Mr. Charlie Phelan:

Senator O'Donnell has raised several issues. I will try to go through them. Perhaps the Senator will remind me if I leave out anything.

The first question was why a letter came out of the blue. For the past year or so we have been looking at the valuation of shares in the context of people disposing of them and paying capital gains tax and capital acquisitions tax arising from the inheritance of shares. It was only at that point that we became aware that there was a grey market in the shares. It was only then that we really became aware that patronage shares were issued in respect of the supply of milk to the nominated purchaser. In other words, we realised that the co-operative issued a share based on each 1,000 gallons delivered to Kerry plc, the nominated purchaser, in accordance with the rules. In some ways, that explains why we are only going into it now.

Why did this happen out of the blue? In Ireland we operate on the basis of full self-assessment in tax. We accept all the returns and issue assessments based on the return that the taxpayer makes. If there is an inquiry or a concern about the risk arising, any inquiry we make will naturally come out of the blue because we do not engage with people until such time as we have some issue to address. In reality, we look at 5% or 6% of all returns by some form or inquiry. They vary from this kind of inquiry to an aspect query, which is the easiest and cheapest form to comply with, up to an investigation. These are outlined in the code of practice.

I wish to deal with some of the other points about the practicality of this and the 60 days for a test case. We have no issue with a test case but it is a matter entirely for the Tax Appeals Commission. A person cannot take a test case and have cases like it considered without raising an assessment, having those assessments appealed and allowing the Tax Appeals Commission to list one and carry on. We have no issue about the technical point and we will facilitate that.

Senator O'Donnell made reference to the 60 day period. The committee should remember that in no letter of ours to the taxpayer did we seek any money.