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.