47 – 49 Pearse Street, Dublin 2

Consultation on Reform of the

Appeal System for Tax Matters

Department of Finance

Government Buildings

Upper Merrion Street

Dublin 2

15 January 2014

By email to: appealcommissionersreform@finance.gov.ie

Dear Sir/Madam,

Consultation on Reform of the Appeal System for Tax Matters

We refer to the public consultation which commenced on 16 October 2013.

Your consultation paper requests views on seven items, which we will now address in turn. In brief summary, our position is that the Office of the Appeals Commissioners must be organised in a cost efficient manner, the appointment of Appeal Commissioners must be transparent and determinations by the Appeals Commissioners should be readily available to the public.

The Appeals process should be informal and easily accessed by taxpayers, even more so now with the introduction of Local Property Tax which widens the self-assessed taxpayer base substantially. This necessitates the publication of guidance on the procedure for taking appeals and the publication of Customer Service Standards which commits the appeals process to time lines for each stage of the process.

All determinations by the Appeals Commissioners should be published on-line within a short period from the date of the issue of the determination. The determinations should be reported in a consistent manner, providing details of the facts and the reason for the Commissioner’s decision and should also state if the determination is to be appealed to the Circuit Court or High Court.

Transparency in the appointment of Appeal Commissioners is necessary. The Appeal Commissioner should be appropriately qualified and experienced in dealing with tax law. His or her appointment should be conducted through the Top Level Appointments Committee procedure as befitting an important public office appointment.

In preparing this submission, cognisance was had to the recommendations made by the ICAEW in its submissions on the reform of the UK’s appeals system and to the recommendation put forward by the Law Reform Commission on reform of the Appeal Commissioners. The Law Reform Commission published a consultation paper “A Fiscal Prosecutor and a Revenue Court” in 2003 and followed this up with a “Report on a Fiscal Prosecutor and a Revenue Court”. The report recommended reforms to various aspects of the appeals process and for increased transparency in the selection of the Appeals Commissioners.

1. Structure of Appeal Commissioners

A number of options are proposed for consideration:

• 1.1 Three Appeal Commissioners are appointed on a full time basis; they are not allowed to undertake work outside their Appeal Commissioner duties.
• 1.2 A “Chairperson of the Commissioners” is appointed on a full time basis, who is not allowed to undertake work outside her/his official duties; along with a panel of suitably qualified persons, who will be paid on a per case basis and who are not restricted in undertaking outside work.
• 1.3 A panel of suitably qualified persons to be appointed as Appeals Commissioners, who are not restricted in undertaking work outside the Appeals Commissioner duties, and who will be paid on a per case basis. Panel members will have no entitlement to sit on any particular case or number of cases.
• 1.4 Provision would be made for the appointment of temporary Appeal Commissioners if necessary for a short period or for a particular case or cases.
• 1.5 Consideration may be given to changing the name of the body (for example, to “Tax Appeals Board”, “Tax Appeals Tribunal”.

The most appropriate and cost efficient structure for the Office of the Appeal Commissioners is reflected in point 1.1 above i.e. appoint three Appeal Commissioners on a full time basis who are not allowed to undertake work outside their Appeal Commissioner duties.

The suggestion in point 1.4 to make provision for the appointment of temporary Appeal Commissions would be appropriate in cases where specialities or expertise in a particular area of tax law is required. An example of a tax head which may require particular expertise is Customs and Excise Duties.

The suggested name change to the office in point 1.5 is not necessary and would not achieve any particular purpose. The real test of reform success will be measured in increased transparency in the appointment of Appeal Commissioners, greater availability of information for taxpayers on the appeals process and the systematic publication of determinations.

2. Establishment and operation of the Appeal Commissioners

• 2.1 The Appeal Commissioners will be established on a statutory basis in a manner which guarantees their independence in relation to the Tax and Customs Acts.

Agreed.

• 2.2 The Appeal Commissioners will manage the tax appeal process in a manner which is separate from Revenue.

A clear distinction between the Appeal Commissioners office from Revenue is central to ensuring a fair process for taxpayers. There are aspects to the legislation governing the appeals process at present which can, from time to time, be seen to be weighted in Revenue’s favour. This is particularly evident in the current appeals listings system which requires the taxpayer to communicate with the Appeal Commissioners through Revenue. This gives rise to a perception that the Appeal Commissioner is an arm of Revenue. In addition, the Revenue’s control over the listing system is potentially open to abuse.

For example, under section 933(7) TCA 1997, it is up to Revenue to decide if there are grounds for allowing an appeal by a taxpayer outside the 30 day limit provided for under section 933(1) TCA 1997.

Another example of where the taxpayer may feel that the appeals system is unfair may arise in cases where Revenue refuse an application for an appeal as is its entitlement under section 933(1)(b) TCA 1997. The taxpayer has fifteen days to make an appeal directly to the Appeal Commissioners against Revenue’s refusal of the appeal application. However, the taxpayer must lodge the appeal within 15 days of the date of issue of the notice of refusal. It may be the case that the taxpayer is left with very little time to prepare an appeal against a refusal due to delays in receiving the notice of refusal from Revenue.

If Revenue does not refuse an appeal but delays the listing of the appeal before the Appeal Commissioners, under section 933(2)(c) TCA 1997, the taxpayer can appeal directly to the Appeal Commissioners to have the case listed. However the longer the taxpayer is waiting for an appeal to be listed and ultimately heard, then the greater the interest exposure if the Appeal Commissioners ultimately uphold Revenue’s assessment.

In line with the Law Reform Commission’s recommendation¹, we recommend that the responsibility for listing appeals should lie with the Appeal Commissioners and not with Revenue.

For the avoidance of any doubt, we also recommend that none of the existing rights of the taxpayer should be displaced when reforming the appeals process.

• 2.3 The Office of the Appeal Commissioners should have full independence and be responsible for its own staffing, IT systems, administration, listing of appeals and all related matters.

It is not for us to comment on the day-to-day running of the office other than to state that the allocation of resources within the Appeal Commissioners should be focused on delivering an efficient and transparent tax appeals system.

• 2.4 As at present, one of the Commissioners will be appointed by the Minister for Finance to be the Accounting Officer for the Vote.

Agreed. The Office of the Appeal Commissioner should continue to be accountable to the Minister for Finance for its expenditure to ensure the transparency and cost effectiveness of the Office. The maximum use should be made of available resources to deliver a service that is fair and transparent.

• 2.5 The Office of the Appeal Commissioners would be responsible for developing processes and guidance to minimise delays; for developing Customer Service standards including relating to the timing and location of appeal hearings.

Agreed. All efforts should be made to de-mystifying the appeals process and the publication of guidelines will help inform the taxpayer of the appeals process. The development of Customer Service Standards setting measurable objectives for good customer service and which commit the appeals process to timelines is central to ensuring a fair and balanced system for taxpayers who wish to appeal an assessment.

Guidance and process documents should be published on the Appeal Commissioners’ website and should be aimed at informing taxpayers in a straightforward, jargon free manner.

• 2.6 The Office will present an annual report to the Minister for Finance.

See next point – no need for duplication.

• 2.7 The Appeal Commissioners will be accountable to the Minister for Finance for their own performance and the performance of the Office while independent in exercising their statutory responsibility to adjudicate on appeals.

There is a need to ensure that the Office is efficient. Reporting requirements should be proportionate to the size and scope of the Office. Therefore if the Office of Appeal Commissioners has an accounting officer for the vote and is accountable to the Minister for Finance for its performance then there should be no additional reporting requirements as suggested in point 2.6. We note that the Ministers and Secretaries Act 2011 ensured that there could be no ambiguity as to the independence of the Revenue Commissioners in the administration of named Taxes Acts. It may be worthwhile to consider introducing a similar provision within the revised legislative framework for the Office of the Appeal Commissioners.

• 2.8 Appeal Commissioners would recuse themselves in cases of conflict of interest or where they may know the parties to the Appeal hearing.

Agreed. This is provided for under section 856 TCA 1997. Currently, section 856 TCA 1997 provides for a penalty of €60 to apply should an Appeal Commissioner fail to withdraw from a case in which he/she has an interest. This penalty should be substantially increased to reflect the serious nature of a situation where a Commissioner fails to ensure that he/she is not conflicted and fails to take appropriate action.

• 2.9 Explicit provision could be made for more than one Commissioner to sit in appropriate cases.

Currently, we understand that two Appeal Commissioners sit together only in very large or complex cases. Provision is made to allow two Appeal Commissioners to hear a case under section 850(4) TCA 1997. We note that procedures are already in place governing which court is to adjudicate on penalties, relative to the potential monetary amount of penalty at issue. A rule specifying the number of Appeal Commissioners to be involved, relative to the potential monetary amount of tax at issue, would be an extension of this principle.

Generally speaking however it is important that the Appeals process remains an informal court of primary jurisdiction. We feel that a provision to allow more than one Commissioner to sit in a case as a matter of routine would promote further formality to the process and could mean that the taxpayer would need to engage further professional representation in the hearing. The use of two Commissioners’ time also appears to be an inefficient use of resources as one Appeals Commissioner should be capable of hearing a case.

The provision in point 1.4 for the appointment of a temporary expert Appeal Commissioner should be sufficient in dealing with cases where specific expertise is required.

3. Appointment of Appeal Commissioners

• 3.1 The establishment of an open and formal selection and appointment and removal process for future Appeal Commissioners will be legislated for and put in place.

Agreed.

• 3.2 Appointment as an Appeal Commissioner will require a professional qualification with a minimum period of experience in law, accountancy or taxation and also that the candidate is otherwise well qualified.

Agreed. In determining the professional qualification, we assume that the provisions of Recognition of Professional Qualifications – SI 139 of 2008 will be applied as appropriate.

• 3.3 Appeal Commissioners will be appointed for a fixed term which can be renewed. The term could be 5, 6 or 7 years. In this context, consideration will be given to what safeguards may be necessary to ensure the independence of the each Commissioner.

We agree that the appointment of a Commissioner should be for a fixed term. A longer term of appointment such as 7 years generally ensures that the role attracts the best possible candidates. Clear terms and conditions for the role should be in place along with grounds for removal from office.

• 3.4 A transparent recruitment and selection process for the nomination of suitable candidates to be appointed as Appeal Commissioners will be conducted under the auspices of the Department of Finance.

Agreed.

• 3.5 The process, which could involve the Public Appointments Service or the Top Level Appointments Committee or both, will present a shortlist of suitable candidates from which the Minister for Finance will make appointments. These bodies, as a matter of course, will engage any expertise needed.

Agreed. The appointment should involve the Top Level Appointments Committee and expertise in the selection process should be accessed to ensure the highest quality appointments are made.

• 3.6 In accordance with existing practice for civil service appointments, canvassing will disqualify.

Agreed.

4. Determinations of the Appeal Commissioners

While the Appeal Commissioners have had the power to publish their determinations for several years, a systematic reporting of the declarations has not been forthcoming. In a 2005 case, concerning the Refugee Appeals Tribunal, the learned High Court judge found the refusal of that tribunal to make available relevant decisions to the plaintiffs breached their rights to fair procedures and to natural and constitutional justice. The judgement of the High Court was later upheld by the Supreme Court².

One of the most important outcomes of the reform of the Appeal Commissioners should be the availability of determinations on the website of the Appeal Commissioners. This should include the publication of determinations from the Appeal Commissioners over the last ten years to compensate for the erratic nature of publication over this time (with 25 decisions published in 2000, 5 decisions published in 2003, 1 decision published in 2007 and 2 decisions published in 2009).

• 4.1 The Appeal Commissioners will control the record of their own decisions, and make them available to the parties as of right.

Agreed, subject to the points made below.

• 4.2 The Appeal Commissioners will issue a concise reasoned determination in all cases within a short period (ideally three months) of the determination, including a summary of the facts and giving reasons for the decisions.

We agree that a concise reasoned determination complete with a summary of facts and the reason for the decision should be published, but the timeline for publication should be much shorter than three months. Appeal decisions in the UK are published within weeks of the determination. At the time of writing this submission decisions up to the end of December 2013 are already available on the Tax Tribunal website. All determinations should be recorded in writing.

Determinations should be published, without prejudice to whether they are subject to appeal to the Circuit Court or High Court. The fact that a determination is the subject of further appeal should also be stated on the published determination.

• 4.3 An effective system for the reporting of decisions of the Appeal Commissioners will be established.

Agreed. All determinations by the Appeals Commissioners should be published on-line and should provide details of the case and the reason for the decision reached by the Commissioner.

• 4.4 Every appropriate decision of the Appeal Commissioners will be published.

The Appeals Commissioners should have no discretion over which determinations are published. All determinations by the Appeals Commissioners should be published on-line and should be freely available to the public, rather than licensed to a third-party for publication. As noted above, determinations over the last ten years should also be published.

• 4.5 Access to decisions of the Appeal Commissioners will be simultaneously available to the parties.

Agreed

5. Appeal Commissioners Jurisdiction

• 5.1 The jurisdiction of the Appeal Commissioners may be extended by the Minister for Finance from time to time by way of legislation.

In the interests of ensuring that the expertise of the Commissioners remains focused on tax issues, the jurisdiction should not be subject to extension. Tax in itself is a complex area of law and any extension of the jurisdiction of the Appeal Commissioners outside tax law would certainly overextend the Commissioners and divert the skillset and expertise of the Commissioner away from tax.

The scope of jurisdiction of the Appeal Commissioners should be identified by a separate legal instrument, rather than by a series of ad hoc pieces of legislation and sections making reference to hearings before the Appeal Commissioners in the Taxes Consolidation Act 1997.

For example, a dedicated chapter in the Taxes Consolidation Act 1997 should set out the statutory scope of the Appeal Commissions’ jurisdiction, the statutory basis for the selection, appointment and removal of an Appeal Commissioner, provisions relating to the independence of the Commissioner and a statutory requirement to publish determinations by the Commissioners.

6. Payment of Taxes

• 6.1 In all cases taxpayers should be required to pay the tax not in dispute. It may be timely to consider whether, based on the outcome of the appeal, the relevant tax or duty should be paid or repaid as the case may be at the end of each stage of the appeal process.

We agree that tax not in dispute should be paid. Tax that is in dispute should be paid/repaid at the end of each stage of the appeal process. The payment upfront of tax and the accumulation of interest places no urgency on the State to conclude a case subject to appeal.

The accumulation of interest on disputed tax is an even greater cost to the taxpayer given the new full self-assessment system. Under the full self-assessment system in Chapter 41A TCA 1997, an assessment no longer issues automatically on submission of a Tax Return. A Revenue assessment may issue anytime up to four years after the end of the chargeable period in which a full and true return is filed and no time limit applies in circumstances where Revenue do not accept the return as a full and true disclosure. Therefore, assessments which come before the Appeal Commissioners under the full self-assessment system will carry a far greater interest exposure for taxpayers due to the potential expanse of time between the original tax payment date and the raising of a Revenue assessment.

Interest should not be charged until the Appeal Commissioner issues a determination and the due date for payment of tax should commence within 30 days of Appeal Commissioner’s determination.

7. Appeals from the Appeal Commissioners

Two options are proposed for consideration. These may need to be reviewed in the context of the forthcoming establishment of the Court of Appeal. In both options, the Revenue Commissioners should have the same rights of appeal as a taxpayer from decisions of the Appeal Commissioners.

A three stage process

• An appeal to the Appeal Commissioners
• A right of rehearing of the appeal by a Judge of the Circuit Court
• A right of appeal from the Circuit Court to the High Court and Supreme Court on a point of law by way of case stated.

A two stage process

• An appeal to the Appeal Commissioners
• A right of appeal from the Appeal Commissioners to the High Court and Supreme Court on a point of law by way of case stated.

A three stage process offers more flexibility for taxpayers. An appeal to the Circuit Court should only be based on the facts of the case rather than on a point of law. Appeals on a point of law should have a right of appeal to the High Court and Supreme Court.

Freedom of Information

We note the application of the Freedom of Information Act in regard to this consultation process. We have no difficulty with this response being published on the Tax Policy website of the Department of Finance. This response will be published on our own website and will be available to all of our members and the general public.

Yours faithfully

Paul Dillon

Chairman, CCAB-I Tax Committee

Source: Chartered Accountants Ireland. www.charteredaccountants.ie

NOTES

1. P.99. Section 7.46. “Report on a Fiscal Prosecutor and a Revenue Court”. Law Reform Commission. 2004

2. Opesyitan & ors -v- Refugee Appeals Tribunal & ors, Fontu -v- Refugee Appeals Tribunal & ors, Atanasov -v- Refugee Appeals Tribunal & ors Source: Revenue Commissioners.www.revenue.ie Copyright Acknowledged.