Thursday, 28 November 2019
Finance Bill (Tax Appeals and Prospectus Regulation) Bill 2019: Second Stage
The proposed Finance Bill (Tax Appeals and Prospectus Regulation) Bill 2019 has three Parts. The first Part contains the Short Title and commencement and definitions section. The second 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. The third Part relates to the transposition of the EU prospectus regulations by an amendment to Part 23 of the Companies Act 2014.
Part 2 relates to the tax appeals process. I am aware that a number of Senators engaged in discussion of this Bill at the pre-legislative scrutiny stage. I confirm that the recommendations of Senators were taken into account in the drafting process.
The Tax Appeals Commission was established on 21 March 2016 under the Finance (Tax Appeal) Act 2015, taking over the former Office of the Appeal Commissioners. Since its establishment, staffing at the commission has grown from two Appeal Commissioners and four administrative staff to five Appeal Commissioners and 22 administrative staff at various grades. However, a number of factors, including the transfer of a substantial number of legacy appeals from Revenue and a change in the appeals process and establishment of the commission, have contributed to the development of a backlog of appeals.
The Minister for Finance, Deputy Donohoe, commissioned an independent review of the workload and operations of the Tax Appeals Commission in 2018. This review examined the governance structures, workload and operations of the commission. The Minister has expressed his full support for the recommendations and work on implementation is ongoing both in the Department and the Tax Appeals Commission. The actions taken to date include a significant increase in the commission's budget, the recruitment of three additional temporary Appeal Commissioners and an increase in staffing of administrative and technical grades in the commission.
This Bill will enable the progression of another key recommendation of the independent review which is the appointment of a chairperson of the commission. The chairperson, who will also be an Appeal Commissioner, will be responsible for ensuring the efficient operation of the Tax Appeals Commission and will be 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 in line with other similar bodies.
A number of technical amendments to the Tax Appeals Commission are also being made. The Bill will remove any ambiguity as to the ability of the Tax Appeals Commission to enter into a contract and thus guarantee its independence. It will also clarify some aspects of the existing appeals legislation with respect to the process of appealing a determination to the commission or the High Court in order to facilitate the appeals process.Part 3 of the Bill will amend Part 23 of the Companies Act 2014 as part of the transposition of the EU prospectus regulations directive. Ireland's prospectus framework is implemented into Irish legislation through statutory instrument and Part 23 of the Companies Act 2014. The Bill provides for amendments to Part 23 of the Companies Act 2014 to complete the transposition into Irish law of EU Regulation No. 2017/1129 of the European Parliament and the Council on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The regulation entered into force on 21 July 2019 and repealed the 2003 prospectus directive. Although the majority of the regulation is directly effective, certain provisions had to be transposed into Irish law through the European Union (Prospectus) Regulations 2019, contained in Sl 380/2019, which were enacted on 19 July 2019.
The EU regulation harmonises the requirements for the drawing up, approval and distribution of the prospectus that must be published when securities are offered to the public or admitted to trading on a regulated market. It aims to help companies, particularly small and medium-sized enterprises access more diverse sources of finance by simplifying the rules applying to prospectus documents while maintaining appropriate investor protections. The regulation aims to reduce the overall cost and administrative burden for companies that are required to issue a prospectus, while enabling investors to make informed investment decisions on the basis of the information provided being accurate, comprehensible, concise and easy to analyse. It was originally intended that the required changes to Ireland's prospectus framework would be made through a consolidated secondary instrument. However, on the basis of legal advice it was deemed necessary to make some amendments through primary legislation, and that is why I am here.
The amendments to Part 23 of the Companies Act 2014 provided for in the Bill are mainly technical in nature. I will also have the opportunity on Committee and Report Stages to debate these matters in depth. I commend the Bill to the Seanad and thank the Senators who engaged at the pre-legislative scrutiny level.
I thank the Minister of State for his comprehensive statement. I will try not to repeat all the wonderful aspects that the Minister of State outlined about the Bill and only say that Fianna Fáil welcomes the Bill.
The Minister of State acknowledged there have been significant issues with the Tax Appeals Commission - mainly the lengthy backlog and the number of cases that are before it. At the end of June 2019, there were under its remit 3,543 active appeals. Since its inception, that list is getting longer where the commission is opening more appeals. In 2016, more than 2,300 appeals were received and 200 were closed. In 2017, 1,700 more appeals were received and fewer than 700 were closed. In 2018, 1,700 were received and 1,400 closed. In 2019, the figures show that up to the end of June, 672 were received and 580 closed. All of the time, the list is getting longer. I appreciate that is the reason we are here. That is the reason we are debating this Bill to allow for an increase in the number of people who can deal with this stuff. There will be three additional temporary appeal commissioners. That is a welcome development. I can certainly put on the record that Fianna Fáil and I will support any measure that helps to further address the backlog and makes the appeals commission even more efficient.
The appointment of a chairperson on a statutory basis is important. It is certainly of concern that the backlog is getting bigger rather than smaller. It is important that we appreciate that some of these appeals are very large. There is one of over €1 billion in play. Clearly, while the State would like that money, and we all would like that money for the use of the State, it is not the State's money until it has been resolved one way or the other. Whether we have it in an escrow account or we have it sitting somewhere, we cannot use it until we know we have the use of it and it has not been refunded.
Much of the debate on this Bill has been probably caught up in the tax appeals. The prospectus regulation part of the Bill has not been referred to as much but it is important to realise that now the definition of a local offer can increase from €5 million to €8 million meaning that some small and medium-sized enterprises making offerings up to €8 million can submit a local offer rather than having to issue a full prospectus. That is welcome in the context of people trying to raise legitimate funds to grow their businesses right across the country.
I do not want to delay the House. We have had problems with the Tax Appeals Commission in the past. There were 25 recommendations published on budget day last year and there has been no update on any of those. The problem has been getting worse. Hopefully, this Bill is part of that. It has been quite slow in coming but, nonetheless, I welcome it.
I thank the Minister of State for being here. I appreciate that the sooner we get this legislation through these Houses the better. Committee and Remaining Stages are being taken on Tuesday next. I thank Deputy O'Donovan for the work he is doing on all of our behalf.
The two elements to the Bill are the amendment of the Act about the appointment of the chairperson of the appeals commission which appears technical in nature, and Part 3, which is the change to update the definition of EU prospectus law which also looks to be a technical point.
I would make a general point on the area of tax appeals. There has been various legislation coming through and there has been a considerable backlog in the area of appeals. It has been open to abuse where people have used it to delay decisions being made. Equally, it has been used as a tactic whereby those who want to get a resolution of their tax situation have to wait an inordinate length of time. Therefore, I welcome the fact there are extra resources going into this area.
The most important aspect of an appeal mechanism for me is that it is comprehensive and takes place in a reasonable length of time. There are many businesses put in a state of limbo until their appeal hearing is completed. In many cases, they wait an inordinate length of time. In my view, if one has appeals heard in a reasonable length of time and they are held by competent individuals, the system should be robust enough to deal with those who are looking for a quick resolution to get on with their business and, equally, to deter those who might use the mechanism as a way of deferring having to make a decision or pay a tax. I wholeheartedly agree with such a system.
The Bill deals with two particular aspects, the first of which is appointing the chairperson. I did not hear the Minister of State's speech. Has an interim chairperson been appointed yet?
Good. The issue in Part 3, which is to update the definition of EU prospectus law, is technical in nature. Overall, I welcome the update of the entire appeal mechanism, both in terms of resources and ensuring that they are heard and expedited. It is most important in terms of the functioning of businesses.
I thank the Minister of State. He will be pleased to hear this is a Bill I very much welcome.
The Bill deals primarily, as the Minister of State said, with the two issues of tax appeal and prospectus regulation. Section 5 amends section 4 of the Finance (Tax Appeals) Act 2015, which itself established the Tax Appeals Commission to replace the Office of Appeals Commission. This is important because of the increased number of tax appeals being made. It is worth noting that in 2018, the Tax Appeals Commission closed 1,440 appeals and the amount of tax involved was €560 million.
The appeals process, as was said, can often be slow, legalistic and increasingly bureaucratic. I would support whatever can be done to sharpen that up to get rid of some of the bureaucracy so that decisions can be made quicker because there is not only financial stress, but all of the other stress, involved.The Bill will provide the chairperson with a specific responsibility to ensure the integrity of the commission's financial and accounting reporting systems, which is important. Additionally, the chairperson will ensure the compliance with freedom of information and data protection law.
I will not say much more. We will be examining it on Committee Stage, and I understand the rationale behind the amendments. However, it is important that these provisions do not excessively impede the ability of the taxpayer to appeal the determination by the Tax Appeals Commission to the High Court in good faith and with justification. We will look at that on Committee Stage.
While we are looking at tax appeals, we have to look also at the Apple appeal. The new chairperson who comes in will be wondering why we are doing that. I will ask the Minister of State just one question. How much have we spent on the appeal in the Apple case?
We will have a closer look at this. I welcome the Bill. It will do a significant job for people who are dealing with the tax system. God knows, businesses face enough pressure without being held up by Revenue as well. Transparency is extremely important. I thank the Chair and the Minister of State and I look forward to Committee Stage.
I thank all Senators who have engaged with the Bill. Senator Conway-Walsh is right that there will be a further opportunity on Committee Stage.
In the context of the appeals that were closed between 21 March 2016 and 29 October 2019, the total number was 3,750, involving a quantum of €1.3 billion. As of 29 October last, the amount of money still in dispute with the Tax Appeals Commission stood at €3.68 billion. By any stretch of the imagination, these are not small numbers. All the Senators who spoke are right in saying there are legitimate reasons that people want to make appeals. It needs to be done faster.
Senator O'Donnell asked about the chairperson. That person will be appointed as soon as we can get legislation through, and it has been through the other House. I am delighted Senator Conway-Walsh is supportive. We have often crossed swords on other issues but I am very happy she is supporting this.
It is great and is a sign of things to come.
With regard to the question on the Apple tax appeal, I am not going to refer to an individual company but I would point out that is not a matter for the Tax Appeals Commission but is an EU matter. I am sure that if there are specifics the Senator wishes to raise with the Minister for Finance at another opportunity, he would be delighted to respond.
In the context of the overview of the prospectus regulations, I reiterate that the threshold exempting securities offerings from the requirement to issue a prospectus is being increased from the current €5 million limit to €8 million, as provided for in the regulation. Given the increased offer threshold, and following consultation with the Central Bank of Ireland, additional disclosure requirements are to be inserted into the local offer regime to improve the investor protections currently available in section 1361 of the 2014 Act.
I thank the House for facilitating the debate on Second Stage. It will either be the Minister, Deputy Donohoe, or the Minister of State, Deputy D'Arcy, who will take the Bill through Committee Stage and Report and Final Stages.