Finance (Tax Appeals) (Amendment) Bill 2019: Discussion

No. 4 is pre-legislative scrutiny of the Finance (Tax Appeals) (Amendment) Bill 2019. The Bill follows a review of the Tax Appeals Commission, TAC, which was sought by the Minister for Finance. The primary purpose of the Bill is to establish the role and responsibilities of the chairperson of the commission. I am pleased to welcome Ms Deirdre Donaghy and Mr. Oliver Gilvarry from the Department of Finance. They are very welcome. I also welcome Mr. Mark O'Mahony and Ms Lorna Gallagher from the TAC, both of whom are appeal commissioners.

The opening statements and associated materials of our witnesses have been circulated to committee members and written submissions have also been received from the Revenue Commissioners and the Irish Tax Institute.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.`

I invite Ms Donaghy to make her opening presentation.

Ms Deirdre Donaghy

I thank the joint committee for the invitation to address members regarding pre-legislative scrutiny of the Finance (Tax Appeals) (Amendment) Bill, 2019, which also amends part 23 of the Companies Act 2014. I am principal officer in the business tax unit of the Department of Finance. My unit also has responsibility for oversight and liaison with the TAC, a body under the aegis of the Department of Finance.

The proposed Bill has two Parts. The purpose of the first Part is to make amendments to the legislation governing the Tax Appeals Commission, primarily to implement recommendations of an independent review carried out in 2018. Commissioner Mark O’Mahony and Commissioner Lorna Gallagher from the TAC have also accepted the committee’s invitation to attend today.

The second Part relates to the transposition of the EU prospectus regulations, via an amendment to part 23 of the Companies Act 2014. I will refer to both Parts and my colleague, Mr. Oliver Gilvarry, principal officer in the markets and securities unit of the Department, is available to address any questions from committee members on this aspect of the Bill.

The TAC was established on 21 March 2016 under the Finance (Tax Appeals) Act 2015, taking over from the former Office of the Appeal Commissioners. The commission was set up as an independent body with its own Vote and Accounting Officer with a view to providing increased transparency and an enhanced appeals mechanism for taxpayers. Since its establishment, staffing at the commission has grown from two commissioners and four administrative staff to three commissioners and 13 administrative staff at various grades. However, a number of factors have contributed to the development of a backlog of appeals within the commission.

On establishment, the commission inherited 282 cases from the Office of the Appeal Commissioners but, during 2016, more than 2,700 additional legacy appeals were transferred from Revenue to the TAC. Changes to the appeals process have also resulted in a significant increase in the number of new appeals arising, as all taxpayer appeals are now notified to the TAC in the first instance, rather than Revenue. As a result, a backlog of appeals has developed, currently standing at approximately 3,650 appeals.

On foot of the growing backlog and requests for significant additional resources, the Minister for Finance commissioned an independent review of the workload and operations of the commission in 2018. The review was conducted by Ms Niamh O’Donoghue, a former Secretary General of the Department of Social Protection. This review examined the governance structures, workload and operations of the commission. The resulting report was published on budget day in October 2018.

The Minister, Deputy Donohoe, has expressed his full support for the recommendations and work on implementation is ongoing both in the Department and the TAC. The commission and Department of Finance are in regular contact about governance matters and corporate supports. An administration working group has formalised discussions between the commissioners and Revenue regarding the administration of appeals. The 2019 Estimates provided for a near doubling of the commission’s budget to accommodate the recommended staff increases and improvements to ICT equipment.

Recruitment of the recommended additional support staff is being undertaken by the TAC. Following a competition conducted by the Public Appointments Service, the Minister has authorised the appointment of three additional temporary appeal commissioners, who it is hoped will take up their appointments shortly.

The proposed legislation undergoing pre-legislative scrutiny today will enable progression of another key recommendation of the O'Donoghue review, the appointment of a chairperson of the TAC. As the legislation governing the TAC does not provide for the role and responsibilities of a chairperson, recruitment cannot commence until the legislation is amended. The Bill will provide that a chairperson, who will also be an Appeal Commissioner, will be responsible for ensuring the efficient operation of the TAC and accountable to the Minister for Finance in this regard. It is envisaged that the establishment of a commission chairperson will strengthen the body's governance and accountability while bringing the commission's structure into line with other similar bodies.

The legislation will also clarify some aspects of the existing appeals legislation in order to facilitate the tax appeals process. It will clarify the requirements for both appellants and commissioners in respect of the case stated process, under which an appellant may appeal a decision of the TAC to the High Court. Finally, in order to clarify a potential ambiguity, the legislation will make express provision for the TAC to enter into contract.

I will now move on to the second part of the Bill, which seeks to amend Part 23 of the Companies Act 2014 as part of the transposition of the EU prospectus regulations. A prospectus is a document that issuers are required to publish when making a public offer of securities or seeking securities admission to trading on a regulated market in the European Union. The prospectus provides key information about an investment and is intended to assist potential investors in making suitably informed investment decisions. The current prospectus regulations have been in force in Ireland since 2005. The regulations are an important part of the overall investor protection regime as they set out the minimum information and disclosure requirements that apply to offers of securities in Ireland and ensure that the information provided to prospective investors is accurate and not misleading through either the omission of key information or deliberate misstatement. The regulations ensure the integrity and stability of the Irish market as a leading exchange in Europe for new securities listings.

In 2017, the EU agreed a new prospectus regulation that will have direct application in member states from 21 July 2019. Within the EU regulation, there are specific member state discretions that must be implemented through national legislation. To ensure the continued and effective operation of Ireland's prospectus regime after the 2017 regulation enters into force, it is essential that these discretions are fully transposed before that date. It had originally been intended to complete the transposition through consolidated secondary legislation. However, elements related to Irish prospectus law are also contained in Part 23 of the Companies Act 2014. While the changes are predominantly technical in nature, legal advice received from the Attorney General has indicated that they can only be made through primary legislation.

These amendments will update references in Part 23 of the Companies Act to refer to the 2017 EU regulation and the relevant legal definitions. They will also transpose provisions contained in Article 11 of the regulation that restrict the civil liability of certain persons involved in the security offering. The EU regulation grants member states the power to exempt offers of securities up to a total consideration of €8 million from the requirement to publish a prospectus. Ireland currently has a threshold of €5 million. It is proposed to increase the threshold to €8 million in line with other member states such as the United Kingdom, France, Denmark, Finland and Italy, which will allow smaller firms easier and less costly access to capital markets funding and reduce their reliance on bank financing. Given the increased exemption threshold and following consultation with the Central Bank of Ireland, additional investor protection requirements will also be inserted into the local offer regime under Part 23. As the EU regulation enters into direct force on 21 July 2019, the amendments to Part 23 must be enacted prior to that date to ensure there are no legislative gaps in Ireland's prospectus regime and to meet our European commitments to have the required legislation in place by that date.

This has been a relatively high-level overview of the provisions in the proposed legislation. My colleagues and I are happy to answer any questions the committee might have.

I welcome Ms Donaghy. I have one or two questions about the proposed legislation. Does Ms Donaghy's remit involve the Department of Employment Affairs and Social Protection, which has a financial aspect to it that is perhaps within the Department of Finance? Does that come under the Department of Finance?

Ms Deirdre Donaghy

I am in the business tax unit in the Department of Finance so I am responsible for corporation tax primarily. We have responsibility for the Tax Appeals Commission as a body under the aegis of the Department. It is a liaison role in that regard but we do not have any connection with the Department of Employment Affairs and Social Protection.

On the social protection aspect, employers must pay two weeks' redundancy pay for each year of service to staff they make redundant. I do not know when exactly the measure was brought in but during the downturn, when companies and sole traders got into difficulties, there was a clawback on the two weeks' pay per year from the Department. The Government or the Department of Finance or Department of Social Protection, as it was known then, paid 70%. The clawback was eroded, however, when it was reduced from 70% to 15% and it eventually disappeared altogether, with the result that the staff of any company or sole trader that closed down or downsized had to get two weeks' pay per year. This was implemented a number of years ago but some of these companies and sole traders employed people prior to the introduction of the requirement to pay redundancy of two weeks' pay per year worked. While this falls within the remit of the Department of Employment Affairs and Social Protection, the Department of Finance got rid of the 70% clawback.

Ms Deirdre Donaghy

I am sorry but I am afraid we do not have any responsibility for that.

While it is an important point and it is important to have a discussion on it, I am not sure it is relevant to tax appeals. As far as I can gather, the proposed legislation mainly concerns business tax and people appealing their tax rulings and so on. That is the first half of the Bill.

Ms Deirdre Donaghy

Yes. The first part of the Bill relates entirely to the Tax Appeals Commission. It deals with occasions on which the Revenue Commissioners raise an assessment on a taxpayer, be it a corporate or an individual, and the individual does not agree with the assessment or feels it is incorrect in some way. He or she then has the avenue of appealing the assessment to the Tax Appeals Commission, which then-----

The Tax Appeals Commission has a very narrow remit.

Ms Deirdre Donaghy

Yes. It relates specifically to appeals of tax assessments by Revenue.

People are very tax compliant, yet the commission seems to be receiving a large number of appeals and is expanding and in need of more staff. How does Ms Donaghy account for this?

Ms Deirdre Donaghy

There are a number of reasons this has happened. Part of the reason for the current backlog is that legacy appeals were transferred when the Tax Appeals Commission was established. Prior to 2016, the appeals function available to taxpayers was the Office of the Appeal Commissioners and while that was independent, it was still an organisation within the Revenue Commissioners. This was then restructured in 2016 and the Tax Appeals Commission was created to improve transparency. It was created as an independent body in its own right. One of the reasons for the increases in staffing is that the commission is now an independent body in its own right and must look after many issues such as its own governance and administration. In addition, at the time the TAC was formally created, as I said, more than 3,700 legacy appeals were transferred from Revenue to the TAC. A large part of the backlog is due to that number of legacy appeals coming over to the TAC.

How far back do the longest appeals go? Do they go back to 2010 or-----

Ms Deirdre Donaghy

The longest they have been with the TAC is since 2016. That is when the TAC formally took responsibility for them. Some of the old legacy appeals came from the Revenue Commissioners and the TAC would not have had responsibility for them before that time. Some of the appeals are older, though.

That is the point I am making. Some of them go way back and no decision has been made on them.

Ms Deirdre Donaghy

Yes, but, as I said, they have only been with the Tax Appeals Commission since 2016, when it was formally created. That is why we are trying to work through them now.

Why would it take more than three years to deal with an appeal that goes back to 2010, 2011 or 2012?

Ms Deirdre Donaghy

The sheer volume of appeals that transferred over is the answer to that question. When the TAC was created, a large number of appeals came in.

There was also a change to the nature of the appeals process when the TAC was created. Under the Office of the Appeal Commissioners, the first line of appeal was to Revenue, which acted as a filter for many basic appeals where there was a misstated number, a clerical error or something relatively uncontroversial. Under the new system, the TAC is the first court of appeal and everything must be appealed to the commission within 30 days of a notice. There has been a significant increase in the number of appeals coming in but many of them turn out to be minor issues that are resolved between the taxpayer and Revenue. This has given rise to a backlog. We carried out a review to point to where greater resources were needed and the purpose of this Bill is to assist in pulling in those resources.

Are the legacy cases left on the back foot?

Ms Deirdre Donaghy

No. They are progressing as well. Two commissioners are present today, Mr. O'Mahony and Ms Gallagher, but there is also a third, Mr. Conor Kennedy, whose full focus is on those legacy appeals and he has been making strides on them.

When will the legacy appeals be completed?

Ms Deirdre Donaghy

With any appeals process one has to ask, "How long is a piece of string?" They are not entirely under the control of the commissioners. An appellant is involved and the Revenue Commissioners are on the other side in every appeal. An appeal may be delayed because one party has requested a delay or is getting additional documentation but the purpose of putting additional resources into the commission is to increase the pace at which they are resolved.

Has the commission received any appeals relating to the property tax?

Ms Lorna Gallagher

Yes. We have dealt with some such appeals.

Are there many?

Ms Lorna Gallagher

I do not have a number to hand but I can get one for the Senator. At least one determination has dealt with local property tax.

How would an appeal come about? Would there have been a dispute between the owner and whoever makes the assessment?

Ms Lorna Gallagher

I am not at liberty to speak about a particular case but various aspects of the legislation have been challenged by taxpayers. The question has arisen as to who is liable when a property is bought and sold, especially if it is around the payment date or in November.

Perhaps a buyer would suggest it should have been paid by the previous owner.

Ms Lorna Gallagher

Yes. It depends on who is the owner of the property at the relevant time.

The second half of the Bill seems to be more substantive. Can the witnesses outline the rationale for increasing the threshold for a prospectus from €5 million to €8 million?

Mr. Oliver Gilvarry

The prospectus is an information document, published before a company issues securities on the general market. Under the existing framework, the threshold was €5 million and any issuance under that amount was not subject to the requirements of the prospectus framework as set out in Europe, though it was subject to Part 23 of the Companies Act, which deals with local offers and which gives certain protections. The rationale for increasing it to €8 million and allowing discretion at European level was to make it easier for smaller businesses to raise money. Big corporates were able to access the markets but this left smaller entities relying on bank financing. The increase gives smaller businesses a choice. They do not have the same level of disclosure requirements as a company such as CRH but a company that has a track record of a number of years can issue debt securities or equity. Balancing that is the fact that we have increased certain protections. People who invest in these companies do not get the full framework of the prospectus regulation but they will get disclosure of a company's track record over recent years, and information as to whether someone was guaranteeing a product, at what level they were doing so and who he or she was.

The rationale for making it a requirement to have a prospectus in the first place was to provide protection to potential investors in the form of full disclosure and full information.

Mr. Oliver Gilvarry

The information is within the document so that a person can make a decision on the investment. It applies to big, complex businesses such as mineral extraction. It seeks information as to what business a company is doing is different jurisdictions and what the risks might be from that. Smaller businesses are more simplistic and there is likely to be just one line of business. They are not likely to be operating across jurisdictions, within or without the European Union, and what they do tends to be bespoke. It could be a fintech business or a manufacturing company. The aim is to give it the option to issue debt securities or equity, rather than require it to go to a bank or a venture capitalist for financing.

The EU regulations set a minimum threshold of €1 million and no country can legislate for a prospectus requirement for companies below that figure, while the maximum is €8 million. We had €5 million and it is now proposed to increase it to the maximum. The British Government changed it to the maximum of €8 million in July last year. Was that a factor in the thinking of the Department?

Mr. Oliver Gilvarry

No. Throughout the negotiations on the prospectus regulation up to 2017, we had called for the increase because the €5 million was set when the negotiations started in 2003 and the directive was agreed in 2005. This reflected the changing market. Following the crisis, banks pulled back from the market and the capital markets union, CMU, project attempted to deepen Europe's capital markets by giving different options for companies. A large number of other member states have increased the threshold to €8 million.

What is the EU average threshold?

Mr. Oliver Gilvarry

The United Kingdom, France, Denmark, Finland and Italy have set the threshold at €8 million, while some six or seven other member states have set it at approximately €1 million. These include Romania and Bulgaria, which have smaller markets. An sum of €1 million is significant for an SME business in Romania or Bulgaria, compared to here and other places. The average was approximately €6 million but we can get the exact figures for the Deputy.

They are the states that have moved up to €8 million.

According to the figures that are online, the mode is €5 million. Approximately 12 states have a threshold of €5 million, including Germany, which is not subject to a very small market, as well as Austria, Belgium, and other states with large economies. Why does it make sense for Ireland to increase its threshold to €8 million when the likes of Germany are staying at €5 million?

Mr. Oliver Gilvarry

Germany has a €5 million base threshold but it has the option of going up to €8 million, at which point the issuer must produce and publish a securities information sheet approved by BaFin, the German financial regulator. That is offered in conjunction with investment advice or brokerage by an investment firm. Part 23 basically sets out the requirements for the entity. Germany has gone at this a bit differently, in that they say the threshold is €5 million but one can go up as far as €8 million with these protections. What we have done is set it at €8 million with these protections and disclosures that must be done. If there is an intermediary in Ireland selling that security, whether it is a MiFID entity or an Investment Intermediaries Act authorised entity, there is a conduct of business rules requirement for which the Central Bank is the competent authority. That is why we feel comfortable moving it up to €8 million and made that recommendation.

If a multinational corporation wanted to offer a security of €7 million and operate throughout the EU, could it do so in any country it wanted or would it have to do it in the country in which it is based?

Mr. Oliver Gilvarry

No. It can pick the jurisdiction. Is this in the sense of the prospectus regulation or under local offer?

If the corporation was looking for €7 million in Austria, it would have to issue a prospectus, but it does not want to issue one. Can it do so in Ireland to avoid doing that, and take advantage that way?

Mr. Oliver Gilvarry

The issue is that the local offer is the local framework. The company is caught then and does not have a prospectus that allows it to offer security across the Union. It is limited to the domestic framework. The benefit of the prospectus regulation is that it does not matter where a company does its listing. An Austrian company that does its prospectus in Ireland can list in an Irish, UK or German market, and sell and have no problems across the Union. The prospectus is the prospectus. The local offer framework limits the company. Companies do not get that flexibility, so it is no use for a big Austrian-based multinational to say that if it only needs €7 million, it will just do it in Ireland or Germany. It is going to be caught because then it is just in that market where it will want more. The other benefit of the prospectus regulation is that it is seen as the standard internationally. Europe has this framework and, therefore, that is the framework. If I am buying a security that is subject to a prospectus issued under the prospectus regulation, I have comfort with the framework Europe has put in place on that.

Is any of this about competing for companies to come here to offer securities here by virtue of having a higher threshold? Does that dynamic exist?

Mr. Oliver Gilvarry

This is basically to give options to Irish entities as they start off. To be fair, it is not the entity that starts off in the morning, but it is as someone is moving through the stages of their financing. They will start off and get their track record, and the options are there. It is not replacing bank financing; it is just that other option that then allows for more flexibility, once we have increased the threshold.

I thank Mr. Gilvarry.

I thank the Chairman. I would like to do a recap on tax appeals. Before this we had the Office of the Appeals Commissioner. Someone who appealed did so to the local Revenue office. Was there a distinction in the types of appeals being heard? What was the distinction that would lead to one appeal going to the Office of the Appeals Commissioner and one to Revenue? Can the witnesses explain the old system?

Ms Deirdre Donaghy

Under the old system the Office of the Appeals Commissioner was within Revenue, so the appeal was essentially made to Revenue. What that meant was that if there was something straightforward at an early stage such as an error in a number or if someone said they were entitled to a particular credit in a PAYE assessment, they could be sorted out.

They did not have to go to the Office of the Appeals Commissioner.

Ms Deirdre Donaghy

They are not appeals; they are more misunderstandings or errors-----

Ms Deirdre Donaghy

-----that can be clarified between a normal revenue official-----

Ms Deirdre Donaghy

What happens now is that if an individual receives a notice of assessment, he or she has 30 days in which to appeal that assessment. The inclination is to immediately appeal it to the Tax Appeals Commission and he or she may also contact Revenue if it is a straightforward error. A volume of cases are always appealed and that would create an appeal that takes processing time.

How are they weeded out? How is the commission able to get at them under the new system?

Mr. Mark O'Mahoney

Once an appeal comes to us, one of the first steps we have to take is to notify Revenue that an appeal has been brought because it does not know that now. The notice of appeal that we receive has details of the appellant's or taxpayer's complaint, so that goes to Revenue. We see that where there are very simple differences between Revenue and the taxpayer and it is a straightforward error on one part or the other, it can very often be resolved without much further input from us. There is a degree of drop-off at that early stage.

On the establishment of the TAC, it inherited 282 cases from the Office of the Appeals Commissioner. That is straightforward. Some 2,700 additional legacy appeals were transferred from Revenue. That seems an exceptionally high number relative to the number that was with the Office of the Appeals Commissioner. How did that happen?

Mr. Mark O'Mahoney

I suppose these cases were with the Revenue Commissioners. They had been notified to them but had not been transferred on to the old Office of the Appeals Commissioner.

Even though they were appeals?

Mr. Mark O'Mahoney

Yes, that is correct. As we said, Revenue almost acted as a filter on appeals in the first instance, and these were still at that filter stage. The Act that established us provided a mechanism whereby-----

The number of cases under appeal is now probably 3,650, whereas prior to that the full figure was not known.

Mr. Mark O'Mahoney

Yes, that is correct.

What is the average waiting time for an appeal to be heard now, relative to what it was under the old system? How long are people waiting for their cases to be heard?

Mr. Mark O'Mahoney

It is difficult to say how long somebody is waiting for a case to be heard because different categories of cases-----

How does Mr. O'Mahoney prioritise? What is his new office called?

Mr. Mark O'Mahoney

The Tax Appeals Commission.

What process is used by the commission? A case comes in and is logged. How long is it before that case will be heard?

Mr. Mark O'Mahoney

The average annually since 2016, from the date we receive a notice of appeal to the date the appeal is closed, which is not necessarily through a hearing as it can be settled, withdrawn or refused, is 353 days. Some cases take much longer than that, and others are resolved more quickly than that. It depends on how complex the appeal is. The more complex an appeal is, and the more issues that are raised in the appeal, the longer it will take for the parties to get ready for the appeal and for us to get to the stage where we can say this matter is now ready for-----

How long were people waiting under the old system? Typically, how long had the 282 cases been waiting?

Mr. Mark O'Mahoney

I do not know the answer to that, and I am not even sure that I can get it for the Senator. I do not think records were kept.

A year is too long. I have been a practitioner in this area for many years. If we are setting up new bodies, they should be cutting down on the time. This is like a court of law, and the appeals should be dealt with much quicker. This would have a major impact on the business of many of the appellants. An average waiting time of a year is way too long.

Is there a problem with resources? Let us remember that the devil is always in the detail. This scheme looks great and is fantastic. Let us say I have a client who is under severe pressure and getting nowhere with his or her local district, and there is a cases for which he or she lodges an appeal. Can barristers appear before the appeals commission?

Mr. Mark O'Mahony

Yes, they can.

Serious costs could be incurred so a year is too long. How can we reduce the time?

Mr. Mark O'Mahony

Today's meeting is an important part of the process. The legislation is to allow for the appointment of a chairman who is also going to be an appeals commissioner. At the moment there are three commissioners. As Ms Donaghy said in her opening statement, the Minister has approved the appointment of another three temporary appeals commissioners.

How does the process work? Let us say, for instance, that I lodge an appeal. Obviously there is an executive within the appeals office. How many people are in the appeals office? What are their qualifications? Are they accountants or tax experts? How are appeals heard? Do appeals have to be heard at oral hearings? If so, how often do oral hearings sit? Do they sit over the summer? How does the scheme work in practice? I ask Mr. O'Mahony to walk me through the process.

Mr. Mark O'Mahony

I will first deal with the question on staff. We have a staff of 15 at the moment, one of whom works on a part-time basis.

What are the qualifications?

Mr. Mark O'Mahony

They vary significantly. In terms of specialist qualifications, we have three case managers at the moment, all of whom are chartered tax advisers with five years of experience. They come from a Revenue, accounting and a legal background, respectively. They were appointed in January and April.

Did one of the case managers come from the Office of the Revenue Commissioners?

Mr. Mark O'Mahony

One of them worked for the Revenue Commissioners previously.

What about the remaining 12 staff members?

Mr. Mark O'Mahony

Our staff are divided into three units. There are the case managers, as I have already described.

Mr. Mark O'Mahony

We have an appeals support unit and we have a scheduling unit, which is a division of work that we have settled on in the past year.

I assume that the appeals support unit deals with the administrative side in cases where people lodge their appeals and the scheduling unit says when cases are heard. How many people physically work on the cases? Is it three people?

Mr. Mark O'Mahony

I would have said 14 people plus the commissioners.

How many people physically sit down with the files in front of them to consider an appeal in technical terms and assess whether there is enough to form the basis of an appeal? How many of these people are administrative staff?

Mr. Mark O'Mahony

When we receive a notice of appeal in the first instance, it will go to the appeals support team. They are responsible for logging it on the case management system for notifying the Revenue-----

That is administration, Mr. O'Mahony. How many people sit down with a case file in front of them and work on them? I understand that one needs to provide administrative backup. We know what determines the length of a case from dealing with the Office of the Ombudsman. Who is the case worker and who is the case manager? How many people physically work on scrutinising files?

Mr. Mark O'Mahony

I am sorry if I misunderstood the question. In terms of considering the merits of an appeal or ways to progress a case from a legal perspective, some members of the appeals support team will identify whether there is an issue. If they feel that there is, then the case goes to one of the three case managers. The case managers will either answer the question themselves or, if they feel that the issue needs to be escalated, they will bring it to one of the appeals commissioners.

Outline the process that takes place from the time case managers become involved to when the case reaches an appeals commissioner.

Mr. Mark O'Mahony

One of the questions that the Senator asked was whether every appeal needs an oral hearing. The answer is they do not. We do have powers under section 949(u) to do a hearing on the papers, which we avail of whenever possible.

In terms of the responsibilities of the case manager in getting a case to a hearing stage, they will look generally at the more complex appeals. If it is a question where, for example, outlines of arguments are needed from the parties which, again, would generally be appeals that raise reasonably complicated-----

In the time I have, Mr. O'Mahony, I understand that.

Mr. Mark O'Mahony

Sorry, Senator.

Each of the case workers has 1,200 cases on their files at any one time because there are 3,650 cases, which is too many. For me, it is basic stuff. That is where there is a logjam. Does the Department expect three case managers to pull back a year? The appeals commission is great. Did the Department seek more resources in terms of case managers?

Mr. Mark O'Mahony

One of the recommendations of the O'Donoghue report is another two case managers.

Will the Department get them?

Mr. Mark O'Mahony

We have applied to the Public Appointments Service or PAS for access to a panel. We hope that by the third quarter of this year we should have two case managers. It has already been indicated to us that there are some candidates who look like they would be suitable having regard to their skillsets and qualifications. That is something that we are actively pursuing at the moment.

There are 3,650 appeals cases. How many of them have been dealt with by the case managers but await being heard by the appeals commissioners?

Mr. Mark O'Mahony

Recently we conducted a big review. Every case that needed a case manager's attention has been looked at by a case manager.

Mr. Mark O'Mahony

In terms of the number of cases that are ready to be heard, I might just see if my colleague has the information. We currently have 80 cases scheduled for a hearing and a further 90 cases will be scheduled this year. At the moment there are about another 100 cases that have been deemed ready for a hearing and we just await the appointment of the three additional temporary commissioners before we assign them.

There are roughly 270 cases at the moment that could be heard by the appeals commissioners. For me, there are two logjams so clearly the Department does not have enough case managers. One additional appeals commissioner will make a huge impact. How many cases does an appeals commissioner hear in a year?

Mr. Mark O'Mahony

We had 165 cases listed for hearing last year. Not all of those cases will go to a hearing because the parties may settle. On average, the figure is about 55 a year per commissioner. Part of our difficultly last year was we moved to new offices in June. Prior to June we did not have a hearing room in our old premises and we had to go to local hotels to get a function room in which to hold hearings.

People must wait a year for their appeal to be heard by an appeals commissioner, which is unacceptable to clients as the waiting period is too long. How can we return to a waiting time of three months? Mr. O'Mahony has told me that under the current system if the three commissioners hear about 150 cases each a year then the total is only about 400 cases a year. How many additional cases will there be in the coming year? A new system must be more efficient in terms of time than the old system but I am not convinced by the new system even though it has good architecture. It will be great to get the new appeals commissioner and case workers this time next year. How many additional cases are lodged per year?

Mr. Mark O'Mahony

Approximately 1,800 cases a year.

We have a serious problem because there are 3,650 cases with 1,800 cases being lodged per year and each commissioner deals with approximately 150 cases per year. Let us say we have four appeals commissioners, then at best that is 600 cases a year.

Mr. Mark O'Mahony

We completely accept the point made by the Senator about the waiting time being unacceptable. The Department accepts that and we have all addressed that. The Senator is right that the hearing time needs to be brought down. Today is part of that process.

With regard to dealing with the level of appeals, not all appeals will require a hearing and not all will even be set a hearing date. There is, perhaps, not a direct correlation between the number of appeals we receive every year and the number of hearings we are required to carry out. In 2018 we doubled the number of cases we had closed. In 2017 it was 700, while last year it was some 1,440. We are getting there, but the Senator is absolutely right and that is why we are here today. The waiting list needs to be brought down. The chairman role is one part of it but we also have sanction from the Minister for a doubling of our staff numbers with the announcement that there will be three temporary commissioners. We are going from three commissioners to six and we are confident there will be a significant improvement in-----

So the commission is going from three to six commissioners, and from three case managers to-----

Mr. Mark O'Mahony

To five.

I will not labour the point. It was always a frustration. As an institution, has the Tax Appeals Commission a target for what it believes is a reasonable time for a case to be heard on an appeal? I referred to three months but has the commission set a target?

Mr. Mark O'Mahony

We have not yet. We have not yet reached full operational strength. We are going to look at that when we have an idea of our workload and our proper level of resourcing. The Senator is absolutely right that there needs to be targets and that we need to be held to a standard. We are not, however, in a position to put a date on it yet. The reality is that ultimately we will have a classification of appeals whereby, for example, a simple appeal should be closed off by the commission on average within X number of months, a medium complexity appeal within 2X months and a very complex appeal within two years - to pick a figure at random. We accept that there have to be targets, which we are actively considering.

I thank Mr. O'Mahony.

As the principal officer, Ms Donaghy liaises between the commission and the Department of Finance. Under the new proposed legislation a chairman will be appointed who will report directly to the Minister for Finance. Does this mean there will then be no contact between the Department of Finance and the Tax Appeals Commission once an appeal has gone over?

Ms Deirdre Donaghy

No. We anticipate there will be ongoing contact during the year, as there currently is. The primary purpose of having a chairman, particularly as the number of commissioners increases, is because it is important to have one identified head of the office who is responsible. There are a number of different areas of responsibility for the commission currently under the Act but the purpose will be to focus these responsibilities in the chairman such as, for example, the putting of reports to the Minister. The Tax Appeals Commission will remain a body under the aegis of the Department of Finance. The body is statutorily independent in the exercise of its functions as an appeals body but nonetheless it is accountable to the Department in its expenditure and the delivery of its functions. We have ongoing contact with the commissioners regarding its annual budget and annual spend, for example, and we have constant contact in relation to answering parliamentary questions. This contact would continue throughout the year but the chairman, essentially, will be the one identifiable person who has the overall responsibility for ensuing the commission is meeting its requirements.

Would there perhaps be a strain sometimes between the Secretary General at the Department of Finance and the chairman of the Tax Appeals Commission?

Ms Deirdre Donaghy

We are very accustomed to managing these relationships.

It does not seem from the statement that the role of authority is well defined. Is the Secretary General the boss and does the chairman of the Tax Appeals Commission report to the Secretary General? Alternatively, will the chairman be completely independent and will he or she report to the Minister for Finance?

Ms Deirdre Donaghy

The chairman will be answerable to the Minister for Finance but the reality is that in the case of all of these bodies that are answerable to the Minister, that is managed by officials within the Departments.

I do not believe that anyone has addressed the following point. I presume that many tax appeals are made by corporate entities and businesses and so on. Equally there are individuals and sole traders whose income tax is being appealed. I am sure it must be a very stressful scenario for them as to whether they must pay an amount. How does the issue of interest and penalties play out during this process? Is this all suspended during the appeal process? Does a person pay the tax and then hope to get it back after appeal or is it in limbo? Perhaps Mr. O'Mahony will explain how this process works.

Mr. Mark O'Mahony

The taxpayer has the option to pay the tax in dispute while an appeal is pending, but he or she is not obliged to do so. If the person pays the tax then obviously there is no interest charged at the conclusion of the appeal if he or she is unsuccessful. If the appeal is successful, however, then the Revenue Commissioners refunds the tax that has been paid. If the person had not paid the tax then statutory interest is accrued if the appeal is ultimately found to be unsuccessful.

Would there be penalties?

Mr. Mark O'Mahony

I do not believe further penalties would accrue in the interim. They would have crystallised at the time.

Does Mr. O'Mahony know what the interest rate is?

Mr. Mark O'Mahony

I do not know off the top of my head.

Is there a breakdown of how much money in the system is being appealed?

Mr. Mark O'Mahony

As of 20 May it was some €3.67 billion.

These approximately 3,650 cases are worth some €3.67 billion.

Mr. Mark O'Mahony

Yes.

In theory, if it has this money the State may have to give it back. If it does not have it, the State is sitting on the guts of €3.67 billion, which is potentially available or not available to the State. It is a very significant amount of money given that we refer to other figures of €100 million or €200 million of fiscal space here or there. I thank Mr. O'Mahony for knowing that figure and for giving it to the committee. Is there a split in terms of value, for example 80:20 of cases with very small value? Is there a breakdown and what is the biggest appeal?

Mr. Mark O'Mahony

The top ten appeals by quantum in dispute amount to some €2.5 billion of the €3.67 billion.

Are those top ten appeals being actively and aggressively managed and investigated?

Mr. Mark O'Mahony

Inasmuch as we can. One case, for example, has circumstances where we cannot progress an appeal, as there are parallel proceedings before the courts and the courts have stayed the appeal before us while the court proceedings are ongoing. At the moment, two of the top ten appeals are stayed by court order and we cannot do anything in relation to the cases. The value of those two appeals is €1.67 billion.

How much is the single biggest figure?

Mr. Mark O'Mahony

It is in excess of €1 billion. I am reluctant to discuss precise figures because obviously we have a duty of confidentiality.

I accept that but I am not asking for names or even the kind of business. I am asking for the numerical amount of the highest claim, that is all. It is just to give to people who may be looking in at these proceedings an idea. Obviously, people appealing their property tax assessment or those who are appealing an ordinary tax assessment, either as an individual or as a couple in their personal circumstances, will not be appealing a €1 billion assessment, but it is just to give a flavour of what is here. Many people would not be familiar with the Tax Appeals Commission.

While the main thrust of this legislation is to appoint a chairman and to give the chairman a role, the Tax Appeals Commission has already been set up and has inherited legacy cases. With throughput there are legacy cases, and new cases every year and the commission is also clearing cases. Is there an in and out schedule of what is happening around that? Will Mr. O'Mahony give us a slightly better picture of that?

Mr. Mark O'Mahony

If he can bear with me one moment I can give the Vice Chairman those numbers.

We have received 557 appeals, working backwards up to 20 May 2019, and we have closed 356.

Was that out of the 557, or is it 356 out of the total amount?

Mr. Mark O'Mahony

No, just 356. I suspect the 356 that were closed are more likely to relate to earlier years. There is a degree of time lag. In 2018, we received 1,689 appeals and closed 1,438. In 2017, we received 1,747 and closed 690.

In each year, the Tax Appeals Commission, TAC, has a deficit, which this year is just over 200. Last year it was 200 odd and the year before it was almost 1,100. The backlog is getting worse every year.

Mr. Mark O'Mahony

It has been. In answer to an earlier question, I noted the number of appeals we closed in 2018 was double those closed in 2017. We are, however, probably approaching the limits of our capacity within our existing resources.

Sanction has been granted by the Minister for a doubling of our staff numbers, and there will be such an increase, assuming the legislation under consideration today is passed. There will be a doubling of the commissioner numbers as well. We expect there to be very significant increase in our closure rate once those additional resources have been put in place and are operational.

The opening statement makes reference to a doubling of the commission's budget to accommodate recommended staff increases and improvements to ICT equipment. This will be a doubling of staff, as well as the budget.

Ms Deirdre Donaghy

To give further details, when the commission was first established in March 2016, it had two commissioners and four support staff. At the moment we are up to three commissioners and 14 support staff. The budget and the sanction are in place and recruitment is in progress to take that up to a total of 32 staff members, including commissioners, which would represent 27 support staff plus commissioners.

Yes, the Senator may.

Prior to that, 2,700 additional legacy cases came from the Revenue Commissioners. Staff were tied up across the country in the Revenue Commissioners' local tax offices working on these cases. These cases have effectively been shipped on to the Tax Appeals Commission. There is a staffing problem here. What was happening in reality was that an appeal was made, a telephone call was made by the tax agent or accountant representing the appellant, who probably knew who the inspector was and who had been dealing with him or her on a daily basis. Discussions were ongoing on cases. A lot of them were pulled out of the appeals process. It was the way it worked.

The problem now is that everything has left the Revenue and the staff who were dealing with it at each individual district are no longer doing so, as the entire process has gone over to the Tax Appeals Commission. My worry is that this will end up by becoming a slow, tedious process that is legal and not practical in nature. I worry that we are creating something here that is unworkable and bureaucratic. The previous system might be described as being inefficient. How do we as a committee get reassurance that we do not suddenly have a situation developing where barristers or solicitors appearing before the Tax Appeals Commission becomes the norm for clients? This should not be the case. It may end up becoming another form of a court, as distinct from being something that will assist people getting cases heard. One will have the hard cases but they will end up in the courts in any event. My concern is that there will be unintended consequences in setting up new bodies in which the mechanisms are foolproof but are utterly bureaucratic and legal in nature and where we do not get the outcomes we seek. I hope that will feed into the questioning.

I thank Senator Kieran O'Donnell for his very helpful interjection.

Ms Deirdre Donaghy

A number of things may be said in response to that. First, we are conscious of that being a potential issue. As already said by Mr. O'Mahony, it is not the case that every appeal that comes into the TAC goes to a hearing or is a very formal process. One can see from its annual reports, for example the 2018-----

I have no doubt that in respect of that figure of 2,700 cases that came from the Revenue Commissioners, were one to look at individual tax districts some would have been highly efficient and some would not. Everything is now being processed through the same filter and the commission has a backlog of one year already. I have genuine concerns.

Ms Deirdre Donaghy

A great many cases, comprising a large percentage, are settled once they are notified to the TAC and then to Revenue. For example, of the 1,440 cases closed last year, 668 of those were settled and 223 were withdrawn. A lot of them still settle, albeit they settle once they are first notified and then they settle. Separate to that, we are concerned that we make this a system that works for taxpayers and in particular for the small taxpayer with the small issue.

This is part of the purpose we have with the administrative group I mentioned that we have set up with between the TAC and individuals in Revenue, who have a particular responsibility on their side for the appeals process. We are looking at options within that to see how we can make taxpayers, particularly the small taxpayer who looks after his or her own affairs, more aware of their options to contact the Revenue Commissioners as a first port of call, if it is a query or incorrect number, so that it does not go to the TAC. This is something of which we are actively aware and are actively trying to find ways to address.

I thank Ms Donaghy.

Ms Lorna Gallagher

If I can assist the Senator on some of those figures, on our receipt of the 2,700 cases that transferred to us on commencement, a lot of was done on them and we netted them down to 1,157 appeals. We were able, for example, to group some similar appeals into one appeal etc. We wrote out and some were not proceeding and some others had been resolved. There were a number of reasons many of them fell away. From the grouping of 1,157, Commissioner Kennedy then commenced a process of case management conferences, which is a small process where the parties can come in and a conversation can be had, fairly informally on some occasions, and an opportunity to resolve cases exists if people want to talk. If people want to proceed, then they can. We have now, at present, on the legacy side, 658 of those cases remaining as of 20 May 2019.

On the question of representation by barristers at the commission, this is a very broad brushstroke figure but I estimate that approximately 40% or above are not represented. We have-----

Does that mean that 60% are?

Ms Lorna Gallagher

Between 50% and 60% are, and that is a broad brushstroke figure. It is not a metric that we have measured.

Some 50% to 60% of cases are represented by barristers.

Ms Lorna Gallagher

Again, I have not measured that metric but I am giving the Senator a broad-brush résumé.

Some 50% of cases being represented by barristers is far too high for me. That means it has become a legal process. That was not what the appeals process was set up to do.

If one was a barrister, it would not be a high enough percentage.

It was set up to help the taxpayer and I have grave worries that it will end up becoming a legal process. The first advice any person who is appealing to the Tax Appeals Commission will get from their tax adviser or accountant will be to recommend that a barrister be present. If one does not have a barrister present, most other people will have. That is something that goes against the spirit of the Tax Appeals Commission. I am sorry but I have a concern regarding that area.

Ms Lorna Gallagher

If I may continue, representation also includes solicitors and I do not know if we differ on that.

I am putting solicitors in the same category - I hope they will take this categorisation in the spirit that it is given - which is the legal profession.

Would some of the representation be accountants?

Ms Lorna Gallagher

Yes, it would. If I may, I would include them also.

Ms Gallagher is including accountants in the legal profession. Would the Vice Chairman consider himself as a member of the legal profession?

No, my fees are not high enough.

This figure may not even be recorded, but would more of the representations be likely to come from the accountants?

Ms Lorna Gallagher

I am getting to that point. What I am trying to convey is the number of live hearings. We have a statutory facility in the commission whereby we can dispose of cases that do not require a hearing, but we can provide for a paper-based hearing, of which many taxpayers avail. It is very advantageous for advisers because they can simply tell their clients that they do not need to be present. They can opt to avail of that facility, assuming that the case is suitable. I will sit at my desk and give the case no less attention than I would any other.

I was asking about oral hearings.

Ms Lorna Gallagher

It was oral hearings I was talking about.

How many oral hearings are held? If one puts solicitors and barristers in one category and accountants in another, what is the percentage of legal people and accountants who appear?

Ms Lorna Gallagher

I do not know the answer; it is not a metric the commission has tried to use, but we might take a look at it. We have a statutory entitlement to take a flexible approach in cases where we consider it is appropriate to do so. Whereas some cases are contested significantly with appellants who are very heavily represented, many are not. In those cases we try to be as co-operative as we can in terms of the hearing being, if not a positive experience, as such, one in which they believe they have been heard and listened to. We want to convey the message that we are not a division of the Revenue Commissioners. It is very important that taxpayers understand that if they come to the Tax Appeals Commission for a paper-based hearing, they will have an absolutely objective, expert review of their appeal, independent of any other State body. That is the service we endeavour to deliver and hope to increase that understanding.

The number of legacy cases has been reduced from 2,700 to 658. Is that correct?

Ms Lorna Gallagher

Yes.

Therefore, just over 2,000 cases have been dealt with. We discussed how in 2017 some 600 cases had been dealt with and in 2018, 1,400. Is the reduction of 2,000 cases reflected in the number of 1,438 for 2018?

Ms Lorna Gallagher

Yes, because as I understand it they are total figures.

I am trying to get my head around this issue. If it is the case that 619 were resolved in 2017 and 1,400 in 2018, almost all of the cases that have been resolved are legacy cases and nothing else has been resolved.

Mr. Mark O'Mahony

When we received the legacy cases, we conducted a detailed analysis of them. For example, the 2,731 cases would have included several appeals by the same appellant over a number of years in which they raised the same issue. We consolidated them into one appeal. Similarly, there were some lead-follower appeals in which perhaps the same tax planning issue was being raised by multiple appellants. We said that rather than have 40 appeals, we would have one.

That sounds very efficient and sensible; however, I wonder when the commission reduces the number from five to one, is the figure recorded as five resolutions?

Mr. Mark O'Mahony

No, I do not believe so. When we reduced the figure from 2,731 to around 1,100, each of the 1,100 cases was counted as one for the purpose of closures.

However, the drop of 1,600 is not reflected in the figure for the number of the closed.

Ms Lorna Gallagher

That is correct.

The figure of 1,100 has been reduced to 658.

Mr. Mark O'Mahony

Yes.

About 500 of the 2,300 resolutions are legacy cases.

Mr. Mark O'Mahony

Yes. The commissioner, Mr. Kennedy, has been in office for just shy of two years and closed about 250 legacy case appeals per annum.

If the number went from 1,150 to 658, has he not closed about 500?

Mr. Mark O'Mahony

Yes; I said he closed 250 a year.

Perfect. On the costs involved in making an appeal, people must engage accountants, barristers, solicitors and so on. Is there a fee or charge to appeal?

Mr. Mark O'Mahony

No; we do not levy any charge for our services.

The commission incurs the costs which are met through the Exchequer.

Mr. Mark O'Mahony

That is correct.

Is there a breakdown of companies, individuals and partnerships?

Mr. Mark O'Mahony

I do not believe so. Certainly, I do not have such a breakdown with me.

Equally, we discussed some of the top figures, but I wonder what is the position at the lower end. Are there many sums under €1,000 or €2,000?

Mr. Mark O'Mahony

The vast majority of appeals are in respect of sums less than €10,000. As to whether cases are appealed by partnerships or small companies, one of our issues has been the need to prioritise resources. We are limited in the number of metrics we can track. The classes of appellants involved is not one we have tracked to date.

I am just trying to get my head around the system of tax appeals. I thank the officials for their engagement, but clearly there is an issue, which is the reason they are here. Increases are being provided for in budgets, including for ICT, to try to resolve the issue. I am just trying to get my head around why it is taking so long to get to where we want to go, but it does look as if there is some light at the end of the tunnel, at least in dealing with legacy cases. At the same time, 1,689 cases were submitted last year. If the figures are all quite small, one can say that is fair enough, but if we are dealing with sums of over €1 billion or €1.67 billion, they are very large cases in which there is a great deal at stake for taxpayers and the State, depending on whether it has to give the money back. Is there a figure for the success rate or otherwise? One hears a figure of 30% for the number of appeals to An Bórd Pleannála won or lost. Is there a figure for the percentage of those who win and lose?

Mr. Mark O'Mahony

That is not something we track. Every determination we write is put on our website in anonymised form. Therefore, the result of every case that goes to a hearing is available for the public to look at.

Roughly, what percentage of cases go to hearing?

Ms Lorna Gallagher

Approximately 10%.

We do not see what happens in 90% of cases; we only see what happens in 10% of them.

Ms Lorna Gallagher

That is correct.

Mr. Mark O'Mahony

If an appeal is settled between an appellant and Revenue, we do not know what the outcome is, as it is a confidential agreement. We can say what happened if we refuse or dismiss the appeal, but a very significant number of appellants settle while the hearing is pending. Therefore, we are not in a position to give a breakdown. Our focus is not on whether Revenue or taxpayers win more cases. We want to make robust judgments that will withstand scrutiny. We are not really keeping track; we are only interested in getting it right.

I am interested in knowing whether some people are submitting spurious appeals in the hope they will not have to pay something. Generally, people have legitimate and genuine concerns. It may be a misunderstanding and they may win. I am just trying to get my head around the issue.

Mr. Mark O'Mahony

There are some spurious appeals, but the vast majority involve genuine grievances or, at a minimum, a genuine misunderstanding of Revenue's position or a genuine belief they have been taxed incorrectly.

Typically, how long does it take? If a case is submitted today, on average, when will it be resolved?

Mr. Mark O'Mahony

As I said, on average, from the date of receipt of notice of appeal to closure, it takes 343 days, or just shy of one year.

Is there a chance to improve that figure?

Mr. Mark O'Mahony

Yes.

In an ideal world, to what would it be reduced?

Mr. Mark O'Mahony

It depends on the type of case involved. I am not trying to avoid the question, but a very simple appeal, if we were fully staffed and it is clear there has been a misunderstanding of something by Revenue, could be resolved within months. There are certain time periods built into the legislation. One of the first things we do when we notify Revenue of the receipt of an appeal, is we ask if it is valid and if it meets the statutory criteria to enable us to consider it.

Revenue has a 30-day period within which to object to the validity of the appeal. With all the staff and all the budget in the world, there are 30 days that we cannot get around. It is very difficult to say at this juncture what an average time should be or what a reasonable target would be. I suspect ultimately there will be three different targets for simple, medium and highly complex appeals. In terms of putting a number on it, I do not think we are quite in a position to do that yet.

I have one final comment which may not be related to anything. I had a query from someone about a farm consolidation scheme procedure. In theory, a farmer was supposed to get relief if he reduced the number of holdings he had. They reduced their two existing holdings and bought a new one, but they were more or less told it did not qualify. Is that something the Tax Appeals Commission would deal with? Has Mr. O'Mahony ever encountered that sort of issue?

Mr. Mark O'Mahony

I think we do have jurisdiction over a question such as that. I am not 100% certain but I believe we do.

I will ask Mr. Gilvarry about another part of it. On this prospective legislation, which we talked about earlier, why is it in this Bill? It sounds strange that a Bill called the Tax Appeals (Amendment) Bill 2019 has a whole load of stuff in it that does not seem to have anything to do with tax appeals. Is just going into this Bill for convenience? Why is it not in a separate Bill?

Mr. Oliver Gilvarry

Convenience could be one way of putting it. This is as a consequence of European legislation as well. The transposition date for the prospectus regulation is 21 July. It was relatively late. Our intention was to make these amendments via a secondary instrument because the requirements came through from EU legislation so the European Communities Act 1972 would apply. However, we have received advice and therefore need a vehicle.

It is a flag of convenience.

Mr. Oliver Gilvarry

I would not like to say my colleague beside me is a flag of convenience, but it is helpful to have a vehicle that is moving along. They are small consequential amendments to the Companies Acts, many of which are just updating definitions from the 2003 directive to the 2017 regulation.

Mr. Gilvarry is piggy-backing on all the good work of his colleague in terms of being able to use this legislation.

Mr. Oliver Gilvarry

We all work very closely together in the Department and it is all very good work.

I can see that and it is for the benefit of all of us. I thank Mr. Gilvarry.

If an appeal is successful in a certain area, does it have a reflection on other appeals of a similar nature?

Ms Lorna Gallagher

I thank the Senator for the question. There are a couple of answers. If it is a stand-alone appeal and it sets a position in respect of a particular provision of legislation, it is conceivable that on consideration of that position, the Revenue Commissioners will take a particular view. However, it is not a necessity. Any appeal may be appealed by a party who has not been successful. The short answer is that it depends.

If the appeal is successful and it has a bearing on other appeals, is it communicated to the Department of Finance or to the Revenue Commissioners that they should drop any similar type cases?

Ms Lorna Gallagher

In fact, in the Taxes Consolidation Act, if we determine an appeal in a particular manner, under section 949AN, we may write out to similar appellants who may have their appeals pending and we may enclose a copy of the redacted form of the original determination, the one to which the Senator is referring as having set a precedent of sorts. We may inform them that the decision has been made. At that juncture, we will invite them to make representations to us if they wish to proceed with their appeal or if they feel their appeal is significantly different from the appeal that has been determined. They still have an opportunity to convey their position vis-à-vis wishing to progress with the appeal or not. We have a statutory facility that allows us to convey that information to similarly situated taxpayers who may be under appeal in the TAC.

In respect of inheritance, particularly around the area of property, in the past ten years we have seen property values rising very high and falling low. Now they are on the increase again. How is the date determined on which an inheritance takes place? Is the valuation taken at the close or at a previous point? How is that decided?

Ms Lorna Gallagher

The valuation date is dealt with in section 30 of the Capital Acquisitions Tax Consolidation Act 2003, CATCA. There are various iterations in that provision, which is about a page long, setting out when the valuation date crystallises depending on the facts and circumstances of the passing of the deceased. The short answer is that it depends on a given case when the valuation date will crystallise. I appreciate the Senator's point. Crystallisation of that date is a significant event in itself in terms of payment of tax.

It can be very significant. In some cases it can be beneficial, I suppose. A particular date is set out in the Act, then.

Ms Lorna Gallagher

A date is not set out as such but there is a provision that deals with the valuation date and sets out the legal circumstances whereupon that valuation crystallises. Those circumstances arise from the nature and circumstances surrounding the passing of the deceased. That provision sets out when-----

How does one get a valuation of a particular property at a particular time? If someone has to get a valuation of a property for four or five years ago, how is that got?

Ms Lorna Gallagher

It is determined by the application of the valuation provision in the CATCA 2003. That provision is quite complex. It deals with rights and interests in property as well as circumstances, and with entitlement to retain interest in property and when that happens. That area is legally quite complex. I am sorry I cannot give the Senator a clearer answer.

Thank you, Senator. I thank the witnesses for their very detailed and helpful engagement and for their opening statement. I wish them well with all of the work. It is hoped we will see the increase in staff helping to reduce the backlogs and giving satisfaction to people one way or the other. I do not doubt it is very stressful for anyone to put in a tax appeal. It may have great impact on their lives, mental health and so on. The fact that it is being tackled is good. I hope the backlog will be reduced from 658 to zero sooner rather than later and that the commission will be able to manage cases more efficiently over time. I accept that it inherited a lot of stuff and had to deal with it. The committee wishes the Tax Appeals Commission well in its work. That concludes our discussion of this matter.

The joint committee adjourned at 11.40 a.m. until 2 p.m. on Thursday, 13 June 2019.