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Joint Committee on Finance, Public Expenditure and Reform debate -
Tuesday, 27 Jan 2015

Draft Heads of Finance (Tax Appeals Commission) Bill: Discussion

The joint committee will engage in pre-legislative scrutiny of the Finance (Tax Appeals Commission) Bill with officials from the Department of Finance. I welcome from the Department Mr. Gary Tobin, assistant secretary, and Mr. Des O'Leary and from the Revenue Commissioners Mr. Gerry Smyth, assistant secretary, and Ms Jean Kelly. Mr. O'Leary and Mr. Smyth will make some opening remarks which will be followed by a question and answer session to clarify matters.

I remind members, delegates and those in the Visitors Gallery that all mobile phones must be switched off as they interfere with the transmission of proceedings. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to 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 asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

Mr. Des O'Leary

I propose to describe the main features of the legislation and the reasoning behind the proposals included in it. Mr. Smyth will address a number of issues that are of particular interest to the Revenue Commissioners. As the joint committee has a copy of my statement, I do not propose to read it in full and it might perhaps be accepted for the record.

In budget 2014 the Minister announced a reform of the role, functions and structure of the Office of the Appeal Commissioners and the tax appeals system.

The commissioners hear appeals against assessments, decisions and determinations of Revenue on a variety of taxes and charges that are under the care and maintenance of the Revenue Commissioners. Most of those appeals relate to the amount of an appellant’s liability.

The Minister’s stated objective was to ensure an enhanced and cost-effective appeal mechanism, which provided transparency and increased certainty for taxpayers. I should point out at this stage that the Minister is on record in the Dáil in noting the important role that the Appeal Commissioners had to play in the operation of a fair and efficient system. He has also specifically acknowledged the important contributions of the current Appeal Commissioners, Mr. O’Callaghan and Mr. Kelly, since their appointments in 1992.

Since the budget we have had a public consultation process. We received a number of submissions, in the main from tax and legal representative bodies and from the Revenue Commissioners. These have been made available to the committee. Subsequent to the public consultation, we have had further contact with these parties about their recommendations. We have also consulted with the Attorney General's office about some of the proposed measures and have discussed them with the Appeal Commissioners.

To give a quick run-down of what the process is like at the moment, not all taxpayer grievances come within the remit of the Appeal Commissioners. Where a taxpayer does not agree with a monetary penalty, his or her recourse is through the courts. Grievances about how the Revenue Commissioners handle cases can be dealt with by way of judicial review. There is also provision for going through the Ombudsman in the case of people who feel that they have been unfairly treated.

I will give a quick outline of the present appeals system. At present, a taxpayer appeals directly to the Revenue Commissioners, rather than the Appeal Commissioners, and Revenue then liaises with the Appeal Commissioners to set a date for a hearing. Appeals are held in camera - in private - following which the Appeal Commissioners make their decision. Hearings are held in various locations throughout the country and are much less formal than a court situation. A taxpayer can represent him- or herself or can be represented by a legal or taxation professional. Decisions by the commissioners are given orally or in writing and, while they can be published, publication has been limited in practice. In recent years it has certainly not been the practice to publish the decisions that are issued. There is no register of precedents as the Appeal Commissioners are not a tribunal of record.

Decisions of the Appeal Commissioners can be appealed to the courts. Appellants may seek a complete rehearing of the appeal, from the very start, by a judge of the Circuit Court or, on a point of law, they can go to the High Court. The Revenue Commissioners are restricted to an appeal to the High Court only on a point of law, except in the case of capital acquisitions tax, where they may make an appeal to a judge of the Circuit Court. This is one of the inconsistencies that are evident throughout the current system. A taxpayer has to pay his or her self-assessed liability before an appeal can be made but any disputed amount between the appellant and the taxpayer is not payable until the matter is completely determined through the appeals process, even when that involves going to the superior courts.

Over the past 15 years, a number of reports have examined the appeals process. These include the DIRT inquiry and the Revenue powers' groups in 1999 and 2003. The Law Reform Commission issued a report in 2004 and there was a commentary from the Commission on Taxation in 2009. The recommendations in these reports focused on the importance of ensuring the independence of the Appeal Commissioners through appropriate appointment procedures and by providing an enhanced, cost-effective appeal mechanism.

The objectives of the proposed legislation are to enhance the independent status of the Appeal Commissioners while ensuring appropriate accountability, to make the system more transparent, and to make the process more efficient.

The current legal provisions dealing with the appointment of the commissioners are contained in a very small section of the Taxes Consolidation Act - it is only a few lines. Effectively, the Minister has discretion as to who is appointed and on what terms, subject only to laying details of the appointment before the Houses of the Oireachtas. The proposal in the legislation is to change this by specifying that an appointment will in future be made by the Minister following an open competition run by the Public Appointments Service. Appointments would be for a fixed term which may be renewed once. There are various provisions on such matters as disqualification and removal from office, which are broadly in line with the arrangements for other independent office holders. The Bill also provides for the Appeal Commissioners to report annually on their work and for that report to be laid before the Houses of the Oireachtas. There is no provision to that extent at the moment.

Currently appeals and rehearings by a Circuit Court judge are held in camera. The Bill proposes that they would in future be held in public. However, the Appeal Commissioners would have scope to hold hearings, or parts thereof, in camera in certain circumstances, for example, where confidential information is being discussed, or where they felt the issue was not of great consequence. There is no reason in principle why tax appeals ought to be heard in camera. Appeals to the High Court from decisions of the Appeal Commissioners and from the Circuit Court judge are held in open court. There is also a trend internationally, in the UK and Australia, for example, which have a comparable legal background, towards public hearings for tax appeal cases.

As part of the consultation process, practitioner and representative bodies have argued that public hearings for tax appeals are not appropriate as they may deter individuals from appealing. The argument is also made that cases sometimes require that information about third parties is divulged. We feel that the provision for Appeal Commissioners to hear some cases in private at their discretion would continue to deal with such issues. The Minister has been advised by the Attorney General's office that public hearings would not breach the constitutional right of privacy or confidentiality of appellants if such hearings were to be provided by law, and that the legislature is not precluded from providing by law that hearings of the Appeal Commissioners are to be held in public. Notwithstanding the concerns that have been expressed, the Minister considers that the holding of tax appeals in public would improve the operation of and confidence in the administration of the tax system. He is very conscious of the differing views on this issue and is willing to engage on the matter as the proposals are taken forward.

As regards efficiency, the proposed reform has significant implications for the Exchequer given that the current appeals process can extend over a number of years, with collection of the disputed tax liabilities being suspended until the appeal process, including all appeals to the courts, has been exhausted. As of last January, Revenue estimated that €770 million was in question where assessments had been raised but collection could not proceed pending resolution of the disputed issues. At any time, the total amount of tax that is in dispute is in excess of €1 billion when account is taken of tax not yet assessed pending the outcome of some other case which was under appeal, as well as claims to repayment which are disputed by Revenue.

In the case of almost 600 appeals more than five years have elapsed since the appeal was lodged, with almost 30 of these cases under appeal for more than ten years. It is important to bear in mind that these statistics relate to the amounts in dispute. The amount in taxes that may be liable for payment depends on the outcome of the appeals process. Furthermore, even where liability is determined, there is no guarantee that all of the amount subject to appeal will actually accrue to the State. In many cases, the proposals contained in the Bill will not change the amounts in dispute, but they are intended to speed up the process of resolution of disputes.

From the Exchequer’s point of view, it is important that tax due is collected as quickly as possible. Mr. Smyth will in due course outline some of the concerns Revenue has about the effect of delays in the appeals system. Equally, of course, taxpayers ought to be able to obtain certainty about their financial affairs, something that is not possible if the appeals process is long drawn out. A number of procedural changes are being proposed which are intended to streamline the process. I do not propose to go into them in detail. However, one of the main changes is that an appellant will now make his or her appeal directly to the Appeal Commissioners, rather than via Revenue. Also, the Appeal Commissioners will decide the timing of hearings and have the power to deal with an appeal, in some cases without a hearing, provided there is no objection from Revenue or the appellant. This will possibly suit cases which are not of great import or significance.

Appeals in respect of which there are common or related issues can create an unnecessary burden on the appeals system. For example, if a large number of a people used the same tax avoidance scheme, it does not make sense to allow each appellant to insist on a separate oral hearing. The new Bill will allow the Appeal Commissioners to make the decision in one case and notify the other appellants of that decision. Unless the other appellants can explain why a hearing is necessary or it would not be appropriate to have regard to the first decision, the commissioners will be able to decide the other appeals without a hearing. Where there is an appeal to the High Court, the Appeal Commissioners will be responsible for drafting the case stated and the current practice of delegating this task to the party seeking the case will end. The commissioners will also be required to draft the case stated within three months of being notified of the appeal. This is an area in which there has been considerable delay at times in that where a case stated is being put together, the two sides may disagree and it can be a long time before the text is ready to go to court. Originally, this process was dealt with by the Appeal Commissioners, but this has been the responsibility of the appellants and Revenue since the 1980s.

In summary, the procedures set out in the heads of the Bill are aimed at preserving fairness, while reducing scope for delay. The key policy change aimed at reducing the scope for delay is the abolition of the right to a rehearing before a judge of the Circuit Court. As matters stand, a complete rehearing of an appeal is available to a taxpayer in the Circuit Court and such appeals are also held in camera. Appellants are not confined to arguments made to the Appeal Commissioners. There is some evidence that this right to a rehearing means that the initial appeal hearing can be a dress rehearsal. If that does not work, we may change tack.

Significant delays can arise in this process, particularly in court areas outside Dublin where it can be difficult to get a case listed for hearing.

A complete rehearing would be justified if there were reasons to suppose that poor decisions on matters of fact were a particular problem in the decision making process of the Appeal Commissioners. We are not aware of any evidence that this is the case. I understand that of the 14 cases appealed to the Circuit Court in 2013, the court found in favour of the appellant in one case and in most of the others, it repeated the decision of the Appeal Commissioners or a settlement was reached outside the court.

The planned reform of the appeal system envisages a better resourced and more efficient appeal commissioner stage with, for example, more flexible and active case management by the appeal commissioners. As this will have resource implications, we have entered into discussions with the Department of Public Expenditure and Reform on the matter.

Consideration was given to the option of continuing with the Circuit Court rehearing for cases, particularly where they involved small amounts of disputed tax liability. However, according to the legal advice received, this would effectively mean that an appellant who was in dispute in a case involving large amounts of tax liability would potentially be treated less favourably than appellants disputing minor tax liabilities. Having taken account of all the expressed views and arguments, the Minister considers that, on balance, the provision for full rehearing by a judge of the Circuit Court should be removed.

I hope I have given members an understanding of the thinking underlying the legislation and the reasons the Minister believes it will enhance the independence of the Appeal Commissioners and increase transparency. I will be pleased to answer any questions members may have about the proposed legislation.

Does Mr. Smyth have anything to add?

Mr. Gerry Smyth

I thank the Chairman for this opportunity to give the views of Revenue on the proposed reform. The tax appeals system has a long history that dates back to the 19th century. Despite the odd adjustment here and there, it remains largely unchanged since that period. For this reason, Revenue welcomes the Minister's proposal to introduce a significant overhaul of the system. Revenue believes the appeal process should be fair, easily accessible, expeditious and efficient and the proposed legislation will achieve these objectives.

I will refer to several of the proposals that are of particular interest to Revenue. On the proposal to allow for temporary appointments, a scenario could arise where all of the permanent Appeal Commissioners recuse themselves because of a conflict of interest, which would mean the appeal could not proceed. The proposed legislation addresses this gap by allowing for temporary appointments.

On the issue of independence, Mr. O'Leary has explained how the process will change from someone making an appeal via the Revenue officer to making an appeal directly to the Appeal Commissioners. While this may appear to be a small change, it is an important one because it will emphasise the independence of the Appeal Commissioners. Under the current system, the suspicion could arise that Revenue somehow controls the timing of the listing of appeals. Clearly, this will not be the case under the new arrangements. This change and some of the other changes proposed will, of necessity, impose an additional administrative burden on the commissioners. This reform will only be successful if the tax appeals commission is adequately resourced.

As regards the procedures on appeal - there are some quite detailed provisions in the heads - it is important to understand that the cases dealt with by the Appeal Commissioners range from those where the law is clear but the facts are in dispute to very complex cases where both the facts and the law are in dispute. To add to the commissioners’ difficulties, some of these complex cases, particularly where there is a tax avoidance scheme, can involve a large number of taxpayers. The challenge is to come up with a system which allows for informal procedures in relatively simple cases such as situations, for example, where the taxpayer is not professionally represented, while, at the same time, giving the commissioners’ clear powers to manage more complex cases in as efficient a way as possible. Revenue believes the proposed legislation strikes the right balance in that regard. We also believe it is important the legislation proposes to maintain the current arrangements where an appeal can be settled by the Revenue and the appellant at any time. This is to avoid overburdening the system.

As Mr. O'Leary mentioned, Revenue has been concerned for some time about delays in the appeals system. There is evidence some taxpayers use the system as a way of delaying payment, as a way to buy time to dissipate assets. The result is that even if Revenue wins the appeal, the Exchequer and the compliant majority of taxpayers still lose because in the end there are no funds to pay the tax. An appeals system that is open to this kind of abuse is not efficient or fair to the compliant majority.

Delays in the courts are a wider issue which is beyond the scope of the current legislation. However, significant delays can occur before a case gets to the courts. These delays have been criticised in the past quite heavily by the High Court. In short, we are hoping that the greater power given to the Appeal Commissioners to manage their cases will help to speed up their stage in the process.

Another source of delay, as Mr. O’Leary mentioned, is that the procedure for appealing to the High Court is done by way of a case stated. This requires the Appeal Commissioners to give a statement of the facts they found, the reasons for their decision and then to ask the High Court to rule on whatever the point of law is. This practice developed in the 1980s of delegating the drafting of the case stated to the party that was seeking the appeal. This gives rise to inevitable delays because, of course, the parties are still in dispute and are, accordingly, reluctant to agree on anything in the circumstances. Each party will argue over the terms of the case stated for fear of losing some advantage in the High Court. The result is the exchange of numerous drafts of the case stated between the parties before a final draft is agreed. The heads make it clear that the responsibility for drafting the case stated is that of the Appeal Commissioners which is what it was always intended to be. In other words, it cannot be delegated and should be done within three months from the date the commissioner is notified that the party wants to appeal to the High Court.

The Circuit Court is another source of delay. Mr. O'Leary has already explained the policy in that regard. Revenue notes if the right of a rehearing by a judge of the Circuit Court remains, then to some degree part of the reform of the Appeal Commissioners is undermined. This is because the Appeal Commissioners will be required to issue and publish written decisions and to draft cases stated while the same requirements would not apply to a judge of the Circuit Court. It seems incongruous to establish an expert tribunal such as the Appeal Commissioners but then allow an appeal by way of the total rehearing to a forum which does not profess to have the same expertise in tax matters.

On the question of transparency and the in camera rule, Mr. O'Leary has explained the reasoning behind this proposal. Revenue notes the argument that it would deter taxpayers from appealing. In the past there was an in camera rule in High Court and Supreme Court tax appeals which was removed the 1980s. We would note that change has not deterred people from proceeding.

I thank both Mr. O'Leary and Mr. Smyth for their opening statements on this proposed legislation. The issue of transparency is the most contentious aspect of the Bill. It has long been a feature of our taxation system that the identity of taxpayers would remain confidential and that the detail of their dealings with Revenue would remain confidential. What is the justification for identifying the taxpayer and the details of the case if the taxpayer takes an appeal to the Appeal Commissioners?

Mr. Des O'Leary

There is no question of lessening the provisions for confidentiality in dealings between Revenue and the taxpayer. The idea in regard to the position of the Appeal Commissioners is to bring us into line with arrangements in other jurisdictions and other appeal processes in Ireland. The Appeal Commissioners are the first forum of appeal beyond the position of dispute between the individual and Revenue itself. As in other forums - the Information Commissioner, the Employment Appeals Tribunal, and so on - once the case moves beyond the relationship between the Revenue and the taxpayer, it is appropriate to have greater transparency in the process.

I understand the need for transparency on how taxation law is interpreted. That should always be a matter of public record and will inform the approach taken by others to taxation issues but I do not grasp immediately the need for a person's identity to be revealed. Whatever Mr. O'Leary says, it is likely to be a deterrent. People guard their private financial information closely and the reality in Ireland is that when information is published in respect of a person's taxation affairs, it is associated with wrongdoing and under-declaring tax liability. There will be serious resistance in that sense. Perhaps Mr. O'Leary could talk us through the logistics. The hearings of the Appeal Commissioners will now be held in public, so the media will, presumably, be free to attend, along with everybody else.

Mr. Des O'Leary

That would be the case. The default position would be that hearings would be in public. It is felt that would enhance public confidence in the process and provide clarity to both taxpayers and practitioners as to the effectiveness and transparency of the system. In the default situation the hearing would be open to members of the public and the press but there would still be a provision for the commissioners to decide that in various circumstances, such as where the case involves confidential information, sensitive commercial information, or in cases that are not of great importance - possibly if there was a small appeal on a property tax case-----

That would be the exception. The default position would be that it is a public hearing and the media or any member of the public or interested party would be free to attend.

On conclusion of the case, what, in terms of findings and decisions, would be published?

Mr. Des O'Leary

The intention is that a concise determination would be made by the Appeal Commissioners of the facts of the case, the issues at stake and the points on which their decision was based and that this would be published. This will increase the level of information available to the generality of the public and taxpayers as to how specific cases have been dealt with and thus enable people to determine whether their case is in some way comparable and so on.

I can understand the logic of all of that but I cannot understand why the identity of the taxpayer adds to that.

Mr. Des O'Leary

There would be scope for the commissioners to issue anonymised information in their reports but that would possibly not be of great value given that the initial case was heard in public.

The combined effect of this provision for the taxpayer is that the case of the Appeal Commissioners will now be held in public and the option of going to the Circuit Court beyond that for a rehearing is being removed, such that a person who does not agree with Revenue's interpretation of the tax law relating to his or her specific case must either accept that or enter into an entirely different scenario where contesting that decision is a matter of public record, resulting in much of a person's financial details being published and revealed. That is a fundamental shift in terms of the administration of taxation law in Ireland over many decades.

Mr. Gary Tobin

I understand where Deputy McGrath is coming from in regard to this provision. We would contend that currently there may be some people who do not know that they may have grounds for appeal. In other words there may be people with particular tax situations, which may be grounds for appeal, but because there is no information in the public domain they do not know they could appeal them. It is not the case that everybody will be deterred by this. Rather, a particular group of people who, unknown to themselves have grounds for an appeal, will know, once more information becomes available, that this option is open to them. More generally, this is becoming increasingly the norm in countries where the appeals process is held in public, including the UK, Australia and Canada. In a sense, we believe it is important that the citizenry at large should have confidence that these appeals are conducted in a fair, open and transparent manner.

In regard to the change in relation to the Circuit Court appeal, as things stand - I am open to correction by Mr. O'Leary and other colleagues on this - under the new system a taxpayer who is unhappy with a determination by Revenue can request an internal Revenue appeal or employ an external operator to undertake that appeal; choose to take a judicial review or to take up the matter with the Ombudsman; take a case to the Appeal Commissioners; take the matter to the High Court and then, if unhappy with the High Court, take up the matter with the Court of Appeal.

Then, presumably, they could ultimately go to the European Court.

There is a significant number of avenues for appeal, even under these streamlined proposals. It is about trying to strike an appropriate balance in terms of the right of the citizen on the one hand, and an efficient system on the other. In a sense, that is what we are discussing here. As Mr. O'Leary has said, we remain open to suggestions and this is the usefulness of this process, to hear people's ideas and concerns. We are at heads of Bill stage. There is a balance to be struck between the appeal process being fair and the length of the appeal process. I think Mr. O'Leary has articulated well the length of some of the appeals at the moment.

I accept that there is a need to make the system more efficient and I have no doubt that some people are using the truncated nature of the system to delay the end point in respect of their own cases. That needs to be dealt with. I am sure my earlier remarks will not be misinterpreted. If somebody is guilty of wrongdoing, I have no difficulty with them being named, as happens under the current system. There is certainly a need for transparency in terms of the interpretation of tax law and how it is administered, but what I do not grasp - I accept that this is only heads of Bill stage - is what is being added to that by identifying the person who legitimately takes a case to the Appeal Commissioners, who holds a genuine view and whose professional advisers also hold a genuine view, that Revenue's interpretation of the law may be flawed in some way. They are entitled to take that case and retain the principle of anonymity. Without that, the cost of an appeal is severely increased - not the financial costs, but the cost of that veil of secrecy being removed. That is a fundamental shift in taxation practice in Ireland and we should think long and hard about it. That is just a view, and I accept that it is early days. It is a debate we will have.

There are a lot of good features here but I want to clarify one point. Currently under the appeals system, if someone is taking an appeal, do they have to pay the tax up front?

Mr. Des O'Leary

They only have to pay their assessment of what they consider is due. Any amount that is in dispute remains in abeyance until the appeal process is completed.

The fact that the Appeal Commissioners have to report annually to the Houses of the Oireachtas is a very good feature and is to be welcomed. Why, though, are appeal hearings taking so long? The question here is whether this is about revenue collection or transparency - that cuts to the heart of it. There could be a small sole trader in business, under enormous pressure, with a practitioner advising him one thing and Revenue assessing him another way. In some cases it could mean the difference between staying in business and going out of business. Without anyone having committed a criminal offence, there is a dispute in interpretation between a tax practitioner and Revenue. There is discretion with the Appeal Commissioners as to whether to hold the hearing in public or in private but that comes down to the individual type of person the commissioner is or whatever view he or she takes. Let us say the trader runs a small shop in a village, and suddenly it is decided to hold the hearing in public. It would destroy that business, for the sake of something relatively small.

Mr. O'Leary is saying there is roughly €1 billion uncollected because it is tied up in appeal hearings.

Mr. Smyth made reference to the lack of resources. Is this about lack of resources and revenue collection or transparency? On the issue of transparency, there are features in the Bill which are clearly to be welcomed. Why are appeal hearings taking so long?

Mr. Gerry Smyth

That is a difficult question to answer because, as I stated in my opening remarks, there are very different kinds of disputes. There can be a dispute which is really only about the facts. Take, for example, a tax payer who has not kept proper records. There is no real dispute about the law. The dispute is about the amount of profits for the year. In a situation such as this, there is a dispute between the Revenue officer and the individual. There are no records so it is necessary to make some kind of an estimate. A lot of haggling goes on as people try to decide what is acceptable.

There would be a range of margins in certain businesses.

Mr. Gerry Smyth

That is correct. There could be a range. Many of these cases will be settled before they go near an appeal hearing. When it is not possible to reach agreement, some third party has to make a decision on it. This is the Appeal Commissioners. I would not expect a case such as this to take very long to be decided or that there would be a delay. Delays tend to arise in higher value cases and in tax avoidance cases in which a person will go to the Appeal Commissioners because it is the first stage, but there are other stages afterwards. The last very big, high-profile tax avoidance case that was heard by the Supreme Court was in 2011. I can speak of it because it was a reported case. In that case, the transactions took place in 1991. It took 20 years before it was completed. The Deputy is correct. In the small cases, there is no reason why it should take a long time. However, in the big ones, where big money is at stake, those kind of-----

The worry is that a sledge-hammer is being used to crack a nut. If there is an abuse of the system, it must be curbed. Some people may be using the system to kick the can down the road for ten or 20 years. The small shopkeeper or the small businessman will not have the resources to do this. However, he could find himself in a public hearing with his customers in attendance and it being reported, and it could destroy his business. What can be done to curb the abuse of the system and to speed up the collection of taxes but at the same time to strike a balance which avoids a public hearing with unintended consequences that could be very damaging? This is fair comment. We are at pre-scrutiny stage. I am always looking for balance and fairness. If there are people who abuse the system, they should be pursued. However, if there is a legitimate dispute between Revenue and a tax practitioner or a person in business, which is why we have the Appeal Commissioners, is the balance of fairness tipped too much by holding these hearings in public?

Mr. Gary Tobin

All the questions raised by Deputies are very fair. It is all about striking a balance. That is the issue for discussion.

From our perspective one thing that could speed up the process is the removal of the Circuit Court stage. As some of my colleagues have stated, there may be a perception currently that the tax appeals process is a rehearsal, to some extent, because there can be a complete rehearing in the Circuit Court.

One can have a complete Circuit Court re-hearing in camera in the judges' chambers.

Typically, how long does a person wait for an appeal to be referred by the Revenue Commissioners and heard?

Mr. Gerry Smyth

I believe it takes three to six months

If it is heard, how long does it take for the Appeal Commissioners to issue a finding?

Mr. Gerry Smyth

It is very difficult to talk about a typical case. Sometimes, a hearing takes place but is not concluded on the day. One must then wait a number of months before it is resumed. In cases in which both sides have counsel, there could be almost interminable delays as they seek a date when everybody is ready. Some cases extend to a year.

After that year, how long would it take to get a Circuit Court hearing?

Mr. Des O'Leary

It can take several months before a hearing is listed for the courts. When a hearing goes from the Appeal Commissioners to the High Court, it can take a minimum of two years.

Have the public hearings and the other measures that have been brought in improved the speed of the process? I have worked with those business people and I understand the pressures they are under. Many of them would not be able to cope with public hearings. We are elected to represent all. I have major concerns that the balance would be lost. Mr. Smyth spoke about extra resources and bringing in other types of informal arrangements. What can be done to speed up the appeals system? From what the witnesses have said, it is open to abuse because of the time period, even within the appeals process. Is there a need to examine the appeal process first and get it working efficiently before considering the public hearings?

Could witnesses please keep their answers brief?

Mr. Gary Tobin

The Deputy's questions are very fair. One of the problems is that we have an information vacuum in the appeals process because it is all held in camera and therefore there are no precedents.

That could be overcome if the Appeal Commissioners were to make an annual report to the Oireachtas.

How many of the 14 appeals to the Circuit Court in 2013 were upheld?

Mr. Des O'Leary

In general, only the appellant, not Revenue, may make an appeal to the Circuit Court. Any case that has gone to the Circuit Court is most likely one in which the Appeal Commissioners have found in favour of Revenue. In nine of the 14 cases the Circuit Court reaffirmed the decisions of the Appeal Commissioners; three cases were settled without going through the full court process; in one case the appellant won; and in one case there was a split decision by the court in which some matters were found in the appellant's favour and others in the Revenue's favour.

Three were settled before going through the full court process, one was won by the appellant and the remaining one led to a split decision by the court. On some matters the court found in favour of the appellant and, on others, in favour of the Revenue Commissioners.

I will return to that matter shortly.

Mr. O'Leary says the Revenue Commissioners are not entitled to appeal to the Circuit Court. One of the presentations, which I thank the witnesses for, suggests the Revenue Commissioners are entitled to a rehearing at Circuit Court. In his latest comments, Mr. O'Leary suggests that is not the case.

Mr. Des O'Leary

No, with the sole exception of capital acquisitions tax cases. There is an inconsistency to a certain extent in the current legislation in that, with regard to all tax heads, only the appellant has the right of appeal to the Circuit Court but in capital acquisitions tax cases-----

Have the Revenue Commissioners ever appealed an Appeal Commissioners' adjudication on the basis of capital acquisitions tax?

Mr. Des O'Leary

Yes.

When was the last time the Revenue Commissioners did so?

Mr. Gerry Smyth

I cannot say as I do not have that information.

Was it done on more than one occasion?

Mr. Gerry Smyth

Again, I cannot say. I know it is a small number of cases.

Did the Revenue Commissioners win that case?

Mr. Gerry Smyth

In the case I can recall, the Revenue Commissioners won.

The option the Revenue Commissioners had, which was of benefit to the State, would no longer be an option if the legislation went through.

Mr. Gerry Smyth

That is correct, there would be equality between the parties in terms of their rights.

It also means the State has lost out financially because the option is not there.

Was a substantial sum involved in the one case the appellant appealed to the High Court and won? Can that information be provided? These cases can range from corporation tax, where it involves large bills, to local property tax. I am not asking for the figure but whether it involves a couple of hundred euro or a couple of hundred thousand euro. I am not sure if the witnesses can provide that information and, if not, it is fair enough.

Mr. Des O'Leary

I certainly cannot give it at the moment but we can follow up on that point.

The case of the individual who won involved 2013 figures. Am I correct in saying people have taken appeals to the Circuit Court, have won in previous years and have not had their decisions overturned later?

Mr. Des O'Leary

In the period 2010 to 2014 there was a total of 40 cases won by the Revenue Commissioners, with six won by the appellant.

Six cases have been won in the Circuit Court. I am focusing on this because the six cases won in the Circuit Court could not have been won if the legislation had been passed unless the appellants were able to appeal on a point of law.

Mr. Gary Tobin

My understanding, and I am open to my Revenue colleagues correcting me, is that the grounds for an appeal to the High Court on a point of law in tax appeals cases, which I accept involves a significant cost, tend to be quite broad. It does not just apply to a very narrow and explicit point of law.

I do not think we can have it both ways. We cannot argue that we are getting rid of the Circuit Court because the Appeal Commissioners stage is a dress rehearsal and then argue that the point of law is so broad that the High Court hearing is really a rehearing of the case.

It appears that the system is broken. We have unacceptable delays, and I do not support these delays, but our justice system is not fit to cope.

I am sure people tear their hair out when they see how long appeals are on the books and how assets disappear by the time a decision is made. The system is broken, it is not being fixed, therefore the option should be taken away.

The problem is that six individuals in the past four years won and justice was served in their cases because they had the right to appeal to the Circuit Court. Without that right they might not have been in a position to receive justice and in one case the State, through the Revenue Commissioners, would have been in similar circumstances. Is there another way of doing this without removing the right because I would be very reluctant to withdraw a pillar of justice from individuals?

Mr. Smyth asked why the High Court should be allowed to re-hear this when it does not have the expertise. However, is that not a challenge to our entire legal system? Why allow the system adjudicate on anything because in many matters that come before it, whether financial wrongdoing or criminal activity, is it not the case that the adjudicators in our Circuit Court have the expertise to weigh up the arguments on all sides and make a decision in a formal way, as opposed to the informal way the Appeal Commissioners would have made decisions in the past?

Mr. Gerry Smyth

To clarify this for the committee, I did not say the High Court does not have the expertise-----

The Circuit Court.

Mr. Gerry Smyth

The Appeal Commissioners are an expert tribunal. With all due respect, the Circuit Court judges would not say, with perhaps limited exceptions, they are experts in taxation matters. Just as in other areas-----

Would the same not apply in the High Court?

Mr. Gerry Smyth

A matter goes to the High Court on a point of law. As the Deputy rightly says, that is the expertise of the High Court. The tax appeals commission and the Circuit Court weigh up the facts and the evidence put to them because there can be disputes about the facts and sometimes it is a dispute about the facts and the law. Having people with an expertise in the area should give-----

That is fair enough. Mr. O’Leary clarified this point in respect of the Finance Act 2014, which suggests that a taxpayer who loses before the Appeal Commissioners has to pay the tax at that stage instead of later. This goes to the core of delays and so on. Mr. O’Leary said this applies only to the disputed amount. Can he clarify whether somebody who loses after an appeal to the Appeal Commissioners before taking it to the next stage, whether that be the Circuit Court today, or in the future to the High Court on a point of law, pays only the disputed amount or pays the amount the Appeal Commissioners has adjudicated on?

Mr. Des O'Leary

We may be at cross purposes on this and I hope I can clarify the point. In all cases, now and under the proposed new system, only the undisputed amount is required to be paid. If a person assesses his or her tax liability as X, that is the amount that must be paid before the case goes to appeal and all the way through the appeals process to the end.

What did the 2014 legislation change?

Mr. Des O'Leary

That legislation related specifically to tax avoidance cases.

The Revenue Commissioners have broad scope in respect of that to suggest that somebody is appealing through the system as a result of tax avoidance.

Mr. Des O'Leary

Yes.

Therefore, Revenue can force individuals it believes are using the court system as a means of tax avoidance to pay their full liability up front at the end of the appeal to the commissioner.

Does that not go to the core and resolve many of the issues in terms of the amount of money outstanding?

Mr. Gerry Smyth

I wish to clarify this for the committee. The 2014 legislation only applies to a relatively narrow range of cases. It has to be tax avoidance within the meaning of the taxes Acts. I do not think we should see that as a very broad power that enables the Revenue somehow to override the system and say, "If we think you're delaying, then we want you to pay up-front."

If the legislation were to go through as the heads of Bill suggest, what would it do for the existing appeals in the system - the 600 that the officials have suggested have been there for five years and others that have been there for ten years? Does it impact on them or are they still allowed to stay on the course they are on?

Mr. Des O'Leary

In natural justice on the basis that legislation cannot be brought in retrospectively, one would be left with cases going through the process and they would continue to be dealt with under the existing regime. There would be a transitional process.

Before Senator Hayden contributes, I have been asked by the broadcasting unit to request members and witnesses to turn off their mobile phones. People are ringing in saying that they cannot hear the contributions because phones are interfering with the sound system.

I will not reiterate many of the points made by other contributors, but I want to focus on some things that seem to be coming from this exchange. The current appeals process, for whatever reason, is cumbersome and does not seem to be capable of delivering decisions within a reasonable period. The proposed legislation will effectively disenfranchise people from a particular right they currently have to appeal to the Circuit Court for a full re-hearing.

To what extent could many of the difficulties with the delays in the system be dealt with by putting relevant time limits into the existing legislation? There is no prohibition on that. I am thinking of planning law, for example, and other quasi-judicial functions operated by other bodies where there are appeals to the Circuit Court. If time limits are an issue and if the capacity of the system to process correctly and deliver timely decisions is at issue, I am not necessarily convinced that removing somebody's legal rights to a particular avenue, namely access to the Circuit Court, is the way to go.

It is not as though many people are using this access. When I first heard the officials' statements, I had the impression that access to the Circuit Court for re-hearings was being used by hundreds of people as a way to avoid paying up. However, their response to Deputy Pearse Doherty suggests that 14 people used that avenue, which is hardly a very significant number of people. Have the officials thoroughly considered putting additional measures into the existing legislation, in other words, time limits whereby decisions could be reached in a timely manner because it is not just in the interests of Revenue, but is in the interests of people who are challenging Revenue to ensure that time limits are within legislation and are robust?

Would the officials accept that people are afraid of the Revenue Commissioners because it is certainly my clear view that they are? I certainly accept the concern that has been voiced by Deputy O'Donnell. It is my experience, having worked as a solicitor, that people are terrified of the Revenue Commissioners.

The notion of an appeal requiring people to go public on their tax affairs would do what Revenue is trying to achieve, which is exact greater compliance, but for all the wrong reasons and from all the wrong taxpayers. The small taxpayer who does not have the resources to go to the High Court on a point of law and who lives in a small community where the people most interested in their tax affairs are from the local newspaper or radio station would not use an appeals system under which their tax affairs would be brought into the public domain. The Irish Tax Institute requested that cases in which smaller amounts are in dispute, say of less than €50,000, should be exempt. Some Revenue legislation has too much of a one-size-fits-all approach and it is like taking a sledgehammer to crack a nut. Why has the Department ruled out a more user-friendly system for those with smaller issues with Revenue?

Mr. Tobin and Mr. Smyth said that holding appeals in public as opposed to in camera, as is the case currently, would give people more information about the issues in respect of which a taxpayer could make an appeal. There is a role for the Revenue in this regard to ensure whatever means is available, including the Internet and liaising with tax practitioners, is used to make sure people know the grounds on which successful tax appeals can be made. Mr. Smyth suggested his organisation is not doing that.

Why are no registered precedents from the Appeal Commissioners published? Surely the place to start if Revenue wants to improve compliance and give the public information about its processes is to ensure there is a register of precedents, with the names of individuals redacted, which makes clear the grounds for making decisions.

Can Revenue deal with delays by amending existing legislation to ensure timelines are complied with? Mr. Smyth is correct that compliance will improve because people will not appeal. The bottom line is they are afraid of Revenue. The organisation should examine its own practices. The improvements Mr. Smyth says changing the system will bring about will make small taxpayers, particularly in rural areas, more uncomfortable. The improvements could be brought about through a more robust public information campaign without destroying the current in camera scenario. Unfortunately, there is a perception that if people's names appear in connection with the Revenue Commissioners at all, it is because they are not being compliant. The organisation will have a difficult job to get over that hurdle with ordinary taxpayers who are not into it for millions of euro and who would not use the High Court or the European Court of Justice on a point of law.

Mr. Gary Tobin

All the Senator's comments are fair and they relates to concerns that Deputies and individuals may have. One of the issues is the appeal system has not changed for a long time. Mr. Smyth said it goes back to the 19th century. Our reason, and that of the Minister for Finance, for bringing forward the legislation is to modernise and improve the process. A number of years ago, the representative bodies and stakeholders, including the Institute of Taxation and Chartered Accountants Ireland, came to us and asked for reform of the system. Were it not for the financial crisis and other issues, we would have liked to reform the system sooner but, unfortunately, we have the system we have and we are now trying to reform it.

If there are any concerns about proposed reforms then sometimes nothing can happen and perhaps that is what has happened in the past. Therefore, one is left with a very imperfect system and nothing changes. We have deliberately tried to put forward a very modern and transparent system. We have been mindful of the fact that this is the way in which systems, increasingly, are moving.

It has been alluded to that taxpayers are afraid of the Revenue Commissioners. I work for the Department of Finance and do not think anyone is afraid of us. One of the ways in which we could reduce some of the fear - if there is any - about the Revenue Commissioners is if there was more transparency around some of the appeals processes. It seems to me that this matter is a bit of a black box. People do not know how the appeals system works and one could rightly accuse various stakeholders for that situation. Perhaps a bit more transparency would help reduce some of the fear but that is just my thought on the matter.

There is a danger that if we do not grasp the nettle, in this whole area, it is quite likely we will be left with a very imperfect system which would be a pity. Clearly, there are differences on specific points, around some of the issues mentioned, between us and the stakeholders. However, there is probably more on which we agree on in terms of the need for reform. My colleague, Mr. O'Leary, will comment on time limits.

Mr. Des O'Leary

One of the features of the new proposals is to have a much greater consistency in terms of time limits and to specify the time limits for dealing with various stages, both at the stage of Appeal Commissioners and at the later stages where the matter goes through the courts.

Reference was made to the setting of limits below which cases should go to the Circuit Court and above which they could go, possibly, to the High Court.

Or be heard in camera.

Mr. Des O'Leary

There is probably some scope for dealing with the issue of what could be dealt with in camera at the Appeal Commissioners stage. The Office of the Attorney General has advised us that, on equity grounds, one would leave taxpayers with a much larger case in a less favourable position than the person who had a small amount at stake. My answer also relates to leaving the Circuit Court stage in or not.

On whether some limits could be set below which cases could be heard in camera by the commissioners, even within the proposals that would be a decision open to the commissioners. Under the new provisions they could decide, on a number of grounds, whether a case should be heard in camera. Whether it should be specified in the legislation is something that we could consider.

This session has gone over time and Mr. Smyth has indicated that he would like to contribute.

Mr. Gerry Smyth

In response to the question of setting time limits, and by way of example, there are time limits in the Circuit Court for a judge to state a case and these are set out in the rules for the Circuit Court.

I am told they are more honoured in the breach than the observance. Without wishing to dismiss Senator Hayden's suggestion, which is interesting, I think time limits can be very difficult to enforce unless there is some kind of real sanction.

On the question of it being Revenue's job to inform people about tax law, we do have that responsibility and we take it very seriously. We publish all our manuals indicating our practices and our interpretation of the law. The difficulty concerning the Appeal Commissioners is that they do not publish written decisions. It is impossible for Revenue to take on that role when we do not have a written decision from the person who is actually making it. That is part of what the heads of Bill are trying to do.

Why does Revenue not get them to give written decisions?

Mr. Gerry Smyth

We do not have control over the appeal commissioners.

Maybe that is for Revenue to consider.

Mr. Gerry Smyth

The point is that this legislation is now imposing an obligation on the commissioners to publish their decisions, to give written determinations and to publish them. If that happens, I think the problem to which Senator Hayden has alluded will go away. In all the debate about transparency, it is important not to lose sight of the fact that there are a lot of other ways of trying to address the problems in the system, such as delays and the lack of written decisions. We should not just concentrate on the transparency issue - these other things are also quite important.

Is the Appeal Commissioners' office well-resourced and well-funded? How many commissioners are there, how many staff do they have, and what sort of budget are they operating with?

Regarding the six Circuit Court cases that went in favour of the taxpayer, to which Deputy Doherty referred, was any of those cases appealed by Revenue or was the Circuit Court opinion accepted?

Regarding the maximum assessment that Mr. O'Leary mentioned, he said there might be an issue about inequality between those paying a lot and those paying little. How strong is that? I have no doubt it will come up in discussion when we talk about this legislation on later Stages.

Regarding the fact that an individual can go back to the Circuit Court after going to the Appeal Commissioners, did a constitutional issue crop up during the discussion on this? Why can the person go right back to stage one again? Is there a constitutional issue that means we have no choice but to let this option be available?

This next question probably cannot be answered now but details might be submitted to the secretariat. Could Revenue give some background information on the individuals or groups it sees as having gotten away with it by dragging the appeals for so long? Is there evidence that assets were disposed of and that, when Revenue came knocking, there was nothing left to take? Could we also have a little more detail on the €1 billion breakdown? I know we are talking about 600 or 700 cases at any one time, which would also reflect on other cases. Does that broaden out to 1,000 cases? If we are talking about 1,000 cases and €1 billion, we are not talking about small change but significant assessments that have been made and have been delayed. A little more detail on this would help us in our deliberations when this comes to us as a piece of legislation.

Mr. Des O'Leary

On the initial points about the Appeal Commissioners' resources, there are two commissioners at the moment with two staff working for them - a clerical officer and an executive officer on long-term secondment from Revenue.

The resources are certainly not considerable. The allocation for the Vote of the Appeal Commissioners in 2014 was €477,000 in total.

That is the allocation for the Vote for the Office of the Appeal Commissioners.

Mr. Des O'Leary

In dealing with our proposals we are conscious that in an era of greater transparency and increased reporting it will be necessary to have more resources for case management and reporting. We anticipate this. The six appealed cases were appealed mainly by the individual taxpayers, not by Revenue. The capital acquisitions tax is the only tax in respect of which Revenue has scope to appeal. Mr. Smyth may wish to comment further on this.

On the issue of maximum assessment, if one were to decide that certain cases could go to the Circuit Court and that other cases would have to go before the appeal court, there would be a reverse equality issue as one would be giving less favourable terms to a taxpayer in dispute with Revenue over a much greater amount of tax. This person is also possibly more likely to be someone using the system to his or her maximum advantage.

On Senator Aideen Hayden's suggestion of setting, at Appeal Commissioners level, an assessment level below which any issue could be dealt with in camera, we have left scope within the legislation for the commissioners to decide, on various unspecified grounds, if a case should be held in camera. There may be a case for having a specific limit. However, if an amount is specified, we will automatically have to deal with cases with figures slightly below or above it and how to revise the level over time. However, there is scope for looking at the issue further.

The possibility of there being a constitutional issue was mentioned in respect of the Circuit Court. There is no constitutional reason requiring a Circuit Court appeal, nor is there a constitutional ban on removing it. There is also the issue of assets disposed of and the amount in dispute.

Mr. Gerry Smyth

The best thing to do, perhaps, is to let the Chairman have a reply in writing in which we can analyse the figures and provide more information for the committee. To clarify one point in the statistics quoted by Mr. O'Leary for the Circuit Court, these are cases in which Revenue has appointed counsel. I cannot say these are all of the cases involved. If a case has gone before the High Court or the Supreme Court, counsel would definitely have been engaged. It is possible that there are cases in the Circuit Court in which what is really in dispute is the facts and the amount of the profits involved. It is possible that some of these cases are not included in the numbers provided.

Mr. Gary Tobin

We are still at a very early stage in our preparation of the Bill. This is heads of Bill stage and we are still engaging with stakeholders. In this regard, this session has been very helpful in identifying the issues arising. Nothing is written in stone until the Bill is published.

It will not be possible to make an appeal to the Circuit Court outside the tax appeals commission, but when an individual wins an appeal in the Circuit Court, does Revenue have the option of appealing the judgment to the High Court on a point of law?

Mr. Des O'Leary

Yes.

In the case of the six appeals upheld by the Circuit Court which overturned the decision of the Appeal Commissioners, did Revenue appeal any of them to the High Court on a point of law?

Mr. Gerry Smyth

I would have to investigate that matter and revert to the Deputy.

On the €770 million tied up in assessments or appeals on which decisions have not yet been reached, as a rule of thumb what percentage of the disputed amounts would be returned to Revenue? Is it 50%? Clearly, it is not possible to predict the decision in an individual case, but in general how much success has Revenue enjoyed in bringing appeals?

Mr. Gerry Smyth

I do not have the statistics, but we will do our best to provide the committee with an indication of what is involved. The Appeal Commissioners, the Circuit Court or the High Court may not rule on the entire amount of the €770 million because many of the cases subject to appeals are settled. Negotiations would be ongoing on the disputed amounts.

Will it be possible to investigate cases that were appealed at some stage to give an indication of the proportion returned? Are we looking at a potential figure of €400 million or €500 million based on previous experience? Is there is a fee for appeals to the commission?

Mr. Des O'Leary

There is no appeal fee.

Has Revenue sought any provision that has not appeared in the heads?

Mr. Gerry Smyth

We may have made some other suggestions in our submission such as changing the rules for payment in a more radical way. They have not appeared in the heads.

This is related to our earlier discussion about whether payments should be more up-front subsequent to the appeals process.

Mr. Gerry Smyth

We had suggested a more radical view might be taken on the question of when an individual should pay. Ultimately that suggestion is not included in the legislation, but part of it appeared in the Finance Act 2014 in the context of avoidance provisions.

Will Mr. Smyth make that submission available to the committee?

Mr. Gerry Smyth

It is included in a published submission.

I apologise; we have it, but I have not seen it.

I wish to raise some minor issues pertaining to disqualifications. There is a big issue in respect of bankruptcy. If we are bankrupt, we are disqualified from doing a number of things. The section on disqualifications refers to arrangements with creditors. I do not know how broad such arrangements will be, but if a case is appealed to the High Court, I am not sure a judge involved in an arrangement with a creditor will be disqualified.

Why should we disqualify an appeal commissioner because he or she is in an arrangement with a creditor? An arrangement with a creditor is not a default.

Mr. Des O'Leary

Given that the adjudication of disputes between taxpayers and the Revenue Commissioners is a highly sensitive function, it was felt that a person who had been declared bankrupt or who had a composition with creditors-----

Although I understand, it is a throwback to a different type of Ireland when we did not have, as we do today, 150,000 people in arrears with their mortgages, let alone small business people who are in arrangements with their creditors. These may be very noble, honourable people and it may bring a bit of realism to what is happening. It is a bit too much. I have raised the following matter in regard to other legislation and perhaps there is a reason it is not in this proposed legislation. While a person who is standing for election to the European Parliament, Dáil or Seanad cannot be an appeal commissioner, a person standing for election to the Presidency can. I am not sure what the difference is, because we all have a role in legislation.

There has been a discussion on tax transparency. While I support tax transparency and understand the concerns raised, Deputy Rabbitte is one of the people who put on the record here a statement about a decision by a former appeal commissioner to overturn the Revenue's decision on the €2 million liability of the late Charles Haughey, a former Taoiseach. The appeal commissioner in question was appointed by another former Taoiseach, Bertie Ahern, who happened to be his brother-in-law at the time. Tax transparency is very important not just to ensure that the public sees justice being administered publicly but also to ensure the Appeal Commissioners make their decisions in the full glare of public scrutiny and thus have their integrity upheld. It is very important that it happens and I support it. The witnesses' submission referred to broad scope and the concept that the Appeal Commissioners could decide that a hearing would be held in camera. I would not like that to be abused when larger firms or corporations, the so-called more important people in society, come before the Appeal Commissioners.

We will end the session because we have run out of time. On behalf of the joint committee I thank our witnesses from the Department of Finance and the Revenue Commissioners for participating in the meeting and for the material they have supplied to the committee. I welcome Ms Anita Kelly, whom I neglected to mention in my opening remarks. We now suspend until 4 p.m. when we will resume our discussion with the Irish Tax Institute, William Fry and the Consultative Committee of Accountancy Bodies Ireland, CCAB-I.

Sitting suspended at 3.55 p.m. and resumed at 4 p.m.

I welcome Mr. Brian Keegan, direction of taxation, Consultancy Committee of Accountancy Bodies Ireland, CCAB-I; Ms Cora O'Brien, director of technical service, Irish Tax Institute; Mr. Brian Duffy, tax partner with William Fry-Tax Ireland; and Ms Mary Dineen, William Fry. Each witness has five minutes to make opening remarks.

I remind members, witnesses and those in the Visitors Gallery that all mobile telephones must be switched off because they interfere with the sound system. By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to 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 asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I call Mr. Keegan.

Mr. Brian Keegan

I thank the committee for the opportunity to contribute to its work on this Bill. Finance Bills are often associated in the public mind with the question of how much tax gets collected. This proposed Bill is no less important because it focuses on how tax in dispute is to be collected. The Office of the Revenue Commissioners has, under the Ministers and Secretaries Acts, an unusual degree of latitude in the conduct of its business. An efficient and effective mechanism for the resolution of disputes between Revenue and taxpayers is, therefore, essential. This Bill redefines how the mechanism should work.

My organisation represents the 40,000 or so accountants working in Ireland, many of whom are involved directly with the operation of the tax system. We had been making the case, long before the consultations in 2013 which preceded this Bill, that the Office of the Appeal Commissioners must be organised in a cost efficient manner. The appeals process should be informal and easily accessed by taxpayers. Tax is a cost to the taxpayer as is the tax compliance process. A remedy for overcharged tax which itself is too costly is no remedy nor is the necessity from time to time to make an appeal confined only to business or to the self-employed taxpayer. All taxpayers need a right of recourse, whether their appeal concerns a matter as complex as their trading status, or a matter as apparently straightforward as a local property tax postponement.

The key criterion for evaluating this Bill, which creates a new tax appeals commission, is straightforward. Will a taxpayer be able to remedy an incorrect assessment or resolve a difference of opinion with the Office of the Revenue Commissioners without undue delay or cost using this new commission? If the answer is "Yes", then all else being equal, the legislation should proceed. A new tax appeals commission will not eliminate the adversarial nature of the tax collection process, nor should it. It will also not result in the simplification of the tax process. However, the legislation underpinning the new commission should attempt to avoid two major pitfalls.

The first of these pitfalls is that delay gets built into the system.

In this regard, it would appear that the commissioners will have extensive powers to determine the conduct and timing of appeals. The second matter to be avoided is undue secrecy, while having proper regard to the privacy and confidentiality of the taxpayer's affairs. A major drawback of the current system is the lack of clarity on matters and outcomes already considered by the Appeal Commissioners. The proposed new regime has provision to reduce, if not entirely eliminate, the waste associated with rehearings on similar issues, coupled with measures to make the precedence value of previous determinations more accessible. The heads of the Bill we have been asked to consider for this meeting reflect genuine attempts to avoid these two pitfalls. We will be happy to explore these points further with the committee over the course of the discussions.

Many taxpayers have in the past opted to avail of professional representation when dealing with matters coming before the Appeal Commissioners. There has been a tendency in recent Finance Bills to favour the legal profession over representatives from other professions when acting on behalf of taxpayers. For example, members of the legal profession do not have the same obligations to report tax avoidance schemes to Revenue and while Revenue has the power to report misconduct to the professional accountancy bodies as represented by the Consultative Committee of Accountancy Bodies - Ireland, CCAB-I, my organisation, this power does not extend to similar reporting in regard to the legal profession. We would be keen to see that this thread of preference would not get extended into the current Bill.

We believe that the type of legislative process currently being exemplified - legislation produced following public consultation with the heads of the Bill being discussed at Oireachtas committee as we have today - contributes to the formulation of good and consistent law and we are happy to contribute to the debate.

Ms Cora O'Brien

Reform of the tax appeal system has been a priority for the Irish Tax Institute for many years. As far back as 2008, we published a comprehensive report on the rules and procedures governing Irish tax appeals. Our appeal system has been very outdated and in need of reform for a long time. This consultative process is therefore an important step in getting our system right. We welcome the fact that major reform of the appeals process is now underway, by way of new legislation, and that attention is being given to the matter by the Government and by members of the Oireachtas, especially this committee.

An appeals mechanism is an intrinsic part of an equitable tax administration system and should deliver equal treatment for all taxpayer groups at low compliance cost. That is why this issue is so important and deserves attention. A number of measures in the new heads of Bill are very welcome, including the publication of determinations in an annual report, tighter and more transparent procedures generally governing the management of the appeals process for everyone, and a better regime for the appointment, tenure and removal of the Appeal Commissioners. However, there are two fundamental changes proposed in the heads of Bill that are of concern to the Irish Tax Institute. These are the abolition of the in camera rule so that all tax appeals will be heard in public and the removal of the taxpayer's option for a Circuit Court rehearing.

Taking the first of these issues, the new Bill proposes to remove confidentiality in the appeals process after 50 years by abolishing the in camera rule. Taxpayer confidentiality has been at the heart of the Irish tax administration system for almost 50 years and it has been one of the pillars on which our system has been built. The 1967 Income Tax Acts introduced solemn declarations to be made by the Appeal Commissioners and by Revenue officers which included references to keeping taxpayer information confidential. It has served the system well and we have compliance rates on tax of up to 99% in this country. There has been talk in this session about the practice of other countries and a move towards publication. We need an appeals system that is suitable for our country. We are a small country in terms of population, no bigger than a mid-sized city in the UK. Countries such as New Zealand do not have publication. It is a small economy also and points to the fact that not everyone is going down this road.

The removal of the right to confidentiality is even more serious because the consultation carried out did not mention or propose this issue. Any proposed change to the in camera rule goes to the heart of the system. This was not made clear to the public in the consultation. Taxpayers may feel that they have a genuine case to appeal but they are going to be forced to reveal the most personal aspects of their finances in order to enter the appeals process.

While it is clear that all parties here seek transparency of process, this can be done without naming taxpayers and putting under the spotlight their financial information. There is precedent for this in the family courts that is worth exploring. The Irish model of publication for tax defaulters has been in existence for 20 years and rightly or wrongly, the public associates publication with wrongdoing. Publishing taxpayer names and details in appeal cases could infer easily in their minds that the taxpayer has not behaved appropriately or has done something wrong. It is not clear whether there will be any limitations on media access to these hearings. Media interest is likely to be high and the taxpayer could be portrayed wrongly as having problems with Revenue or being somehow non-compliant. Experience to date is that the reporting of taxpayers who have a Revenue issue can portray them as tax evaders, which is not the case in this regard.

The second issue is that taxpayers will be forced to appeal to the High Court, should they not accept the decisions of Appeal Commissioners. At present, a taxpayer has the option of having the facts of the case reheard at the Circuit Court if he or she loses the appeal. This is an important option for taxpayers because few can afford to take the matter directly to the High Court. It appears as though this option is being removed in the heads of the Bill and taxpayers who do not agree with the decision of the Appeal Commissioners must appeal directly to the High Court. This is a prohibitively expensive option for all but the biggest taxpayers. As losing at the High Court will cost a taxpayer approximately €100,000 at a minimum, no average taxpayer could afford this process. It therefore discriminates against the average taxpayer and will be a significant deterrent to average taxpayers seeking a hearing on a tax issue. It is not clear why the Circuit Court rehearing has been removed. In summary, the combined effect of holding the case in public and removing the taxpayer's option for a Circuit Court rehearing means that a taxpayer must now make a stark choice either to pay the amount Revenue states he or she owes - even if the taxpayer does not believe it is correct and fair - or have his or her financial details published for everyone in the country to see and, if they lose at appeal, to go directly to the High Court with all the expense involved. We do not believe this is fair to taxpayers.

There are a number of other related issues in the heads of the Bill, including the need for timely issuance of determinations, the importance of appropriate staffing for the office and the need for a hearing in each individual case. In our submission on the consultation, the Irish Taxation Institute also recommended the establishment of a separate forum for small cases involving less than €50,000, which is not mentioned in the heads of the Bill. I am conscious that there is limited time to address these issues and have focused my opening remarks on matters of greatest concern to taxpayers. I thank members for their time and look forward to any questions they might have.

I thank Ms O'Brien and invite Mr. Duffy of William Fry to make his opening statement.

Mr. Brian Duffy

I thank the Vice Chairman for the opportunity to address the joint committee today. I am a tax partner in William Fry's tax advisers, Tax and Ireland, and have experience in tax litigation matters. In summary, we welcome many of the proposals. We seek greater clarity in some areas and the main proposals with which we have concerns are the holding of tax appeal cases in public, the removal of the right to a full rehearing in the Circuit Court and the proposed case stated procedure.

I will now give my comments on the main sections of the Bill and in areas to be welcomed, I refer to the independence of the tax appeal commission. To have an effective tax appeal system in Ireland, the tax appeal commission must be and must be seen to be a totally independent body. Any measures enabling the development of a wholly independent appeals body are to be welcomed. In respect of the withdrawal and dismissal of cases, this section gives legislative effect to the pre-existing practice set out in Revenue's tax and duty appeals manual and this is to be welcomed. On flexible proceedings, a flexible approach to tax appeals is practical and is to be welcomed. There may be an opportunity in this regard to include reference to the burden of proof. We do not believe that the burden should rest on the taxpayer in all circumstances and should be assessed on a case-by-case basis as a preliminary matter by the Appeal Commissioners. As for pre-hearing proceedings, it is clear that a significant focus of the new legislation is on settling the matter before reaching a hearing. Mechanisms that enable this, such as deciding the issue at a preliminary hearing or adjudication without a hearing, are positive developments so long as the taxpayer always maintains the right to choose a full hearing. Such mechanisms, if used by parties, should reduce waiting times and make the tax appeal system more efficient. In respect of determinations, it is essential that a comprehensive database of decisions is created.

We submit it is possible to achieve this without the introduction of public hearings. Taxpayers and their advisers should have access to previous determinations, as it would assist them from the outset in deciding whether it is appropriate to take an appeal against any matter in the first place.

Areas to be clarified include the issue of temporary commissioners. This section should outline specific criteria as to when a temporary commissioner should be appointed. As we set out in our submissions, a defined set of criteria is necessary to ensure that temporary commissioners are in fact used. We note that the Bill does not envisage a body of suitably qualified persons being formed from which to appoint a temporary commissioner. The use of such a body may be easier and more efficient. As for notice of appeal, this section does not appear to include a time limit in which the taxpayer must issue a notice of appeal. For the sake of clarity, it is suggested that a time limit be inserted. In respect of valid appeal, it is suggested that the definition of "appealable matter" be made more clear. On the refusal to accept an appeal, the wording currently is highly subjective and to safeguard the taxpayer, we suggest an objective, reasonable standard should be required such as, for example, where the Appeal Commissioners conclude on reasonable grounds that an appeal is without substance or foundation. Denying a taxpayer access to a hearing must be done in an objective and transparent manner.

I will now turn to the main areas of concern. In our opinion, the introduction of the public hearing of tax appeal cases before the Appeal Commissioners will constitute a disincentive to taxpayers appealing a tax matter on the basis that individuals and corporate bodies generally wish to maintain privacy over their tax affairs and finances. The grounds listed as reasons for holding a hearing in private are limited and vague. In addition, the threshold for maintaining an application based on these grounds is unclear. If ultimately it is considered necessary to introduce public hearings, we submit the reporting of such hearings should be restricted to protect the privacy of the taxpayer. For example, in family law proceedings, although reporters are allowed access to hearings, their reporting cannot identify parties expressly or implicitly. In addition, a party to the proceedings may apply to the court to have reporters excluded on the basis that the facts of the case are so specific that any degree of reporting would identify the parties.

In respect of appealing against determinations of the Appeal Commissioners, we disagree fundamentally with the removal of the rights for a full rehearing before the Circuit Court. It removes a fundamental safeguard to the taxpayer. An appeal by way of case stated is a highly specific form of legal appeal based solely on a point of law. Therefore, the taxpayer has no general right of appeal against the decision of the Appeal Commissioners, which is highly unusual in the context of judicial or quasi-judicial proceedings. In respect of the envisaged case stated procedure, it is unclear from the Bill but in our opinion, the parties to the proceeding should be given a right to agree to the content of the case stated as drafted by the Appeal Commissioner before it is transmitted to the High Court. We also believe that if the Appeal Commissioner drafts the case stated, then the commissioner should transmit it to the High Court.

In respect of evidence, we query the appropriateness of the ability of the Appeal Commissioners to admit evidence regardless of whether the evidence would be admissible in proceedings in a court of law in the State. This has the potential to deny parties fair procedures. The criteria for the admission of evidence should be based on more objective grounds. For example, evidence should be admissible if it is reasonable to consider that the admission of evidence is necessary to decide the matter. This concludes my opening statement. I am happy to discuss any points raised and hope my comments will inform the committee in its finalisation of the Bill. I reiterate that I am grateful for the opportunity to make a presentation to members today.

I thank the witnesses for their presentations. I have them all to myself today, apart from the Vice Chairman. While the committee agrees to a lot of different hearings, many members then fail to turn up. I acknowledge that Deputy Michael McGrath is attending to banking inquiring matters and I have been caught up in some of those as well. The core area the witnesses have in common with one another - they should correct me if I am wrong - is that the main concern is the holding of the appeal in public.

Deputy Liam Twomey resumed the Chair.

I wonder how big an issue this is. I am unsure whether the witnesses are aware of this but I mentioned a case earlier that already had been mentioned on the record here in which an Appeal Commissioner overturned a decision of Revenue and which involved two former Taoisigh through the appointment and the person involved.

Questions were raised on that case but we are not here to adjudicate on it. The fact is that the case was held in private. We will never know. Is this not about creating transparency, accountability and more faith in a system that was previously closed and heard by commissioners who were appointed by the politicians of the day? I do not see the extent of the issue.

Let us get to the core of the question. We heard earlier that in 2013, there were 14 appeals to the Circuit Court. I am sure that the Revenue Commissioners made many decisions and in my view that number of appeals does not seem very large. We are told that of the 14 cases that were appealed, the original decision was upheld in nine cases, three cases were settled and in one case, it went in favour of the individual. In the nine cases that were upheld, there may have been an option to appeal further, however if there was such an appeal it would be heard in open court. Do the witnesses know the number of cases that were appealed to the High Court in the past number of years? Is the fact that a case in the High Court is heard in open court a deterrent to individuals exerting his or her right of appeal?

Ms Cora O'Brien

Thank you Deputy. The Appeal Commissioners' system is not a court, it is an administrative adjudication process. Whereas there are certain rules around publication and public hearings that are right and proper for a court, this is a process that happens before one gets to court.

I will deal with the points raised earlier. If a taxpayer has a dispute with Revenue - one of my colleagues mentioned the various routes open to the taxpayer- we must strike a balance between the rights of the taxpayer and the issue of transparency. If there is a disagreement on a point of law, the taxpayer has only one choice, he or she must go to the Appeal Commissioners. The Appeal Commissioners' process is independent and is set in a pre-court setting where an independent person makes a decision or an adjudication. That has worked very well up to now. We have a very good compliance rate in this country. Part of the reason is that there is a respect for taxpayer confidentiality. My concern is with perception, something that is very hard to gauge. When a taxpayer gets an assessment from Revenue, he or she must decide whether to appeal it. In reaching that decision, he or she is setting out on a path which could ultimately lead him or her to the High Court. Some taxpayers will be prepared and will be able to afford to go all the way. That is their choice.

However, there is an interim process, where one can have the facts of the case heard and as long as the facts are published, what is including the name of the taxpayer going to add to the information that is in the public domain? One can have a transparent process and everybody acknowledges the need for a such process because we all need to find out what is happening in the cases that go to the Appeal Commissioners. We do not even know how many cases are going through in a year at this stage. It could be 50 or up to 300 cases. It is very important to have the process, and the facts and the decisions of the cases published. However, our members, who are working with taxpayers and dealing with the day-to-day practicality of facing the possibility of having all of one's data in the public domain, question whether the taxpayer should be named publicly.

As Ms O'Brien mentioned, all of a taxpayer's data would be in the public domain, bar his or her name. Is she suggesting she would like to see all of the data, bar the name of the taxpayer concerned, in the public domain?

Ms Cora O'Brien

I am indicating what would happen if the process of going to the Appeal Commissioners was fully public - I am not saying it is the right thing to do - with access to media and full reporting. All of the information, including personal information, by necessity, would have to come up for discussion at an appeal hearing to enable the Appeal Commissioners to make the proper decision. They often need details of assets, bank accounts and income. If that information is in the public arena, it will be fully on display for the world to see. The problem is that it will not encourage taxpayers to take that path. It is already difficult because of the cost of appealing an assessment and many choose not to take it, perhaps because the tax amount at issue is not large enough to warrant incurring costs and fees. They also face the fact that, whatever way the case goes, everybody in town will know their affairs and what they have. That is not exactly conducive to engaging in the process. What is the cost benefit to the system from having done it? As my colleague pointed out, this is what is done in the family courts. One can have the principles ventilated in public and everybody knows what the Appeal Commissioners think of an issue, without having a person's name published with the information. We are concerned to get the balance right.

I will ask a question which I will also ask the other delegates. Is it not the case that tax law is laid down in legislation and that if one decides not to pay one's tax liability - I am on record as not having paid my local property tax voluntarily which is being deducted from me at source - one is in breach of the law? Therefore, the Revenue Commissioners who are empowered by law to actually make the adjudication have found an individual to be in breach of the law. If the individual decides to appeal Revenue's decision, why should the case not be held in public? Is the fact that High Court cases are heard in public a deterrent in taking an appeal to the High Court? On the other countries that have moved in the direction of providing for transparency in tax matters in the case of appeal - Ms O'Brien mentioned New Zealand - is she aware from studies or research of a drop-off in the number of appeals?

Ms Cora O'Brien

Appealing an assessment does not mean a taxpayer is in breach of the law. It is not a case of the taxpayer not paying his or her tax liability when he or she decides to appeal but of him or her not agreeing with the assessment. A person is fully entitled to appeal an assessment and still be within the law. This is part of the problem. There will be a mix-up of what has happened in these cases. People reading about them will think the taxpayers concerned have breached the law. They have not; rather, they are availing of their entitlement to disagree and take the case to the Appeal Commissioners. Everything surrounding the issue is then attached to that person and his or her personal reputation. There are so many grey areas that I have concerns that people will be afraid to appeal because it will look as if they have done something wrong, that they have breached the law, when they have not. That is a very important principle that we need to ensure is enshrined.

In response to the Deputy's question on whether the fact that cases are heard in public in the High Court acts as a deterrent to appealing Revenue's decisions to the High Court, I am not aware if any study has been conducted, but I can check to see if there is research on what happens to the pattern if the rules are changed. A person who goes through the appeals process has to sit down and reach a decision on whether he or she will take the next step and incur very large expenditure in taking the case to the High Court. He or she has to answer that question.

It is a big decision, to which there are many aspects, and he or she takes it when he or she has exhausted the appeals process. I do not think it warrants him or her having to make it at the outset. The person is not being given a chance to explore the possibility that his or her view of what should be paid, which is different from that of Revenue, might be right. He or she has not had a chance to have that issue discussed and adjudicated on in a confidential setting and then to move to the open public court. Everybody fully agrees with this. We do not agree with imposing the publicity and everything that goes with it on the person concerned, taking the whole set of rules from the judicial system and placing it in this process.

That is interesting and Ms O'Brien makes a strong case. In a dispute between an individual and Revenue does the individual have no ability to engage with Revenue as it comes up with that determination? Is it not the case that the individual is engaging with it and that, therefore, there is a confidential process in which that engagement with Revenue happens, directly or indirectly, through the person’s accountant? Only after a determination has been made and the confidential process exhausted does it go to a public process.

Ms Cora O'Brien

An assessment will be issued only when both parties have come to a point where they cannot agree on the issue. The Deputy is absolutely right. Having agreed to disagree, the only place to take it is into the appeal regime. In the initial forum, with an independent person adjudicating, it is right that it should not be aired in an open forum. I would have to be convinced of the benefits to the system versus the downside - disenfranchising people or making them unwilling to engage in going further or even beyond the first step of the assessment.

Mr. Brian Duffy

I refer the Deputy to case stated procedure. I agree with everything Ms O’Brien said. My fear is that making the tax appeal system open to the public would be a disincentive to taking a case. One has a constitutional right to access the courts, but if one is afraid to have one’s affairs dealt with in open court, that right is infringed.

In respect of the case stated, I do not think the Deputy will find the information he wants such as how many cases do not reach High Court level. From recollection, the Revenue Commissioners publish details of cases stated that are in being, dealt with or withdrawn. Unless one has a poll of tax practitioners around the country, I do not think one would find that information.

In terms of what comes before the courts in a case stated document, under the current system, the Appeal Commissioner is in charge of that document. The aggrieved party asks for a case to be stated and signed for the opinion of the High Court. The aggrieved party drafts the case stated and inserts into it a summary of the facts found and the determination of the Appeal Commissioner. There could be a summary of oral evidence given and the question is posed for the determination of the High Court. That is a written document which goes into the High Court office and is presented to the parties on the day and handed to the judge. Parts of the document may or may not be read in open court. Copies should probably not make their way into the public domain, but anyone present is perfectly entitled to listen to the discussion and so on and may or may not be able to follow it.

In terms of the deliberations it is not like the Circuit or District Courts where one would expect to see cross-examination of witnesses and so on. The High Court judge is presented with a question of law: has the Appeal Commissioner erred in a point of law in finding for or against the tax payer. A very limited amount of information gets into the public domain.

Mr. Brian Keegan

We also need to distinguish between what is genuinely harmful to the tax payer and not. I do not subscribe to the notion that because somebody is in dispute with the Revenue Commissioners everybody will assume he or she is a defaulter. The public is far too clever for that. It is well able to distinguish between somebody who is genuinely in tax default and somebody who has a dispute over the way his or her tax affairs are being handled.

I take Deputy O’Donnell’s point that from time to time in the course of appeal hearings matters which may be commercially sensitive might be discussed, such as the kind of margins the taxpayer’s business has, or some research and development it is engaging in which, if it was discussed in open court, could damage the business. We need to be careful when we talk about hearings in open court that we do not damage those kinds of commercial considerations.

One point in the heads of the Bill that might be worthy of further exploration is that the appeal commissioners are given extraordinary discretion in this proposed Bill as to what should or should not be publishable, who can or cannot attend an appeal hearing, and we would, as a minimum, like to see those powers a little more tightly defined and a little better scoped. That kind of approach might just as easily help deal with the kind of concerns rightly expressed about tax payer confidentiality.

I want to tease out a couple of points. How many appeal hearings take place annually?

Ms Cora O'Brien

I do not think we know the answer to that because the Tax Appeals Commission does not publish that information. Perhaps our colleagues in the Revenue Commissioners could help with that because they would be party to every appeal. As a representative body we have no published information about how many appeal hearings there are.

Mr. Brian Keegan

If it is helpful, in the context of the original submissions we made in the open consultation in 2013, we did an informal poll around of how many cases are being taken and came up with something in the order of between 50 and 60.

Mr. Brian Duffy

The majority of cases are settled before they get to the Appeal Commissioners. That is the reality.

We do not know much in terms of openness and transparency which is a little ironic given that the Revenue Commissioners want to remove certain rights on the basis of openness and transparency.

People are very much in awe of the Revenue Commissioners and would not like the idea of being put on public display. The kind of data that would be made public in an appeal case would be extensive. Do any data protection issues arise? What a field day for anybody trying to pull a scam or steal an identity on the Internet, to be sitting in one of these public hearings where the person discloses all sorts of private financial information. To what extent does a privacy issue arise? For those 50 or 60 cases do the Revenue Commissioners really require this type of power, which seriously invades privacy, to do their job properly?

Mr. Brian Keegan

One of the recurring difficulties with the Appeal Commissioners’ process is that we do not know what is going on. We had difficulties identifying how many cases were going through the process. We have to try to reconcile the very legitimate concerns about taxpayer privacy and confidentiality with the concern to ensure that adjudication is seen to be open, transparent and fair.

Another problem with the Appeal Commissioners' process that can be overlooked is where the rubber hits the road. One of the great values of the process is that it tells us, for example, that if one hires somebody on these terms will Revenue treat them as an employee or does a certain kind of research qualify for research and development exemptions? There is great precedential value out of the Appeal Commissioners’ hearings. If we lose that, we will lose an intrinsic part of the appeals process.

Perhaps we need to have a little more regard for what happens internationally. For example, in the UK it is an open court. I am not in a position to say if that type of process has damaged businesses there but I believe we could benefit from studying that much more. The trick will be to ensure that we know, to a reasonable extent, what is going on with the appeals process and the precedential value of those kind of decisions while, at the same time, ensuring no taxpayer is put at a commercial or personal disadvantage by how the hearings are conducted. It is not clear to us if the heads of the Bill will achieve that.

We had a discussion at an earlier hearing about using a sledgehammer to crack a nut but we do not even know how many cases there are. Do we know the value of those cases in tax terms? In his opening statement, Mr. Des O'Leary from the Department of Finance stated, "As of last January, Revenue estimated that €770 million was in question where assessments had been raised but collection could not proceed pending resolution of the disputed issues". That would imply the issue around Revenue disputes is enormous. To what extent is this to do with the appeals process? Alternatively, is it due to other processes in the revenue system?

Ms Cora O'Brien

On transparency grounds, there is no way to answer that. We are in an abyss in that we do not know what is happening. That is the way we have been working for the past 30 years with this process. We do not know what cases are going through, or the issues or how much tax is involved. We do not know how many times the same type of cases are heard and a decision made. We do not know how many people have to go through the system again and pay all the money when publication of a decision could have enlightened them that they were right or wrong.

I have a concern about the grounds when the Appeal Commissioners can take the matter to a private hearing. Those grounds are in the heads of the Bill. They specifically state nothing in the section shall be taken to mean the grounds on which access to the hearing is restricted extends to maintaining confidentiality of a person's tax, financial or business affairs. That cannot be a reason that it will not be held in public. There has to be a much bigger public policy reason for not having an appeal heard in public, which would be very exceptional grounds. We are then looking at a large percentage of these cases being held in public.

Apart from what the delegation has gathered from its consultations, we know nothing about what is going on, not even the number of cases or their value. There is limited publication of determinations, which does not help in giving any guidance. However, now everything is going to be in public and it will all be in the public domain. Is there no better way to achieve the kind of knowledge the delegation is seeking that will not require serious public disclosure of an individual's financial situation?

Mr. Brian Duffy

The example of family law matters is a good one. The reason restricted reporting was introduced in that arena was basically because plaintiffs, defendants and practitioners had no idea of the basis of decisions made by the family courts. It was decided that limited reporting would be introduced. Reporters are allowed into certain sessions but must report under very restrictive conditions. This was only introduced in 2013 but what has happened slowly is that there is more transparency with reports published. While names and other details would be redacted, people are able to see the basis of the legal decisions made.

That is a good example of how one can get transparency in the system while protecting the privacy of taxpayers. At the moment, there is a legislative basis for the Appeal Commissioners to publish their determinations. I suspect that because they have a big enough workload, they cannot get around to this or that they do not have the resources to delegate that function. The only party that actually knows about the jurisprudence value of the Appeal Commissioners is the Revenue Commissioners because they are on the side of all tax appeal cases. They have the knowledge but do not share it necessarily with the taxpayer. A taxpayer can go down the route of an appeal without knowing a case similar to theirs has already been determined and lost. By taking a leaf out of the family law book, it would be helpful to set up a precedent bank.

It also seems the Office of the Appeal Commissioners will have the power to increase its staffing levels. Currently there are only two Appeal Commissioners but that number will increase to three. Perhaps the office might envisage court reporters doing technical analysis of and research into cases. If it will now be the job of the Appeal Commissioner to draft a case stated document, it sounds like the process is moving in the right direction in producing a proper jurisprudence to which taxpayers will have access.

Given we do not really know very much about the system as it stands, that in itself is not open and transparent and not in the taxpayers’ interest. That clearly has to change. Obviously, there are concerns about delays. Canada, Australia and the UK have moved towards public hearings. However, the bottom line here is that Ireland is a very small country. We have to bear that in mind when we are talking about openness and transparency in public hearings.

Much can be done to improve this process. Is the delegation happy that anything that can be done to expedite the process is contained in the heads of the Bill as they stand? Given we do not know the value of claims, is there merit, as has been proposed by others, in more informal small claims court style set-up where the financial value of an appeal is less than a certain amount?

Ms Cora O'Brien

That was our suggestion. There are legal and constitutional difficulties in having different rules for different taxpayers within the Circuit Court. Our suggestion for minor issues involving a small amount where one did not agree with Revenue was for a different venue where one would not incur legal or professional costs. The Office of the Appeal Commissioners was originally set up as a cheap and cheerful way of giving a quick answer to a reasonably small issue. However, as issues have become very complex, it has become very formal with counsel and all kinds of other costs. We still believe there is a role for another process. People with cases involving small amounts of money even now do not go to the Appeal Commissioners.

Another issue which can speed up the process involves the determinations produced by the Appeal Commissioners. Under the new rules, they go to the parties involved and are then published. The drawing up of the determinations in the first place is stated as being "as soon as practicable" after the completion of the appeal. That could mean anything.

As the witnesses from the Revenue Commissioners said earlier, it is difficult to enforce rules but there must be some time limit because we cannot publish a determination that has not been written up and presented to the parties to the case. There must be some way a time limit is put on the process of drawing up the determination and giving it to the parties. I do not think it is unreasonable. There are three months for a case stated to be prepared for the High Court. I do not know if something similar could be done in respect of determinations. Perhaps it is not realistic but perhaps it could be examined.

Mr. Brian Keegan

One point is the notion of a preliminary hearing, which is an adjudication without going to the full hearing. Perhaps it is an area worthy of further exploration, where the adjudication process stops short of a full open hearing and enables taxpayers to come to a speedy resolution, particularly if the issue is relatively straightforward or if the amounts are relatively small. If the idea got more prominence, as enunciated in the heads of the Bill, it could be helpful.

I have a few quick questions. At the moment, there is no database. The legislation provides for a report to be laid before the Houses of the Oireachtas on an annual basis. Is that sufficient? What would be more useful?

Mr. Brian Keegan

There are two aspects to this. There is a report laid before the Houses of the Oireachtas on how the new office is conducting its affairs. A second aspect of reporting concerns the determinations and adjudications arrived at. They are two separate matters and one helps to police the other. In any annual report, there should be some record of how many adjudications were published. One could contribute to the other but they are not mutually exclusive.

What is not provided for in the proposed legislation?

Mr. Brian Keegan

In terms of reporting, the main change in the proposed legislation is that the Appeal Commissioners "shall report" as distinct from the current situation, which is that they "may report". If that measure sticks, it would be a significant improvement.

What else is changing apart from public hearings? What negative aspects are in the legislation? Could elements be added to the legislation to enhance it?

Mr. Brian Keegan

As a general observation, the legislation as it is drafted is predicated on the quality of the individual Appeal Commissioners appointed. Everything rests on their quality, ability and diligence because they have so much scope to determine how the adjudication is conducted and how the appeal is to be published.

Should there be more detailed criteria for who they are?

Mr. Brian Keegan

Perhaps if there was more detailed criteria for who they are and more detailed support in the Bill for the operation of their office, it would be helpful.

Mr. Brian Duffy

There is also the abolition of the right to a rehearing in front of the Circuit Court judge. I did not catch the earlier session but I would like to know the rationale for displacing it.

I cannot speak for the Revenue Commissioners but, paraphrasing what we were told, the Revenue Commissioners felt the level of expertise available at the level of Appeal Commissioner, to which Mr. Keegan made reference, means people are dealing with experts at that level. If it goes to the Circuit Court, we are not always dealing with people at the same level of expertise. It might be inconsistent.

Mr. Brian Duffy

It is my experience that Circuit Court judges have ample experience to deal with that. They are intelligent people and I have not had a problem so far.

There is no time limit on the appeal. At the moment, is there a time limit on when the taxpayer can look for an appeal?

There is a telephone interfering with the meeting. Is someone's telephone turned on or is it a laptop?

Is there a time limit of 30 days under the new legislation?

Mr. Brian Duffy

No, under the old legislation it was 30 days from the date of the assessment. It was not a case of when it was received or the date on which it was served but the date it is printed by the inspector of taxes. It arrives in the post and people have 30 days from the date of the assessment.

So there needs to be a time limit in the new legislation.

Mr. Brian Duffy

Exactly. Under the old legislation, the notice went to the inspector of taxes while, under the new legislation, it goes to the Appeal Commissioners but it does not say what is the time limit.

Currently, with the appeal process, does the burden of proof lie with the taxpayer or the Revenue Commissioners?

Mr. Brian Duffy

The practice has developed that the burden of proof, in a majority of cases, lies with the taxpayer. That is out of kilter with the general legal concept that he who asserts should prove.

There is an element that needs to be re-engineered.

Mr. Brian Duffy

The Appeal Commissioner should be able to use discretion and decide to reverse the burden of proof.

Do the witnesses agree with the general tenet of the Revenue Commissioners and the Department of Finance that the current appeals system is not fit for purpose?

Mr. Brian Keegan

To say it is not fit for purpose is a harsh judgment and might reflect negatively on good people doing good work.

The current system is not as efficient as it should be.

Mr. Brian Keegan

It is not as efficient as it should be, requires modernisation and requires both taxpayers and those who act for them to have a better clue about what is going on, what is acceptable to the Revenue Commissioners and what procedures should be followed in the proper administration of the tax system. It needs modernisation.

Self-assessment came in during the 1980s. Prior to self-assessment, people argued with the Revenue Commissioners when cases were listed for hearings. Suddenly, an onerous and stringent self-assessment system came in and it has a 99% compliance rate. It has worked. Could a more efficient appeals system be implemented? It appears it is open to abuse because people can use the legal system to push it out. Some cases have been going on for ten years, which seems crazy.

Mr. Brian Keegan

The point about the self-assessment system is correct but we have also layered more opportunities for appeal by the taxpayer. In the case of the local property tax, every local property taxpayer has the right of appeal in a case where a deferral is refused or where there is a valuation issue.

That is a good system.

Mr. Brian Keegan

It is a good system but every time we bring something new into our tax system or modernise it, it creates a greater requirement for an efficient Office of the Appeal Commissioners by virtue of the fact that it creates more opportunities for taxpayers to make appeals.

Ms Cora O'Brien

There is much in the heads of the Bill that is very good and will speed up the process. There are time limits and certain things the Appeal Commissioners will have to do. They will need more resources and, if they must write, issue, and publish determinations and produce annual reports, there must be flexibility in staffing to provide legal expertise in the office. They cannot do it on their own. It is worth investing in.

I have been thinking about what the witnesses have been saying on whether it should be held in public. It is a key point that the three witnesses have raised. While Mr. Keegan referred to the sophistication of the members of the public, with which I agree, I also agree with Ms O'Brien that when someone's name is associated with the Revenue Commissioners there is an automatic suspicion that the person has done something wrong, broken the rules or withheld tax. The same can be said about our courts when someone is charged with a serious offence. When cases are going through the courts, the full details are published.

At the end, when a jury adjudicates, the person may be acquitted. However, this does not seem to matter. The principle which Ms O'Brien seems to be arguing, if we were to apply it to the courts, is that we should not publish anything until the determination is made and someone is found guilty. This is my problem with the argument she is putting forward.

In the previous hearing, serious claims were made regarding evidence that some taxpayers are using the appeal system as a way of delaying payment so as to buy time to dissipate assets. This is trying to ensure, to quote what was said, that "the Exchequer and the compliant majority of taxpayers still lose". Some of the delegates are practitioners. In their experience, are there practitioners who are advising clients to use the appeal process for this purpose?

Mr. Brian Duffy

Not to my knowledge.

Ms Cora O'Brien

I would go further. For anyone embarking down the appeals road, it is not a frivolous action to take. It comes with a high cost and a lot of time and effort. It is something taxpayers take very seriously. Just because a large amount of tax is at stake does not mean that a person is more likely to be involved in bad behaviour or messing around. The person could simply be a large taxpayer. This in itself means nothing.

I have not seen the evidence to which the Deputy referred. I would like to see evidence of people deliberately delaying the process. It is not in anyone's interests if it is happening and I do not think it is. However, the structures envisioned, with strict time limits on cases stated and determinations, will go a long way towards dealing with it if it is happening. Perhaps the Deputy thinks this is the reason or a motivation for people to bring appeals. This argument could be levelled, perhaps, at 1% of them or at someone with a particular axe to grind. The vast majority of people want to get through the system as fast as they can and they are frustrated because they cannot do so.

It is interesting that Ms O'Brien referred to delaying tactics by a possible 1% of those involved in this process. I am not involved and have no experience in this area, but Revenue is saying there is evidence of this problem and it is the taxpayer who loses out. Revenue has provided the numbers. A determination issued and it was found that in some 600 cases, five years have elapsed since the appeal was lodged. In 30 appeals, ten years have elapsed. The Revenue is suggesting that the assets are gone in some of these cases. It is not suggesting that this is the case in all of them, or anywhere near that, but it is saying that there is evidence of some taxpayers using the appeals system as a way of delaying payment so as to buy time to dissipate assets. The result is that if the Revenue wins the appeal, the Exchequer and the compliant majority of taxpayers still lose out because there are no funds to pay the tax. If the system is so messed up that 600 cases are still going on after five years, with the suggestion that there will be no assets at the end of it, I can understand why people might consider taking this course of action despite the impropriety of it.

Ms Cora O'Brien

It is very difficult to suggest that because taxpayers are five or ten years into a case they may misbehaving or engaging in delaying tactics.

No one is suggesting that.

Ms Cora O'Brien

That is fine. There are many situations where taxpayers might have been asked for evidence, they have submitted it, they are asked for more and they submit more------

The point being made is that there is a large number of cases which are in the system for over five years-----

Ms Cora O'Brien

That is undoubtedly true.

-----and given the fact that the system is so messed up - I am sure it is not working properly - it should not be too surprising that some people may use it to buy time, as the Revenue has suggested, to get rid of their assets, so that if they lose the appeal the State still gets nothing.

Mr. Brian Keegan

An equally potent argument can be made in favour of those taxpayers who, under the current system, look at a Revenue assessment and know it is excessive but, because the system is so convoluted, unclear and costly, are prepared to pay what is termed "go-away money" and satisfy the Revenue assessment.

We need to be just as concerned to ensure the system is fit for those people also. I would really like to see a system which can deal with the extremes rather than a system which is designed for the extremes. Revenue has sight of all of the cases in the entire country and I have no doubt it has come across things I cannot even imagine. However, if we start going down the road of designing an appeal system which highlights one or two egregious examples and, as a consequence, does not address the requirements of the more average and ordinary taxpayers, the kind of guys our members are dealing with it all the time, we are missing something.

We were talking about the figures. I have never requested the figures from Revenue or from the Minister. I will table a parliamentary question this evening and look for the figures over the last number of years. However, when we asked for the figures from Revenue or the Department - I am not sure which official gave the figures - we were given the figures for 2013 freely and openly. This suggested there were only 14 appeals. I am not sure if that is the case year-on-year or if that was just a low year. However, I assume, given the quantum of money that is being disputed, that these are not people appealing the local property tax of €200 or so being levied by the Department. These are individuals who have a serious amount of money at risk if the appeal fails. Is this not the case? It is not a huge amount of individuals appealing on a year-on-year basis.

Mr. Brian Keegan

One of the few things we can say is that there are not a huge number of people appealing, on any grounds, in any given year. This is one of the issues and one of the things we are hoping this new legislation will address. The overriding concern is that, in the taxes Acts, there are several grounds for raising an appeal against a determination by the Revenue Commissioners. Are we going to design a system which works at its best when it is dealing with the kind of appeals which the average taxpayer wants to bring? These are cases where too much income tax is being charged, there is a problem with the local property tax or the taxpayer has been disallowed a capital allowances claim for his or her business. Alternatively, are we going to design a system which deals with the very extreme forms of tax avoidance, in which, as I think it admitted in the earlier session, Revenue has already taken measures to ensure it is getting its cash in under the Finance Act 2014? My concern is that if we over-emphasise one aspect of general taxpayer activity over another, we are going to end up with the wrong answers.

What does Mr. Keegan think we are over-emphasising in the legislation?

Mr. Brian Keegan

It is a big mistake to design a system whose main objective is to ensure that people cannot indefinitely not pay until such time as they run out of assets thereby prejudicing the design of a system which makes the appeals process accessible, cost effective and transparent for the average taxpayer.

This is not about local property tax alone. It is about corporation tax, capital acquisitions tax and the majority of the tax heads. Is it not in the interests of, and of financial benefit to, high net worth individuals - which some of the delegates may represent - to buy time and restructure rather than pay a tax liability? This is not about an overemphasis. It is about the quantum of money involved. There were 13 appeals in 2013. If 1,000 people appeal the local property tax, this will tie up the system. It will not be a huge loss or gain to the State. However, if 1,000 people challenge their corporate tax liability or their liability under one of the other tax heads, it is probably more significant.

I am not in favour of the idea of moving beyond the Circuit Court, for costs reasons and so forth. Also, the Circuit Court seems to have got it right in six cases since 2010 in which the Appeal Commissioners' decisions were appealed. Further, if it can take up to two years to have a Circuit Court appeal heard, how can we justify, as the delegates seem to be arguing, keeping the Circuit Court procedure?

Ms Cora O'Brien

With respect, whether in principle, the Circuit Court should be retained and, second, whether it should be easier and quicker to get into it, are separate issues. Just because it takes a long time to access the Circuit Court does not mean it should be withdrawn. I want to ensure the Deputy is clear about where I am coming from on this point. If there are cases of delay, the best way of dealing with them is through quick throughput of the system. People cannot then delay. In fairness, what is proposed is, I believe, a big step forward in terms of ensuring this happens, provided it is adequately resourced.

I agree with Ms O'Brien's comments in regard to the Circuit Court. The points made by her in that regard and by myself are at least in the same area. I am playing devil's advocate here. We are all aware that our courts system is blocked and that different measures, including the establishment of the Court of Appeal, have been introduced to deal with problems at the higher level. I am speaking about delays in respect of the Circuit Court. Revenue has stated that there is evidence that people are using the delays as a mechanism of buying time. Is there anything that could be done that would support the retention of the Circuit Court and would also seek to speed up delays in that area? Does Ms O'Brien believe that the automatic right to a full hearing in the Circuit Court is a principle that should be retained regardless of the delays?

Ms Cora O'Brien

We suggested in our original submission the possible establishment of one or several dedicated tax judges in the Circuit Court dealing specifically with tax issues. That might help. At the bottom end, the establishment of a smaller forum to deal with minor cases, thereby removing them from the main body of the Appeal Commissioners, would free up the system and enable quicker throughput of bigger cases.

Mr. Brian Duffy

Obtaining a rehearing before a Circuit Court judge is a simple process. A person must in the first instance apply for the hearing to the Inspector of Taxes. It is then sent to the county registrar, following which it is listed to the next available date. In regard to appeals, a person is required under legislation to pay his or her tax prior to taking an appeal. If that person cannot pay the tax, a question then arises as to whether he or she was ever able to pay it. Such a person would then probably have to enter into negotiations with Revenue regarding his or her inability to pay the tax and the taking of an appeal in that regard. Any agreement reached in such a situation would be on the understanding that if the appeal goes against the applicant penalty interest of 11% would apply from the date on which he or she should have paid the tax. The Deputy might also query that in the context of his parliamentary question to Revenue.

We touched on this issue earlier, at which time the point was made by Revenue and the departmental officials that the tax paid on the decision of the Appeal Commissioners would be not be disputed. Reference was made earlier by the Revenue officials to €770 million in respect of which assessments had been made but collection could not proceed. Some of that €770 million relates to cases which arose prior to the 2014 change. As I understand it, if Revenue determined that I owed €1 million and I assessed myself as owing €500,000 and appealed on those grounds I would not be required to pay the €500,000 outstanding until the appeals process has been exhausted, a process we know can take a number of years.

Mr. Brian Duffy

That is addressed in the new legislation.

I thank the delegates for attending today's meeting and for the useful information they provided. Following this meeting, the clerk will draft a report for consideration by the committee, taking into account all of the views expressed here today.

The joint committee adjourned at 5.20 p.m. until 3 p.m. on Wednesday, 28 January 2015.
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