy will have seen in the annual report and statement, are case management conferences. They were originally envisaged as a means by which we would give directions. We have been much more flexible and creative in our approach. That is a forum where if there is, as we see it, a genuine difficulty or lack of clarity affecting a taxpayer's ability to form a view as to whether something is appealable, that is an opportunity for us to invite Revenue to clarify its position. The Deputy is right that the scope to extend one's grounds of appeal is quite prescribed by statute. The approach of the TAC has always been that we will be flexible and sympathetic to a taxpayer faced with an assessment where he or she honestly does not know how the figures have been arrived at.

Revenue transferred legacy appeals to the commission. They had to write to taxpayers to advise them of this but also to give them an option to negotiate to close their outstanding tax liability. How many took that opportunity and how many were finally transferred?

Mr. Mark O'Mahony

Some 2,731 appeals were finally transferred. We were not privy to the original negotiation process. I recall that we were informally advised by the Revenue Commissioners that 5,000 or 5,500 legacy appeals might be transferred to us. On a back of the envelope basis, one could say that maybe 50% were resolved. I do not have first-hand knowledge of that and do not want to pin down a figure.

Mr. O'Mahony says that the commission currently has 14.5 staff.

Mr. Mark O'Mahony

Yes.

Does he envisage that as meeting the commission's requirements? How many does it need? Does it have a work floor plan? Has it a case for an optimum plan?

Mr. Mark O'Mahony

We made a submission to the Department of Finance in February saying that, at a bare minimum, we need another ten support staff.

At what level?

Mr. Mark O'Mahony

They are generally high level. We asked for one assistant secretary, two principal officers, one assistant principal officer, one higher executive officer, one executive officer and four clerical officers. We said in February, as the situation was becoming clearer to us, that we needed more case managers. We have three case managers appointed. We are optimistic about what they will be able to achieve. We hope that they will lift much of the more routine case management work from us.

We have plans to introduce a two-tier case system which is something our equivalent body in the UK has done. They have simple appeals and complex appeals and they are processed differently with more resources and effort going into the more complex or high-value appeals. We have plans to introduce that system but we need more staff to do that and in particular we need more case managers. We would like to have more case managers and we would particularly like some case managers with legal qualifications. Our existing case managers are all chartered tax advisers with at least five years-----

What would the witness deem as a reasonable time to process an appeal, with reference to international figures? I know that the complexities can vary, but generally is there any best practice?

Mr. Mark O'Mahony

It is a how long is a piece of string question. That is an unhelpful answer but I do not mean it that way. They vary so hugely. What we-----

There are a huge number of cases under €10,000, approximately 50%. With so many cases at that level blocking up the system, is there any working out of the legal cost of bringing them to that stage compared with the realisation of taxation at the end of the day?

Mr. Mark O'Mahony

We have always been conscious that we are a tax appeals body for everybody. We are not always dealing with multinational corporations with tax bills in the hundreds of millions. We are also the body for the small farmer from west Cork. We have the statutory power to be flexible and we exploit that to the maximum. If we have a small taxpayer with a small appeal and who has a grievance, genuine or otherwise, we are flexible. We do not apply the same standards to a small person who does not have professional representation as we do to a large body which has a solicitors' firm and a professional firm of accountants. We have a statutory power under section 949U to do a paper-based determination. That is something that-----

Does the witness believe that more can be done by the Revenue Commissioners to settle these cases of less than €10,000 before they reach his office?

Mr. Mark O'Mahony

We are not involved at the stage before they get us. What I can say is that-----

The Tax Appeals Commission would have the information and would know what the differences between the two sides.

Mr. Mark O'Mahony

What I can say is that at least five or six of the 12 submissions that we received said there is a significant difficulty in engaging with Revenue prior to an appeal being issued. They said there is a want of engagement on the part of Revenue. One phrase used was that the Tax Appeals Commission is being turned into Revenue's back office.

That is a significant point.

What is the phrase again? The Tax Appeals Commission is being turned into?

Mr. Mark O'Mahony

It was being turned into Revenue's back office. To be clear, that is not a statement I made. It is what one of the submissions to us said.

If 50% of the appeals are under €10,000 and tax practitioners are making submissions to suggest that more should be done at that stage to negotiate a settlement, one would wonder why Revenue is not getting through them.

Mr. Mark O'Mahony

There is one other point. The Revenue Commissioners have their own internal reviews and external reviews, and that is something that we are actively trying to make taxpayers aware of. There are a lot of cases where this is more appropriate. To put it in context, in 2016, when we got our 901 appeals, there were 13 internal and external reviews to the Revenue Commissioners. They are significantly better resourced that we are. We believe that this is an avenue which is more appropriate for some taxpayers and it is one that we are trying to educate taxpayers about and trying to encourage the use of that mechanism.

The committee should write to the Minister on this. It is very important for the administration of taxation that they are resourced.

We will have a letter to that effect by next week because it is so serious, we cannot wait for a periodic report. We can draw from experience where we have the same situation with social welfare where there is an internal review system, and that probably obviates the need for a number of these appeals to go to the independent Social Welfare Appeals Office. That is written in every letter that is sent out. People are encouraged to use this system where there is a quick review and it is dealt with promptly. We will have the Revenue Commissioners in after lunch and we will be discussing this with them.

I add to the sympathy that has been expressed to the witnesses in terms of the working conditions in doing the job. I want to pick up on the phone issue. Is it a question of the telephone companies, the Office of Public Works, OPW, or what is the impediment? Does the office have broadband?

Mr. Mark O'Mahony

I will ask my colleague, Ms McVeigh, to deal with this.

Ms Brenda McVeigh

We did not have the best of phone systems in our previous office. We inherited it from the Revenue Commissioners and it was put into a very small office. We also got very short notice to exit our previous office. We had to move out in a matter of two and a half to three weeks and move in to the new one. We needed to get Office of the Government Chief Information Officer, OGCIO, sanction for most of the matters. We were lucky - it is too long to go into it - to be able to get a lot of new equipment quickly to try to get going. One of the things that we did not have, however, was a new phone system. We did not anticipate everything we would need, given there are only a small number of us to deal with of these needs. It turns out that we do need OGCIO sanction to get a new phone system. We were also trying at the same time to get multiple contractors: builders, furniture people, new landlord-----

I have very limited time and I do not mean to be rude. There is a particular type of phone system for which the witness needed sanction.

Ms Brenda McVeigh

We need more phone lines. I think we only have 15 phone lines at the moment. We have had phone people in several times but have not been able to address the problem yet and we are left, three and a half weeks into the move, where we can make calls out but people cannot make calls in.

The office has broadband.

Ms Brenda McVeigh

We have broadband.

When the office was specifying requirements, were meeting rooms specified as a requirement?

Ms Brenda McVeigh

Yes, as an urgent requirement.

Did the witnesses question why this was not delivered?

Ms Brenda McVeigh

We have meeting rooms but we do not have the chairs or the table for the meeting rooms yet. I believe the tables have been delivered but the chairs have not.

I have been a member of this committee for about a year and a half and I have never heard anything like this. This is just deplorable.

Ms Brenda McVeigh

Part of the problem is the way we were exited from our previous building.

How could someone approach an independent statutory body and say that it must exit in two weeks? How did that situation arise? If we had people come to us, as Deputies, saying their landlord had given them two weeks to leave, we would tell him to take a jump.

Ms Brenda McVeigh

We did say that we were not leaving but the OPW insisted that we were. It has an agreement with the landlord. We do not have the agreement with the landlord for any of these buildings. It reached an agreement with the landlord that we would exit for 8 June.

It is interesting that the OPW is under the remit of the Department of Finance

Mr. Seamus McCarthy

I believe it is the Department of Public Expenditure and Reform.

Did the Department of Finance officials know that people were being given two and half weeks' notice to quit?

Ms Deirdre Donaghy

We were not aware of the two weeks' notice. It is, as far as I understand, and perhaps the Tax Appeals Commission, TAC, can explain more, that it would have been aware for quite a length of time that it would have been moving out of this building because it was scheduled to be refurbished in its entirety. There has been a process up to the past year of looking for alternative accommodation that would suit TAC and it has looked at alternative premises before the current one it has moved into. It is certainly that it is ongoing for that length of time. We would not have been involved with the final say with the OPW as to the date of moving.

Did the OPW not help with the kitting out, albeit the office pays for it? That is its business. The office staff should be dealing with tax appeals, not office phones.

Ms Brenda McVeigh

We certainly felt that the office should have been prepared for us before we moved in. There was a period when we knew the building that we were in was going to be demolished. We got very sudden notice, because we had pushed back against the exit date for a while, saying that until something was ready, we could not move. We kept pushing back until eventually we were told we were moving. That was it and when we got there, the weekend we moved in, the walls were still going up. There was certainly no furniture, no walls and no IT system. There was nothing when we moved in.

I know how disruptive moving can be. Moving an organisation is not a minor deal, and we appreciate that. It obviously takes away the witnesses' attention from the core work they should be doing.

It is difficult to return to the other matters but I will. The witness said that they used Revenue Commissioners support services. The office is independent and the witnesses have stressed their independence.

Does that present a conflict, in terms of independence? What support services are involved?

Mr. Mark O'Mahony

We have a service level agreement, SLA, with Revenue. The SLA dates back as far as 2005 and has been renewed or rolled over informally on a number of occasions since then. Certainly, since Commissioner Gallagher and I were appointed, we were aware that at a minimum it might create a perception of a want of independence if we were still tied to Revenue in that regard. It has always been our intention to move away from that.

I will try to keep my questions short and I would appreciate short answers. What is the staff complement? Is it 14.5? Is 14.5 the full staff complement?

Mr. Mark O'Mahony

That is the full staff plus commissioners, plus a temporary commissioner and we have one project manager who works for us on a drawdown basis.

How many of those people are case managers?

Mr. Mark O'Mahony

Three.

The commission has said that ten additional staff are needed, at a minimum, and specified the levels that they should be at. Does the figure of ten people include the three case managers?

Mr. Mark O'Mahony

No.

Ms Lorna Gallagher

No.

That means the bare minimum of staff is 13 people. When did the commission apply for more staff?

Mr. Mark O'Mahony

We have been looking for more staff since May 2017. That particular submission was made in February of this year, Deputy.

Has the Department responded and sanctioned the proposal?

Mr. Mark O'Mahony

We have met the Minister. We told him we were not getting our own resources reviewed because we felt perhaps our requests were not being fully appreciated as to their urgency or their necessity. We have got our own resource review and the Minister has said that he is putting in his resource review. A decision will be made at the conclusion of those processes.

Have the commission been given a timeline?

Mr. Mark O'Mahony

No. In relation to our own resource review, we have been told that it would be finished this year but it has not happened yet. In relation to the Minister's resource review, I do not have a timeline.

Can the official representing the Department of Finance tell us the timescale?

Ms Deirdre Donaghy

If I can possibly do, I can maybe comment back on some of the other statements that the Minister has made or the commissioner.

In a moment, yes.

Ms Deirdre Donaghy

The timeline on the review is that it has already commenced. Ms Niamh O'Donoghue, former Secretary General of the Department of Social Protection, is undertaking the review. We are very much aware that this is an urgent requirement. She is expediting this immediately. As I say, she has already commenced. She has a schedule of meetings next week to meet with various stakeholders. She is going to deliver the review by mid-August, I believe.

The sum of €1.6 billion is disputed. I presume all of that money is outstanding, it is unpaid and there is an argument for a refund due to the sum being outstanding. Is that tax or penalties?

Mr. Seamus McCarthy

I understand that some payments are made in relation to some cases. Where it is agreed that a certain liability is there, my understanding is that about €0.5 billion has actually been received and, if one likes, the outstanding debt, as far as Revenue is concerned, is of the order of €1.1 billion. Obviously if the determination goes in favour of the taxpayer there may actually be repayments to some taxpayers.

How much will it cost to provide the bare minimum staff complement? Has the commission estimated the cost?

Mr. Mark O'Mahony

We currently have a budget allocation of €1.626 million. We believe that we need at least another €1 million to €1.5 million on top of that.

The sum of €1 million or €1.5 million is small when compared with the €1.1 billion that is outstanding, and the integrity of the tax system.

Does the long delay prevent people from getting tax compliance certificates and functioning?

Mr. Mark O'Mahony

My understanding is that if there is a valid appeal in being it does not affect one's eligibility. I am not 100% certain about that, Deputy. I ask her for permission to come back on that.

Mr. Mark O'Mahony

My understanding is that it does not.

Obviously the function was shifted from the Courts Service to the Tax Appeals Commission. There is a scope for a person to submit a claim to the High Court for a judicial review. Have there been judicial reviews?

Mr. Mark O'Mahony

Not of our decisions.

We have been told about the amount of money that was returned in 2016 because of an inability to recruit staff. Did the commission return money in 2016?

Mr. Mark O'Mahony

Yes, we did. We returned about one third of our budget. I am sorry if I was unclear, Deputy. I understand Deputy Burke to have asked about the return of moneys in 2017, which was the plan for the upscaling of staff. I mean the plan to put the new ICT system in place. Those were envisaged for 2017.

Is it correct that staff could not be recruited in 2016?

Mr. Mark O'Mahony

In 2017 and 2016.

The commission could not recruit in 2016, it experienced the same problem in 2017 and is at full complement. That assessment does not add up for me.

Mr. Mark O'Mahony

I think the position was not entirely apparent to us in 2016. We were established in March of that year. We did not have a picture at that stage in the ramp up in the number of appeals that were going to be coming to us. We knew that inevitably, when Revenue stopped acting as a filter, there would be more. We knew there was going to be a huge volume of legacy appeals coming to us.

I am not talking about the legacy appeals. I am talking about the amount of money that the commission returned.

Mr. Mark O'Mahony

Yes.

The commission returned money in 2016. This committee takes a dim view of money being returned if it can be spent because it has been allocated for a particular purpose. I completely accept that it can be time consuming and difficult to recruit staff, particularly when an organisation is being established. Was the matter resolved in 2017?

Mr. Mark O'Mahony

No, it was not. It was in 2017 that we were finally able to say this is the magnitude of the task facing us and this is what we need. That is when we put in place plans saying we are going to have these three units, we are going to bring in case managers, we are going to need so many support staff and so many management staff. It was really in 2017 that we ran into the problem of having a plan for the staff we needed, trying to recruit them and-----

How much money did the commission hand back in 2016 and 2017?

Mr. Mark O'Mahony

We surrendered €596,000 in 2016 and €528,000 in 2017.

The Accounting Officer's statement is peppered with references to resources yet a significant amount of the commission's budget was surrendered, which is very problematic because it happened two years in a row. Will the commission surrender money in 2018?

Mr. Mark O'Mahony

No. Ms McVeigh wishes to comment.

Ms Brenda McVeigh

I cannot comment too much on 2016 but on 2017. I would say that this is a chicken and egg situation. One needs to have resources in order to spend them. One must go through all sorts of processes to recruit and procure. Those processes take time. If one does not get through a process in time then one is not going to spend the money, and that is why it is sent back.

I appreciate that and I accept it happening in the first year. When it happens a second year it indicates something else, which is a real concern.

How many of the appeals to date have been successful? Does the commission retain data on how successful an appeal has been, what money was accrued as a consequence of the 860 cases this year? Does the commission collect such data?

Mr. Mark O'Mahony

We do not, Deputy.

Does the commission have that data for last year?

Mr. Mark O'Mahony

We will get the data and supply it to the Deputy. I am afraid that we do not have it to hand.

I ask the commission to supply the information to the committee.

Mr. Mark O'Mahony

Yes.

The Accounting Officer identified some legislative changes and I ask him to be specific.

Mr. Mark O'Mahony

Yes. Commissioner Gallagher has worked on those and I ask her to answer the question, if I may, Deputy.

Ms Lorna Gallagher

I thank the Deputy. I ask her to allow me a moment to locate the information. We have at this stage approximately two years under our belt and we have considered the legislative aspects of the system that might be improved. There are a couple, and I can bring the Deputy through them if she allows. I do not know if she wishes me to do so.

Can Commissioner Gallagher provide them to us?

Ms Lorna Gallagher

To my knowledge, they have been provided. I beg the Deputy's pardon, sorry.

Provide them to this committee. The TAC might have submitted them to the Department of Finance.

Ms Lorna Gallagher

We can undertake to provide them to this committee. There would be no difficulty with that.

Ms Gallagher could give us the headlines. For example, how many are there?

Ms Lorna Gallagher

Six. I can highlight two or three for the committee, if it believes time is a pressure. I will start with the one that has been obvious to all of us from the get go, which is the matter of cases stated. The Deputy asked whether we had been judicially reviewed, to which the answer is "No". However, there is an appeal mechanism in the tax legislation whereby an appellant or the Revenue Commissioners, if they are so minded, may appeal us directly to the High Court to have what is effectively a point-of-law rehearing. That provision requires an Appeal Commissioner himself or herself to draft the case stated document, which is a detailed and exacting document for the benefit of the High Court judge who will hear the case. A series of questions must be set out, the determination must be clearly put forward, the points of appeal clarified and all of the exhibiting, supporting documentation included.

I believe we have asked, and will do so again, for this provision to be amended in a manner that will alow usl to request the appealing parties to draft a case stated document for review by us so that we can then alter or amend as necessary. Drafting case stated documents takes many hours, consuming a great deal of our time. We will ask for that change. When our body of determinations grows, the number of appeals will inevitably grow as well. The interesting thing about the case stated legislation is that it provides a tight timeframe of three months within which an Appeal Commissioner must draft, finalise and sign the case stated. As such, if I receive a case stated application, I must prioritise that ahead of determinations that have been sitting on my shelves and awaiting my attention. If the parties could draft the case stated document for my review and my final sign-off, it would be of great assistance. This is one of the recommendations we have made.

Another recommendation that may be of interest to the committee relates to our section 949 new jurisdiction provision. This jurisdiction is helpful for taxpayers because it allows them to opt to have their appeals heard without oral hearings. They can furnish to us in writing their submissions, statements and points of view, the points of law and anything else they feel is relevant. The Commissioner will then sit down at his or her desk and draft the determination on foot of that paperwork, as per between Revenue and the taxpayer. This facility has been taken up significantly by taxpayers. However, the legislative provision as drafted does not allow us to make the final call on whether a case is determined in this way. In circumstances where we feel that a small case, for example, of under €10,000, or a non-complex case is appropriate for a section 949 new determination but the taxpayer disagrees with us, unfortunately we have to schedule a hearing and the matter will go through that process. We have asked for consideration of whether we might make that decision.

The Commissioners might send us details on the rest of the recommendations. It might be helpful were we to take them up with the Department.

I will revert to the extraordinary overtime claim that was raised in the Comptroller and Auditor General's report. At what grade was the person who was the subject of the claim?

Mr. Mark O'Mahony

She had just been promoted to higher executive officer.

Was that the level at which the overtime claim was made?

Mr. Mark O'Mahony

No. The overtime claim was made at executive officer and higher executive officer levels.

Did the employee give any reason as to why the claim dated back such a length of time?

Mr. Mark O'Mahony

Yes. I am sorry to be unhelpful, but I am not in a position to discuss it because-----

Mr. O'Mahony might identify the person if he goes any further.

Mr. Mark O'Mahony

Yes.

We do not want to do that.

What was the nature of the work involved in the claim?

Mr. Mark O'Mahony

It was administration of the Office of the Appeal Commissioners and then work in scheduling and case management within the TAC.

Is there a cut-off point at each grade level for the making of monetary overtime claims?

Mr. Mark O'Mahony

At assistant principal level and above, claims are not permitted.

How does the system differ now from then?

Mr. Mark O'Mahony

Overtime is actively discouraged as a matter of policy. In the event that it is necessary, it has to be approved in advance and recorded in a specified form, there has to be an explanation as to why the extraordinary circumstances exist that render it necessary, and the claim has to be submitted within four weeks.

Given the commission's staff complement, there may well be a need for overtime. It might be discouraged, but there is a large body of work that needs to get done.

In this case, the Commissioners did not seek legal advice or require sanction from the Department of Public Expenditure and Reform. Is there any threshold beyond which sanction is required? Sanction is required for new staff. This amount would certainly pay one or two salaries.

Mr. Mark O'Mahony

I accept that. A small point I would make is that we were not aware of the monetary value of the overtime claim. The information presented to us did not include that. I do not know whether there is a threshold over which the Department has to be notified, but we have accepted that, with the benefit of hindsight, we ought to have done so, given the nature of the claim.

I will move to another point. What aspects of the risk register are operational, what remains to be done and under what headings?

Mr. Mark O'Mahony

Ms McVeigh is the person in charge of that, so I might ask her to respond.

Ms Brenda McVeigh

We had completed a draft risk register and started speaking to staff about identifying risks, what they needed to do to identify them, etc., but we are talking about junior and inexperienced staff who have no background in the Civil Service. We identified that we would not be able to get on top of this, given all of the other work we had to do and the fact that we have such a small complement of staff to do everything. The main focus had to be on getting the appeals moving. Through the procurement mechanism, we hired consultants to help us put a draft risk register and a risk management policy in place. We have the register and are still working on it. While I cannot say that it is populated or working, the whole ethos of risk management is there among all staff every single day. We provide governance workshops to them and talk to them about risks. No issues have arisen that cause us unwarranted concern. Staff are well aware that, because they are so inexperienced and junior, they should come to someone more senior and experienced if they have doubts or concerns about an issue. I cannot say that we have a risk register in place today, though.

If the commission had a risk register in place, would it measure the risk of not being able to fulfil the task?

Ms Brenda McVeigh

Yes. We have run training courses for the staff. The main risk that we identified is our lack of staff and resources.

If the commission does not have a risk register and name a risk, the commission will be required to attend a committee like this and identify it. If it is not named, it does not get addressed.

Ms Brenda McVeigh

Yes.

Would Ms McVeigh regard that as a significant shortfall?

Ms Brenda McVeigh

Yes.

Does the commission require outside assistance or must the register be generated internally?

Ms Brenda McVeigh

As I said, we have sought outside assistance. This is something that we would have been actioning in recent weeks had we not been doing other work. We must work incrementally - we cannot do jobs in parallel because we do not have enough staff. If we must focus on going through appeals, preparing an annual report or preparing for a meeting with this committee, the risk management process has to be moved to one side because we do not have enough staff to move forward.

Outside of the commission's direct work, are there demands from Revenue? In what condition did the files the commission is dealing with come to it? Is that adding to the workload?

Ms Brenda McVeigh

It certainly did last year.

Mr. Mark O'Mahony

It did. We eventually received a listing of the final tranche of legacy appeals on A3 printouts. We received a soft copy - an electronic copy - of that information in November of last year.

There was only one person who had the password and that person was on annual leave so we could not access that until early this year. There were issues with the accuracy of the data we received. There were appeals that had been settled. There were taxpayers who had died. There were appeals that had been withdrawn. So we had to carry out - I cannot overstate how time-consuming this was - a quality control exercise on the data as we manually inputted every single piece into our case management system. It was a huge task.

On the password, if someone who is out sick has the password, it does not take much to-----

Mr. Mark O'Mahony

This was a Revenue person who had the password, not one of our staff members and we were told that one would be able to get this password when this person returned.

The Tax Appeals Commission is provided with data that it can search in digital format, but it cannot search them because it does not have the password from an organisation that is passing on the appeals to it.

Mr. Mark O'Mahony

Yes, and to be clear we had the data in hard format as well, but obviously that limits what one can do with that data in terms of searching or grouping.

I have a few questions just to wrap it up. Is the Tax Appeals Commission accessing the information that is on the Revenue site or is it on its own site? Under the new system taxpayers log in to the Revenue site to do PAYE or PRSI, or to submit an annual return online. They get a password but it is not on their personal computer at home; they are actually logging into the Revenue. Is the Tax Appeals Commission separate?

Mr. Mark O'Mahony

We have our own database.

Is that separate from Revenue?

Mr. Mark O'Mahony

We have a proposal to do a limited link to the Revenue database so that some of the communications elements can be speeded up or possibly even automated, but that is just at the planning stage at this point and, like everything else, it is resource dependent.

Mr. O'Mahony mentioned overtime restrictions. Who placed the restrictions on the overtime given that the Tax Appeals Commission's office is so busy and it cannot recruit staff? Who is saying staff cannot work overtime? Is it Mr. O'Mahony or-----

Mr. Mark O'Mahony

It was a management decision made in the middle of last year.

Was it made by Mr. O'Mahony?

Mr. Mark O'Mahony

It was on the recommendation of our new head of administration.

Given that the Tax Appeals Commission had the funds to pay overtime in 2016 and 2017, why did Mr. O'Mahony tell people the office would discourage overtime? There is no financial impediment to overtime. Why would he have discouraged overtime if it could have helped?

Mr. Mark O'Mahony

It is because the policy of the Department of Public Expenditure and Reform is that overtime is to be discouraged and eliminated wherever possible. I suppose-----

Is Mr. O'Mahony being over-strict in his interpretations compared with other Departments on that one?

Ms Brenda McVeigh

I do not think so. When the TAC got new management in the mid-part of 2017 I think the first decision we took was to stop and review everything here; see what was going on and look at work processes. I think it was a case of trying to say that even with limited resources, we could apply them better so that we did not need to do the overtime thing but we just need to prioritise the work that is there. As I said, on a review of our systems-----

Is the Tax Appeals Commission allowing any overtime this year?

Ms Brenda McVeigh

No.

Is there a need for overtime? If some staff were able to work overtime this year, would it help the Tax Appeals Commission's situation?

Ms Brenda McVeigh

To be honest, the staff are so pressured that I do not think they would do overtime if they were asked at the moment.

I accept there might be that issue.

There are 5,000 cases in dispute and €1.6 billion in tax in dispute. There is a general understanding among the public that €1.6 billion in tax is due. That is not the case. The witnesses are now saying that in respect of an aspect of the tax that is not in dispute, there has been a payment on account. Everyone out there assumes there is €1.6 billion due. I ask Mr. O'Mahony to clarify that figure. What is the figure if the amount paid on account is subtracted from the total tax amount of the cases in dispute?

Mr. Mark O'Mahony

I think the Comptroller and Auditor General said it was a figure of some €1.1-----

The Comptroller and Auditor General's report is more than a year old. I am asking about the figure now.

Ms Brenda McVeigh

We do not have those figures. The money has been paid to Revenue.

The refunds would also be paid by Revenue. The Tax Appeals Commission is a bit like the Social Welfare Appeals Office. It makes a decision and sends it back to Revenue to sort out the figure by saying, "Here's our decision; implement it." None of the money comes through its office. It is important that the public get that and it is on the public record that it is back to the Revenue. Surely the Tax Appeals Commission gets some analysis back from Revenue of all the cases the Tax Appeals Commission ever dealt with. I think the Tax Appeals Commission determined 700 cases last year. Of those 700 cases, what was the level of tax in dispute and what was ultimately the settlement. Then I presume it is up to Revenue to collect the interest. That is not the Tax Appeals Commission's area.

Ms Brenda McVeigh

Yes.

Of the 700 cases it disposed of last year, what was the amount of tax that was in dispute and what was assessed? Was it 80%, 70% or 60%? They are the kinds of figures we expect the witnesses to have.

Mr. Mark O'Mahony

I am sorry, Chairman. We do not have that information. We will get it to the committee. In terms of the level of data we can get, again it comes down to a resource issue. We have not been collecting-----

If the Tax Appeals Commission has sent 700 cases back to Revenue as having been concluded, surely Revenue can get the figure from its computer. It might show, for example that out of €200 million the settlement was €150 million. Do the witnesses understand my question? This is the sort of thing we need to know. How much went in and how much came out?

Ms Lorna Gallagher

I think I may be able to assist if I may intervene. In many cases that are disposed of, they are disposed of without us necessarily knowing the outcome. For example, if a case is settled between the parties midway through a hearing or if a case is settled between the parties during the correspondence processes when we are building up a file to create a file that can then be transferred to a hearing, it usually does so on a confidential basis and we would not necessarily be apprised of the terms of settlement of such a case. We would not therefore be able to collate that type of information.

I understand that.

Ms Lorna Gallagher

We can certainly collate information for the committee in relation to-----

I would call that a case withdrawn.

Ms Lorna Gallagher

Yes, indeed.

I am drawing the parallel with social welfare. If a case goes to the appeals office and it is withdrawn at local level, it is no longer in the Tax Appeals Commission's system and not one of its live cases. There is probably a percentage of cases that came to the Tax Appeals Commission but were withdrawn and did not have to proceed. We are not looking for the withdrawn cases because the commission ultimately did not have to conclude on those. However, there may be a gap in the system in respect of the 700 cases. The Tax Appeals Commission makes a decision on certain details and then it is a matter for Revenue to calculate the figures. We need an understanding of what is happening here. We do not know if the cases with a total value of €1.6 billion will translate into €2 billion, €1 billion or €500 million for the Exchequer. We need to have some yardstick. I accept that Revenue will produce the figure. It is a bit like social welfare cases. I believe there is a gap in public understanding of what is happening if we do not have the headline figures of what went in under appeal and if the case was adjudicated what the success rate was. Does Mr. O'Mahony understand my question and where I am coming from?

Mr. Mark O'Mahony

I do, absolutely.

Does he see the simple logic that the public would like to see the headline figures because-----

Mr. Mark O'Mahony

I think that information will have to come from Revenue. We are just not privy to the data.

We will ask the Revenue about putting a system in place this afternoon. There can be no confidence given how poorly the Tax Appeals Commission is resourced. For us to know the system is working and for the public to have confidence in the system, people need to know these kinds of things. Does the Comptroller and Auditor General wish to make an observation?

Mr. Seamus McCarthy

We will be talking in the afternoon about collection of tax debt. Being in control of the information around cases - the new cases that are registered, cases that are closed - I think is something that one can reasonably expect from Revenue.

Does the Revenue know all the cases that go to the Tax Appeals Commission?

Mr. Seamus McCarthy

It has to because there will always have been an assessment, which is put on hold.

At a Tax Appeals Commission hearing, the Revenue makes its case and the taxpayer on the other side makes his or her case. Both sides make a case and we are familiar with that. I know there is a presumption that hearings will be held public. There was a significant dispute about confidentiality when the legislation was going through. How many hearings did the Tax Appeals Commission hold last year? How many were held in public and how many were held in private?

Mr. Mark O'Mahony

I ask the Chairman to bear with me.

I ask Mr. O'Mahony to give us a feel for what is happening. He can send the information in writing during the week. If he has it with him, that would be great.

Mr. Mark O'Mahony

I think I have the information. There were 65 hearings in 2017.

How many were held in public and how many in private?

Mr. Mark O'Mahony

They were all private hearings.

I thought there was a presumption that hearings were generally to be held in public.

Ms Lorna Gallagher

It is at the discretion of the taxpayer. The taxpayer can ultimately opt to have his or her case heard in private and that is what is what we have been experiencing.

That is what the legislation ultimately said on that issue.

Ms Lorna Gallagher

Yes, that is what it provides.

When the legislation was before the Houses, there was a major dispute about whether all hearings should be held in public. People have been given the option. Did Ms Gallagher indicate that only 10% of the 700 cases the commission dealt with last year went to hearings?

Ms Lorna Gallagher

Only a small percentage of the cases that reach us progress to a hearing. Many cases are disposed of-----

Through correspondence.

Ms Lorna Gallagher

Yes, that is correct, through the correspondence process.

I am pleased to hear that. I had the impression earlier that there were a large number of hearings relative to the overall number of cases, but hearings account for only 10% of cases or even less.

Mr. Mark O'Mahony

I might add that they are also resolved through case management conferences, which is a new statutory power we have to get the parties together for an informal hearing. We have found those hugely useful in terms of netting issues and clarifying issues generally for the taxpayer rather than for Revenue. Very frequently, when the issues have been clarified between the parties there is ground for a settlement, so we have been focusing on that because it does yield results.

Is it similar to mediation?

Mr. Mark O'Mahony

Quasi, although I am reluctant to call it mediation because that is not what the legislation states.

Ms Lorna Gallagher

It is a facility for the parties to come together and for differences to be addressed.

I understand. It allows for the exchange of information and for issues to be addressed. Could I get the figure again for the net amount of the €1.6 billion that is in dispute? Is the net figure €1.1 billion?

Mr. Seamus McCarthy

We have later figures. I think it is of the order of €1.8 billion in dispute and €1.17 billion which is the outstanding tax liability. That is subject to confirmation by Revenue.

We will come to that in the afternoon. In other words, it is more than a third of it. Everybody thinks €1.6 billion is due but that is not the case.

Ms Brenda McVeigh

It is important to point out that we can get a notice of appeal in any manner. It can come in on the back of an envelope. The reason we did not collect the data ourselves was agreed with Revenue and it was more for Revenue.

We will go back to Revenue.

Ms Brenda McVeigh

A person can say they owe this amount but Revenue says they owe that.

We ask the commission to supply more information on the cases in hand. We want an age analysis of that. How many cases have been ongoing for three months, between three and six months and between six and 12 months? It is not sufficient to simply use the heading "legacy". We want to know the timing of the legacy in terms of how many cases have been ongoing for two years, three years or four years. We need to understand the length of time some of those cases are taking. We want two sets of figures, first, the number of cases and the age analysis and, second, the value of those cases in each category.

Ms Brenda McVeigh

We do not have the value.

We will put this to Revenue as well in the afternoon.

Mr. Mark O'Mahony

We can certainly give the committee the number of cases on hand and the age analysis.

Revenue can provide additional information. Both bodies will have to work together.

Ms Deirdre Donaghy

I thought it was important to put on the record, in terms of the resources, the interaction that has been had with the Department over the past year to 18 months.

Is Ms Donaghy in the Department of Public Expenditure and Reform or the Department of Finance?

Ms Deirdre Donaghy

The Department of Finance. We have a liaison role with the Tax Appeals Commission, TAC. What is important to state is that each time the Tax Appeals Commission has come to us with resource requirements we have assisted to the best of our ability. To take 2017, for example, we secured sanction for an additional five temporary commissioners to be recruited in 2017. The commissioners had input into the selection and recruitment process and, as a result, only one candidate was selected. However, we have sanction for five and to the best of my knowledge that sanction still exists.

How can the extra four staff be recruited?

Ms Deirdre Donaghy

Following the request for additional staff which came to the Minister in February, a large number of whom would be administrative staff, the reason we have appointed an external review is that we have a serious concern that this will cause more of a backlog and a bottleneck. We are very much aware that resources are needed. We just want to make sure that the correct resources go in. To put this in context, one can see from the increase in staffing that the commission has gone from having two commissioners and four staff in 2016 to having three commissioners and 15 support staff. That demonstrates the engagement the Department has had in improving the staff.

As of our liaison meeting on 18 January, we were still aware that additional shortlisting was going on for new case managers at assistant principal level, and that process was under way. Three weeks later, we got a request for resources that would include an assistant secretary, two further principals, an additional assistant principal and a higher executive officer. The fact that this came three weeks after a liaison meeting where none of that had been raised gave us serious cause for concern and that is why we have said we are not disputing that more resources are needed, we just want to make sure that the correct resources go in. The Minister is very conscious that a fully functioning appeals system is an essential part of the tax system. It is as much in our interest that this system works as it is in the interests of tax and taxpayers that it works. We want this to work and we want it to be appropriately resourced. The Minister is fully engaged with this. That is why we have appointed a single reviewer to go in to do the review as quickly as possible. It is someone with experience, who can essentially put the business case to the Minister with his Public Expenditure and Reform hat on, and say these are the resources that are needed to make this an effective and fully functioning body and then we will have the basis on which to resource it.

Has the Department factored into that process the fact that if Revenue were to put in a review system. as happens in social welfare. it might prevent cases arising? We got a briefing note from a body other than the Tax Appeals Commission showing there has been an almost exponential increase in the number of cases. In 2012, the figure was 247 but this increased to 356 in 2013, 498 in 2014 and reached 667 in 2015. That is based on information received in response to parliamentary questions. In 2016, the figure was 960 and in 2017 it was 1,405. The more people know about the office, the more people will make appeals. There needs to be some way of triaging cases. Perhaps Revenue needs to step up to the plate and deal with some by having a review. Revenue might say that is the job of the commission; I do not know. The figure was 1,405 last year and will be at least 1,800 this year. Only four years ago, the figure was 500 and it will have increased to well over 2,000 next year. The number is increasing exponentially.

Ms Deirdre Donaghy

It is certainly an issue.

We do not want to give the TAC only what is required from now until Christmas. My main criticism is that, given the importance of the issue, the new system established has not been on the scale required to allow it to be up and running. It seems the approach has been one of allowing the Department to work it out in that it will provide two commissioners and four staff and then increase staffing little by little. This was all foreseeable.

Ms Deirdre Donaghy

Those were the requests we received and actioned. What happened is that an unforeseen number of legacy issues were transferred from Revenue to the TAC that we and the TAC were not expecting and we had to deal with the situation.

Did the Revenue transfer the cases to the TAC or was it the taxpayers who transferred the cases?

Mr. Mark O'Mahony

The Revenue transferred them to us.

Was that a new process whereby the Revenue could dump some of its old cases over to the TAC?

Ms Lorna Gallagher

Yes.

Mr. Mark O'Mahony

Yes.

Did the TAC engage with each of those taxpayers and write to them?

Ms Lorna Gallagher

Yes, we did.

Are they all happy to engage with the TAC or did many withdraw their cases?

Mr. Mark O'Mahony

There have been some withdrawals but a lot of them will require a hearing.

Did that give Revenue the opportunity to clear out some of its difficult cases? We will ask Revenue officials that question after dinner.

Mr. Mark O'Mahony

I saw an interview in which the Revenue chairman, Mr. Cody, very fairly said the Tax Appeals Commission did not create the backlog, it inherited it. It was nice to see that acknowledgement from our perspective.

Ms Deirdre Donaghy

This is one of the things we think is very important in the review. There are two very distinct issues here. There is an unforeseen backlog that has been delivered to the Tax Appeals Commission and has to be addressed, and there is then also the necessity to have a fully functioning ongoing system that can deal with the new appeals coming through on a day-to-day basis. That is something we need to take into account with the resourcing. That was originally the intention with the temporary commissioners. There is an element of possibly needing shorter term staff to clear the large backlog and then we need an assessment of what is required on an ongoing basis to make sure that new appeals are coming through and are being dealt with in an effective manner.

I know responses have been given but we will ask the commission to give us a detailed note on the topic. There is probably more information available. As the other members of the committee are not here, we would like to have that information on record. When we are reaching a view on the issue we want to be able to collate all the information.

Does the commission get a recruitment agency to do the work on its behalf or will it have to devote existing and limited resources to the recruitment process?

Mr. Mark O'Mahony

Perhaps Ms McVeigh will deal with this question.

Ms Brenda McVeigh

That brings us back to the problem that there are only one or two members of staff to do all of this work, namely, to run the office, to recruit and to deal with all the investigations and appeals.

The recruitment licence allows us to recruit if we have the money and the sanctions from the two Departments to go ahead and use it. We are out of sanctions at the moment. It will not matter if we get additional temporary commissioners because without the support team to support them, we will not be able to move forward because there is a significant processing job to be done on these appeals. It has to be addressed. It will not be addressed by a commissioner. That would be a complete loss of money. All of our Civil Service obligations have to be addressed. That needs something apart from a temporary commissioner. The only sanctions we have at the moment are for a temporary commissioner. We do not have sanctions for additional staff to run the office.

The commission only has sanction for a temporary commissioner. Did Ms Donaghy say there was sanction given for five?

Ms Deirdre Donaghy

There was sanction for five.

Is that different?

Ms Brenda McVeigh

That is the only sanction.

I do not understand the witnesses saying there was sanction for five and only one came in while at the same time saying the Tax Appeals Commission has no more sanctions.

Ms Brenda McVeigh

We have no more sanctions for-----

I do not understand this. What did I miss?

Ms Brenda McVeigh

The temporary commissioner is a ministerial appointment. The Minister has given sanction for the appointment of four more temporary commissioners.

Why are they not being recruited now?

Ms Brenda McVeigh

It is a ministerial appointment. It has nothing to do with us.

I am lost.

Ms Brenda McVeigh

The Minister for Finance has to-----

I am lost in terms of who recruits.

Ms Brenda McVeigh

The Minister for Finance has to appoint temporary commissioners. We can recruit up to principal officer standard level but we cannot even do that at the moment because we do not have the sanction from the Department of Public Expenditure and Reform for the additional staff.

The Minister is willing to appoint four extra commissioners.

Ms Deirdre Donaghy

There was sanction for five in early 2017 but only one was selected. The sanction is still there. We enquired throughout 2017 whether additional appeals commissioners were needed but the response at the time was "No." This is why our concern at the moment is if only administrative staff are recruited there will still be a bottleneck at decision-making level. I am not prejudging the outcome of any review. The point is we need to be sure that whatever we put in will be effective in clearing the backlog and addressing issues.

That is the Department of Finance but does the Department of Public Expenditure and Reform have a role in this?

Ms Deirdre Donaghy

In terms of the numbers of staff in the commission, the Act provides that the Minister for Finance, in consultation with the Minister for Public Expenditure and Reform, decides the staffing numbers in the commission. The Minister, Deputy Donohoe, is the Minister in both Departments.

They are separate.

Ms Deirdre Donaghy

It is a joint role shared by the Department of Finance and the Department of Public Expenditure and Reform.

The committee has asked the Department to send us a note. Do we need to write separately to the Department of Public Expenditure and Reform if we have a query on this?

Ms Deirdre Donaghy

I can liaise with my colleagues in the Department of Public Expenditure and Reform.

Will Ms Donaghy try to make it comprehensive and cover the bases at the Department of Public Expenditure and Reform? That is all I am asking.

Ms Deirdre Donaghy

I will confirm afterwards with the Chairman exactly what he wants us to cover but we are more than happy to do that.

Ms Donaghy will see the Official Report next week. Are there any final comments? I think we are finished. A division has been called in the Dáil.

Mr. Mark O'Mahony

We thank the committee for the opportunity to explain our position and to show we are taking on board what the Comptroller and Auditor General has said. We are doing our best. We have one small query about what the Chairman asked of us in terms of the age analysis but I am happy to that by way of correspondence if it is easier.

I do not expect it today. Mr. O'Mahony will understand what I am asking. I was amused looking at the last page of the annual report which refers to the customer service charter. With regard to contact by telephone, when the commission gets a new telephone number, the witnesses should let us know.

Mr. Mark O'Mahony

We will give the Chairman a call.

I thank our witnesses from the Tax Appeals Commission and the Department of Finance.

The witnesses withdrew.
Sitting suspended at 1.04 p.m. and resumed at 2.37 p.m.