asked the Minister for Finance the criteria for assessments of tax liability due from the commercial sector; whether these criteria are based on previous years' returns or on some other rational basis; whether such criteria are available in writing or whether in fact they are totally arbitrary in many cases; and whether there is an obligation on the Revenue Commissioners to explain the basis for their assessments in such cases.
Written Answers. - Estimated Assessments for Tax Purposes.
52.
It is assumed that the Deputy's question relates to the making of estimated assessments for income tax and corporation tax purposes.
I am advised by the Revenue Commissioners that the amount of the profits of an undertaking is estimated by the inspector of taxes at the commencement of the tax year. The inspector bases his estimate on the best information available, if possible on the preceding year's income figure where it has been determined. However, if the information is not known the inspector would be expected to made his estimate by using his best judgment. The same would apply to the making of corporation tax assessments which would usually be raised about three months after the end of the company's accounting period, to allow for the statutory time limit for appeals before the due date for payment of the liability, or of the amount specified by the taxpayer.
With regard to explaining the basis of the amount assessed the taxpayer is entitled to lodge an appeal within the statutory time limit and to specify the amount of tax which he considers should be payable. In the ordinary way the question of the Revenue Commissioners being obliged to explain the basis of the estimate would not arise, since the taxpayer would know that he had not furnished the proper accounts and returns which would enable the liability to be accurately determined and that only he and his tax agents would be aware of the amounts of the taxable profits.