Mr. John O'Callaghan:

Essentially, I am here because of some of the submissions made at the last hearing of the committee which we did not attend. We did not receive notice of it in time to enable us to attend. We thought the best way to deal with the matter was to make submissions to the committee, as we have done, and also to attend, give evidence and answer questions members might wish to put to us. There are only two of us and we obviously have considerable experience as we were both appointed about 22 years ago. Given that our hearings are held in camera, what we do is not widely known. We thought the most appropriate thing to do was to come to be of assistance to the committee and make a few points we thought were important. That is why I am here.

I will briefly outline the scope of the office. Effectively, we act as an interface between Revenue and the taxpayer on all taxes.

I am looking here because I wanted to talk about our costs, but I am taking it from the last full set of the finance accounts to December 2013. I am just going to the sources of income, all of which we are quite intimately involved with - income tax, VAT, excise duty, corporation tax, stamp duty, customs duties, capital acquisitions tax, capital gains tax and local property tax. We do not have a function in regard to the training and employment levy or motor tax receipts but we do in regard to everything else that has been read out, and also the plastic bag tax, which has not featured but we have had one or two cases on it. We are involved in anything covered under any of those headings. Under the heading of “scope of the work”, in the 22 years since we were appointed there has been a considerable increase in the scope, apart from the fact that new taxes were added. For instance, stamp duty appeals, vehicle registration tax appeals, and custom duties appeals, among others, have all been added on, but much more importantly, the nature of the work has changed hugely. VAT, to be blunt, is a bit of a monster. It is rooted in European law. We frequently have cases where there are perhaps three or four ring binders of European precedents and complex arguments about European and Irish case law involving barristers on both sides. Essentially, the work we do has become much more legalistic in the past 20-odd years than was the case previously.

Self-assessment was introduced in the late 1980s. Prior to that, people were using the appeals system as a way of deferring payment of tax. They were dragging things out. The legislation on self-assessment reversed all of that. It said that if one has not paid one’s tax and submitted one’s tax return, one will not get an appeal. Things have changed dramatically since then. The way the Revenue Commissioners approach matters has changed. When we started, we had quite a lot of cases in which the Revenue Commissioners might be arguing about mileage allowances, for example, but that is all gone now. It is much more practical in its approach. Some of the cases we hear are short but many of them are very lengthy. We have had several cases lasting weeks.

Perhaps a very important point to make which people may not be generally aware of, although I am sure everybody here is aware of it, is that there is no limit on the jurisdiction in regard to matters we hear. On one hand, it could be tens of millions, while on the other, if one goes to the District Court the jurisdiction is €10,000 to €15,000 and in the Circuit Court it is €30,000, perhaps going up to €50,000. There is no limit on cases we hear. I have a couple of cases running at the moment involving €10 million in tax. The work has become much more technical, particularly with the European dimension.

We act as an interface between the Revenue Commissioners and the taxpayer. We go around the country. A taxpayer in Kerry can have his or her appeal heard in Killarney or Tralee. We counted it up this morning and there are 18 different locations in which we hear appeals. When we are down the country we typically hear appeals in the local courthouse, but sometimes they are held in a hotel. In terms of the cases before us, frequently the taxpayer will turn up on his or her own. We do not award costs. We do not have the power to do so, which is probably a good thing, but more and more the issues are technical and detailed.

In terms of our resources, I will start by giving the committee the figures from December 2013, as they have not changed very much. The voted expenditure, current and capital, for the Office of the Appeal Commissioners for 2013 was €409,000. That represents two assistant secretaries, namely me and Rónán Kelly, and, in that year, one executive officer and one clerical officer. We had a total complement of four. We have gained one clerical officer since then, so now there are five people in the entire office. For many years we have had great difficulty dealing with the recruitment embargo, which has prevented us from bringing on board researchers or whatever else, which would have been very helpful. To blow our trumpet a little bit, Vote 10 for the Office of the Appeal Commissioners is €409,000. I note that Vote 15 is for the Secret Service, which comes in at €635,000. The Vote for the Office of the Chief State Solicitor, which is about 60 times bigger than us, is €28 million. The Office of the Ombudsman costs €6.5 million, which is roughly 14 or 15 times more than the cost of our office.

To stress the scope of our resources, we made some detailed submissions in writing to the committee. I do not propose to take up the committee's time at this phase, but I do wish to raise a couple of points in regard to proposals in the heads of the Bill. On the matter of public hearings in the heads of the Bill, initially I wondered about it, but while I am personally in favour of it, that will have to be carefully considered. I do not mean this as a criticism of the Revenue Commissioners for a minute, because I am on record as saying the Revenue Commissioners do a wonderful job. The one circumstance we do not want to come about is where someone is effectively threatened that their case will go to appeal and the appeal on their tax affairs will be held in public. I could imagine lots of situations where someone might be sensitive about issues or they might be afraid of going public, and where the matter of the appeal being public would work against them. I am in favour of the proposal generally, despite the comment, but there would probably need to be pre-hearings at which there could be consideration of what would be made public.

The Bill, as drafted, raises questions. Section 949Y deals with public hearings. It starts out by saying that every hearing of an appeal shall be public other than the preliminary hearing, and subject to subsection (2). Under subsection 2(a) the Appeal Commissioners may give a direction that a hearing or part of a hearing is to be held in camera if they consider that restricting access to the hearing is necessary in the interests of public order or national security. That is fair enough. I think that would be unusual enough. The second category of exemption is to avoid serious harm to the public interest - ditto. The third category is to maintain the confidentiality of sensitive information. That is immediately brought into question. The fourth category of exemption is to protect an individual’s right to respect for his or her private and family life or, lastly, in the interests of justice. The point in subsection 2(a)(iii) is to maintain the confidentiality of sensitive information, but that is trumped by subsection (3), which states: “Nothing in subsection (2) shall be taken to mean that the grounds on which access to a hearing is to be restricted extend to maintaining the confidentiality of a person’s taxation, financial or business affairs." I do not propose to go into an analysis of that here. That is a matter for the committee to consider. Issues arise as to whether this essentially says that maintaining the confidentiality of sensitive information does not extend to maintaining the confidentiality of a person’s taxation, business or financial affairs. In other words, if I am running a small shop in a town and the Revenue Commissioners are auditing me and I am going to appeal, perhaps my accounts are going to be public and my competitors will be able to see how I am doing and, as I read the draft Bill now, I will not be able to claim that the information should be kept confidential because my business affairs are sensitive. That is a matter which requires further discussion, but it is important because it is such a dramatic change in the nature of the appeal hearings. It is a cultural thing as much as anything else, one that needs considerable debate both for and against. It is a difficult issue.

The other area that comes up regularly is the matter of our jurisdiction. We have jurisdiction over, essentially, mostly tax assessments, which sometimes quantify the amount of tax due. Sometimes there might be a decision by the Revenue Commissioners, such as a refusal to grant artistic exemption for a book or a refusal to grant medical expense claims or whatever else, but regularly, there are matters dealing with discretions afforded to the Revenue Commissioners.

I will give the committee an example of a case I heard not so long ago. It was within the past couple of months. I will change the facts a little bit. A couple had separated in the late 1990s. They had agreed that they would continue to be taxed as though they were married, as they are perfectly entitled to do. In the early 2000s, the wife went to the inspector of taxes and stated that she wished to be singly assessed. The inspector then explained to her that as a consequence, the maintenance being paid by her husband would, in the future, be taxable in her hands. Up to that point, because they were treated as if they were still a married couple, there was no tax effect on transfers between them. She paid tax on that amount. Then, quite a lot of years later, the husband discovered that this had been going on. His tax advisers sent in a series of tax returns claiming tax relief, for about ten years, on the payments he had made to his wife and in respect of which she had paid tax. The Revenue Commissioners said, "We know we did not inform you that your wife had changed the circumstances, but we felt we could not because she was a separate taxpayer. Now you are looking for tax refunds in respect of moneys on which she has paid tax, but there is a four-year time limit on the refunds. Therefore, you cannot have them."

There are a series of issues in this, with which I will not bore the committee, not least of which is section 955(2)(a), which deals with the four year time limit and circumstances in which the Revenue Commissioners do not need to enforce it. In fact, the Revenue Commissioners had acted in a manner which I believed I did not have jurisdiction to overrule. There is a possible argument regarding a Supreme Court case - the Keogh case - which is to do with the taxpayers' charter. The simple thing to do, which is what I urged it to do, was to allow, in the circumstances, the tax relief to the husband in respect of the amounts on which the wife had paid tax. Strictly speaking, I am not sure I had that jurisdiction. The inspector had failed to inform the husband. Generally, the principle is that we do not have jurisdiction over the behaviour of the Revenue Commissioners; we have jurisdiction over the quantum of tax. A similar point applies in the UK. The First-tier Tribunal, which is the equivalent of our office, would not have jurisdiction for equitable remedies such as legitimate expectation.

Another example might be an extra-statutory concession where the Revenue Commissioners might do a deal with a building company and allow meal allowances, etc., on a certain scale. There might then be a disagreement between the Revenue Commissioners and the builders. The builders would appeal and we would say that it was an extra-statutory discretion and that we do not have jurisdiction. Mr. Justice Frank Murphy in the Revenue Powers Group recommended that our jurisdiction be increased to take account of this. As we see it, we do not have that function at the moment. This is an important area which needs to be addressed and is not currently addressed in the Bill.

There are various other matters to which we have adverted in our written submissions. Another heading is "expertise required to carry out the functions of the review commissioner". We are of the view that it has become so legalistic that it would need a legal degree. Neither of us has a legal degree, but we have been doing the job for 20 years and we have been gradually educated about many issues. Coming in cold would be difficult for someone who is not a long-term tax expert or does not have a legal background. Those are the principle points I wished to make, but there may be questions.