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 camerarule, 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 camerarule in High Court and Supreme Court tax appeals which was removed the 1980s. We would note that change has not deterred people from proceeding.