Prepared for Main TALC – April 2006

Introduction

This discussion paper has been prepared following debate at Main TALC on 21 February concerning Revenue Customer Service and reducing the difficulties in service delivery which are currently being experienced.

CCAB-I recognises that over the past 15 years, the amount of money collected by Revenue has quadrupled, while the number of Revenue staff has remained relatively static. Despite the impact of inflation and efficiencies through the use of ICT, this statistic still reflects the efficiencies realised by Revenue staff, but in particular by tax payers and their agents. It is in everyone's interests that these efficiencies be preserved.

A poor quality service to taxpayers from Revenue results in increased compliance costs. It is not to be expected that Revenue would seek to address this issue for altruistic reasons. It is in Revenue's interests to ensure that compliance with Revenue law and practice can be achieved at a reasonable cost to all tax payers. Otherwise the fairness of the overall tax take will be as distorted. As over 90% of all mainstream direct tax returns are completed with the agent assistance, Revenue cannot disregard the negative impact on overall compliance levels of poor customer service to agents.

Self assessment has been in place for almost twenty years. It has its advantages. One of the downsides however of self assessment for taxpayers and their agents is that it has permitted Revenue to introduce limits, restrictions and deadlines which could never have been countenanced if Revenue were still fully responsible for the assessment of tax. No bureaucracy could administer the complexities accountants and taxpayers now undertake as routine matters.

The particular areas of customer service difficulty have been well identified already – we do not propose to revisit them here. The purpose of this paper is to propose approaches as to how some of these might be resolved.

Assessments

Despite the fact that we are operating a “self assessment” regime the assessment remains a fundamental component of the tax compliance system both for income tax and corporation tax.

It is common ground that ROS has impacted very positively on the ratio of correct assessments issuing. However, there remains a block of returns (for the filing date October 2005, some 135,000) which are prepared on paper. Difficulties with incorrect assessments generate high volumes of Revenue contact between tax payers and their agents.

Recommendation 1 – Extend ROS functionality for Income Tax cases.

CCAB-I wishes to cooperate with Revenue on a review of ROS functionality to arrive at a situation whereby a higher proportion of returns could be furnished on ROS. This process has already commenced through the TALC Collection group. If the handling of returns for death cases and non-resident cases could be prioritised when applying further enhancements to ROS, we believe that ROS take up percentages will increase, resulting in turn in fewer incorrect assessments.

Recommendation 2 – Reward companies which elect to use ROS to file their returns

Take-up of ROS by companies compared to take-up by individuals is low. CCAB-I recognises the merits of electronic filing, but also recognises that it can create an additional administrative burden, at least initially, for taxpayers and their agents. An effective incentive, comparable to the incentives available to income tax payers, must be introduced.

CCAB-I's position on preliminary Corporation Tax has already been notified to Revenue via the TALC Simplification process. As an immediate minimum incentive, and without prejudice to our position on the matter, Revenue should consider permitting companies which file electronically to pay their preliminary tax based on the previous year's final liability.

Recommendation 3 – Fast track the repair of assessments

The process of correcting Income Tax assessments is cumbersome. In many cases, all that is required is the correction of one or two figures. We suggest that a procedure be introduced which would permit the rapid repair of incorrect assessments.

This procedure would involve the creation of assessment repair form. Ideally this should be available on-line. Where an incorrect assessment is received by an agent or tax payer, a note of the required repair could be made on the form. The form would include a declaration which would merely state that the repair being requested is in accordance with the return as submitted.

Requests for repair would be submitted to a central location, or perhaps to a central location for each of the Revenue regions. Revenue in turn would undertake to have a dedicated team processing these repairs. Revenue would also undertake a reasonable turn around on the requested repair. It is likely that this team would only need to operate for part of the year, around the assessment season.

A further advantage of this proposal is that it would permit the tracking of frequently occurring errors. This in turn would permit improvements either on the face of the form to promote clarity, or on the processing procedures already in place within Revenue.

If this procedure is operated correctly, it should eliminate the need for telephone contact in relation to the repair of assessments.

Application for Tax Registrations and VAT Registrations

It is a source of puzzlement to tax payers newly arrived in the country that the process of obtaining PPS numbers and VAT numbers should be so protracted and cumbersome. CCAB-I recognises that tax registration numbers have a commercial value, and that careful procedures are required to ensure that they are properly signed and allocated. We acknowledge this is particularly true of VAT registration numbers. Similar difficulties relate to RCT registrations.

According to Revenue's own customer service standards, as published in the 2004 Annual Report, registration processing falls short of target. Anecdotal evidence suggests that the current position has not improved substantially, if at all.

Registrations – Target	Result –2004
VAT: 100% within 10 working days	69%
Other: 100% within 5 working days	68%

Recommendation 4 – The processes for handling requests for registration should be improved as a matter of urgency

We encourage Revenue to revisit their work process in relation to the issue of tax registration and VAT numbers. Not only would this reduce immediate levels of tax payer and agent contact, but it would also serve to provide for the increased demand for registrations given the level of immigration and anticipated economic expansion.

Recommendation 5 – Recognise existing compliance records in handling registration requests

In many instances, requests for VAT registration are made by new entities perhaps within a group of companies, or tax payers with a good Revenue record who are registering for VAT for the first time. The application form should be redesigned to reflect these aspects, if they are present in any given individual application. Such applications could then be fast tracked by Revenue with reasonable confidence that the application is not bogus or spurious.

Recommendation 6 – Fast track registrations from reputable sources

Revenue may also wish to consider fast tracking applications made by accounting firms. It is now a commercial reality that accounting firms must, if only by virtue of the money laundering regulations, perform considerable due diligence on new clients to satisfy themselves that they are happy to accept the client's work. It is wasteful and inefficient for this due diligence process to be disregarded when processing applications for tax registration.

Technical Guidance from Revenue

Technical guidance sought by accountants from Revenue can fall into the categories of straight forward technical information, confirmation of Revenue interpretation, or “advance clearance” in accordance with procedures set out in Tax Briefing Issue 48.

Straightforward Tax Information

Revenue are to be commended for their proactive approach through their website in particular in assembling content which is reasonably easy to find and easy to use. CCAB-I would encourage Revenue's efforts in this regard.

Recommendation 7 – Time stamp technical content and remove obsolete content

We would strongly urge a more systematic approach to a recent development whereby modified guidance, statements of practice, information leaflets and so forth are flagged as having been changed. This will help ensure that obsolete or out of date information is not being used. An example of where this should be pursued is the Trade Rulings published in 2004. These rulings have not been updated since initial publication.

Information on Revenue's Interpretation of a Technical Point

It is acknowledged that this area is more problematic. CCAB-I welcomes the establishment of the TALC technical sub group, which will attempt to identify frequently recurring areas where Revenue interpretation has been requested, and publish any necessary commentary arising.

This initiative however may not go far enough. It is not acceptable that Revenue should rely solely on the engagement of the professional representative bodies such as CCAB-I to address the current shortcomings.

Recommendation 8 – Restore the Revenue Precedents service

Revenue should consider making available contact details for recognised subject matter experts in each of the regions.

Such experts would serve as the first port of call on matters of interpretation. However, for such an initiative to be truly effective, the views expressed by the subject matter experts must be codified and published, in a fashion akin to the publication of the Revenue Precedents under the Freedom of Information Act some years ago. For example, many advance rulings are sought in relation to Share for Undertaking reliefs – the publication of precedents in this area would reduce the number of advance rulings sought.

Recommendation 9 – Develop the concept of technical adjustments

A range of circumstances should be identified and defined to permit transactions to proceed without exposure to interest or penalties, even where it subsequently transpires that the interpretation applied might have been incorrect.

Many issues arising are quite time sensitive, and CCAB-I recognises that no system can turn around all technical queries within the requisite time. In the United States, in certain circumstances, recognition is given where a tax payer has obtained independent professional advice on a technical point. In such circumstances, if it transpires that a transaction has not been correctly handled from the technical standpoint, the tax arising can be paid over without either interest or penalty. It should be noted that the Code of Practice for Revenue audits recognises the concept of “technical adjustments” whereby tax items can be corrected without penalty (though not without interest).

We have in mind here transactions where there is a defined and available tax relief – for example, capital gains tax retirement relief, or company buy back of shares.

Recommendation 10 – Acknowledge queries

Acknowledgments should be issued by Revenue on receipt of a query.

Accountants will be encouraged to provide an e-mail contact address when making a query. We suggest that it is good practice for Revenue to acknowledge receipt of the query through a simple e-mail. Ideally this acknowledgement would provide an indication of the likely date of response to the query. We believe that this in itself would reduce the number of contacts with Revenue offices.

Recommendation 11 – Determinations of the Appeal Commissioners should be published as a matter of routine

The determinations of the Appeal Commissioners offer a rich source of analysis and interpretation. To date only 31 determinations have ever been published, the most recent being in May 2005. Nevertheless, all determinations are available to Revenue. This is indefensible in the context of customer service.

Recommendation 12 – Taxpayers should be empowered to list cases for appeal

We are quite clear that if this facility were available to taxpayers, much of the time consuming and resource intensive to-ing and fro-ing on particular cases would disappear.

Redesign of Forms

CCAB-I notes the work being undertaken by the TALC simplification subgroup in relation to the simplification of Form 11. This is predicated on acceptance by Revenue of full self assessment – the details which need to be returned are those which are required for risk analysis and statistical purposes. This approach in itself would reduce, though not entirely eliminate, the difficulties with assessments discussed earlier in this paper. We also recognise that the earliest likely date for the new approach would be the filing date 2007, and this is too far away to make a significant impact on the real difficulties currently being encountered.

Part and parcel of the success of this approach would be Revenue's use of taxpayer data which is already to hand – PAYE details etc.

Recommendation 12 – More use must be made of content already submitted

Revenue should make more use of data already compiled and submitted by taxpayers on a more proactive basis. This should also include data available within the public service as a whole, for example, payment of local authority charges.

Furthermore we are aware of several instances where information provided to Revenue is not being processed, leading to further correspondence, or is being re-sought.

Collection

Case intervention is a routine part of Revenue activity, which accountants and tax payers have to deal with. The various levels of case intervention are becoming more prevalent – attachment orders, referrals to the Sherriff, and overpayment offsets.

Recommendation 13 - Provide a single point of contact to deal with proposed collection interventions

We recommend that before any intervention is undertaken by the Collector General's Office (including offset of taxes) a notification of the proposed course of action be sent to the tax payer and their agent with a seven day response interval in which the tax payer can settle any amount due, or challenge the correctness of the proposed action, or request for alternative offsets. This should be handled by a clearly identifiable division within the Collector General's office. All requests to this division should be acknowledged, irrespective of the ultimate outcome.

Again this would greatly reduce the level of contact between accountants and the Collector General's Office.

General

Recommendation 14 – Revenue should publish details of their telephone usage policies.

Many of the customer service complaints which arise are concerned with telephone contacts. CCAB-I would refer to suggestions already made in relation to dedicated lines for accountants and other practitioners, and endorse these. We also consider it is necessary for Revenue to publicise their telephone policies in terms of available numbers, hours of availability, likelihood and duration of being on hold, and use of answering machines. E-mail usage should be promoted as a way for Revenue to acknowledge calls and contacts received.

Recommendation 15 – Using their care and management powers, Revenue should postpone the implementation of new compliance obligations until progress has been made in resolving the current difficulties.

We have made the point already in this paper that self-assessment permits the imposition of increased compliance obligations impacting more on taxpayers and their agents than on Revenue. Finance Act 2006 introduces a range of new compliance obligations, in the areas of:

• Registration requirements to secure Case V interest deductions
• Revised procedures in relation to the operation of PAYE and RCT
• New obligations in the context of VAT
• Particular conditions relating to specific reliefs, for example Patent Royalties, Pensions and the various capital incentive schemes

There is no commercial advantage attaching to compliance with any of these. New compliance obligations are unhelpful in attempting to address customer service difficulties which derive from existing compliance obligations. Continuing customer service difficulties are undermining taxpayer confidence in the administration of the system overall.