Thursday, 1 October 2015
Finance (Tax Appeals) Bill 2015: Second Stage
I move: "That the Bill be now read a Second Time."
The Bill will reform the role, functions and structure of the Office of the Appeal Commissioners and the tax appeals system, and will ensure an enhanced and cost effective appeal mechanism for tax cases, providing transparency and increased certainty for taxpayers. The Appeal Commissioners are responsible for carrying out the statutory duties assigned to them under the Taxes Consolidation Act 1997, TCA, and related legislation, principally the hearing of appeals by taxpayers against decisions of the Revenue Commissioners concerning taxes and duties. The commissioners hear appeals relating not only to income tax but also to corporation tax, value added tax or VAT, capital gains tax, stamp duties, capital acquisitions tax, customs and excise duties, vehicle registration tax and local property tax. Most appeals relate to the amount of an appellant’s tax liability.
The Appeal Commissioners are independent in carrying out their functions, and I wish to acknowledge the valuable role that the commissioners play in the operation of a fair and efficient taxation system, and in particular the contributions, since their respective appointments in 1992, of the current Appeal Commissioners, Mr. John O’Callaghan and Mr. Ronan Kelly.
The Irish tax appeal system has been examined over the years and the following reports or tribunals have made recommendations about the appeal commissioners in that time: the steering group on the Revenue Commissioners (2000); the Dáil Committee of Public Accounts final report on the DIRT inquiry (2001); the Revenue powers group report (November 2003); the Law Reform Commission report on a fiscal prosecutor and a revenue court (2004); and the Commission on Taxation report (2009).
There have been proposals for changes to the appeals system from stakeholders, including the professional representative bodies, such as the Irish Tax Institute and the accountancy bodies. Accordingly, it is timely to proceed with this reform process, which will ensure the continued provision of a cost-effective appeal mechanism for tax cases, enhanced transparency and increased certainty for taxpayers.
I announced in budget 2014 my intention to instigate a reform of the appeal system for tax matters, including a reform of the role, functions and structure of the Office of the Appeal Commissioners, and the Bill I am introducing today is the culmination of a process which involved constructive dialogue with stakeholders on the oversight and operation of the tax appeals system towards a common objective of reform to enhance the system for all participants.
The reforms proposed will bring appeals through the initial stages in a more streamlined fashion, with enhanced case management procedures to facilitate a more efficient and structured flow of appeals. The proposed reforms will end the practice of appeals being made via the Revenue Commissioners and will involve a significant change to the process for appeals by way of the "case stated" procedure for the High Court, and the removal of the Circuit Court rehearing stage of the appeal process. Opportunities for redress also exist in certain circumstances by way of judicial review and appeal to the Court of Justice of the European Union.
In accordance with the agreed protocol for pre-legislative scrutiny by Oireachtas committees, the heads of Bill were sent to the Joint Committee on Finance, Public Expenditure and Reform, which issued its report on 16 April last. Following consideration of the report of the joint committee and concerns expressed by stakeholders prior to and during the pre-legislative scrutiny process, I decided to change the provisions in the heads of Bill regarding public hearings of tax appeal cases. The heads of the Bill envisaged that hearings before the appeal commissioners, heretofore held privately or in camera, would in future he held in public session following enactment of the legislation. While the default position will still be for public hearings, the Bill has been drafted to provide that where an appellant requests it, the hearing of his or her tax appeal will be held in private. I consider that this provision will meet the concerns of the committee and stakeholders. The committee considered that transparency, which had been one of the objectives of the original public hearings proposal, would be enhanced and clarity provided to taxpayers and the general public if all hearings were accompanied by written determinations, as is proposed.
The key elements of the Bill are as follows: the establishment and structure of the commission; the appointment and removal process for appeal commissioners; the terms and conditions of appeal commissioners; the provisions for staffing and funding of the commission and its accountability; a new Part 40A of the Taxes Consolidation Act 1997, or TCA, providing for a wide range of amendments to the legislation governing appeals in regard to the various taxes under the care and management of the Revenue Commissioners; and a Schedule of consequential amendments to the various tax and duty Acts arising from reform measures and from the effect of the new Part 40A. The main thrust of the reform is to strengthen the independence, and the perceived independence, of the appeal commissioners. The measures to achieve this contained in the Bill include appropriate selection and appointment provisions involving the Public Appointments Service, fixed-term appointments, a clear statutory statement of independence, new funding and staffing arrangements and the making of appeals directly to the appeal commissioners, and not via Revenue, as currently happens.
The Bill is in five Parts and has two Schedules. I will outline the provisions of Part 2 in some detail. As the provisions of the subsequent sections are extensive and complex, I will give an overview of their essential components. I look forward to detailed consideration of them on Committee Stage and later Stages, if the House sees fit to pass this Stage of the Bill.
Part 1 is preliminary and general. It contains standard provisions comprising the Short Title and commencement provisions, together with interpretations and definitions for the Bill.
Part 2 deals with the tax appeals commission. It contains provisions relating to the establishment of the tax appeals commission, its membership and functions and the appointment, terms and conditions of the individual appeal commissioners and their staff. The more important of these provisions are described below.
Section 6 sets out the functions of the appeal commissioners in regard to the acceptance, refusal, adjudication and determination of appeals, the conduct of hearings, the provision and publication of determinations, the stating and signing of cases for the High Court and the establishment of efficient and effective systems and procedures for the processing of appeals. The commissioners are required to conduct appeal proceedings in a way that is accessible and fair and as expeditious as possible. The functions of the commissioners can be performed by any one of them acting individually, unless they have provided otherwise in their rules of procedure.
Section 8 deals with the appointment of appeal commissioners. The Minister is required to have the Public Appointments Service assess and select candidates for appointment as a commissioner and to recommend suitable candidates to the Minister. The Minister is given powers to specify requirements with which candidates must comply, such as practical experience or academic qualifications. The Minister is permitted to appoint a serving commissioner for a second term, without recourse to the Public Appointments Service, where the commissioner’s first term of office has expired. A commissioner is precluded from serving for more than two consecutive seven-year terms.
Section 9 provides for temporary commissioners in cases where the full-time commissioners have recused themselves. In such cases, the Minister can appoint a Circuit Court judge as a temporary commissioner. The Minister can also appoint a person as a temporary commissioner in non-recusal situations where circumstances require such an appointment, for example, in a situation where there has been a significant increase in appeals and a temporary commissioner is required to help deal with it.
Section 10 establishes the independence of the tax appeals commission and its appeal commissioners in the performance of their functions. Section 13 provides that the term of office of appeal commissioners will be seven years, with scope for the Minister for Finance to reappoint a commissioner for a second and final seven-year term. Section 17 provides for the Minister’s powers to remove commissioners from office for stated reasons, subject to the Minister laying a statement before the Dáil giving the reasons for any such removal.
Section 18 provides for the cessation of a commissioner’s tenure where she or he is adjudicated a bankrupt, makes a composition or arrangement with creditors, is convicted of an offence or ceases to be ordinarily resident in the State. The section also provides for the cessation of a commissioner’s tenure on his or her nomination or election to various public offices such as the Oireachtas, a local authority or the European Parliament. Section 19 provides for the funding of the commission to be as determined by the Minister for Public Expenditure and Reform. Section 20 provides that staff numbers of the tax appeals commission are to be determined by the Ministers for Finance and Public Expenditure and Reform.
Section 21 requires the appeal commissioners to submit annual reports to the Minister for Finance, who will lay them before the Houses of the Oireachtas. These reports are to contain specified statistical information in regard to appeals where this is required by the Minister or by any enactment. The commissioners will also be able to report to the Minister on other matters as they consider appropriate. The Minister may require the commissioners to report on various matters but this is subject to the commissioners not being required to include information on matters that would prejudice the performance of their functions.
Part 3 deals with transitional provisions. It provides for the treatment of existing appeals when the new appeal process comes into operation. It contains provisions relating to the arrangements for transitioning from the old appeal process to the new appeal process. On the commencement date for the new appeal process, appeals will already have been made and will be at various stages of the old appeals process.
Many of the steps in the old appeals process will continue under the new process. The general rule is that existing appeals will move on to the next analogous stage in the process. Thus, for example, appeals that have already been made to Revenue will be transferred across to the appeal commissioners and the revised "case stated" procedure for appeals to the High Court will apply to appeal commissioners’ determinations made after the commencement date. However, there are exceptions to this general rule, for example, a taxpayer whose appeal has been heard but not determined will still be entitled to a rehearing before a Circuit Court judge, should he or she lose the appeal.
There are also provisions to allow a different appeal commissioner to finalise an appeal in circumstances where the appeal commissioner who started the adjudication is unable, for example because of retirement, to finalise the appeal.
Part 4 concerns the insertion into the Taxes Consolidation Act 1997 of a new Part 40A which deals with appeals to the appeal commissioners. Part 40A contains provisions relating to the entire appeal process and to the appeal commissioner's conduct and management of that process, commencing with the making of appeals and their acceptance or refusal, progressing to adjudication, hearing, determination and publication of determinations and finishing with appeals to the courts against determinations of appeal commissioners.