Introduction

The balancing of the rights of the individual with the need for the Revenue Commissioners to have sufficient powers to protect the integrity of the self-assessment system is an ongoing issue in Ireland. However, it is important to note that whilst Finance Acts since 1999 have dramatically increased the powers of the Revenue Commissioners on an annual basis, there have been no corresponding statutory safeguards introduced for the taxpayer or his adviser. 

In my view, the most intrusive powers should have the highest levels of pre-use control and post-use scrutiny as confirmed in a recent UK decision , mirroring earlier Irish  and UK  judgments. Safeguards, of necessity, are required to be embedded in legislation of a penal nature, to ensure that they are effective in providing the appropriate balance between protecting taxpayers and the need to secure the Revenue of the State. The current level of statutory safeguards in Irish legislation clearly does not meet this standard.

The Taxpayer’s Charter of Rights was a non-statutory document issued by the Revenue Commissioners following the introduction of self-assessment in 1989. The Charter provided particularly strong support to the protection of taxpayer’s rights in the section on "Consistent Administration" which stated that taxpayers have a right:
“…to expect that the Revenue Commissioners will administer the law consistently…”
In other words, the Revenue Commissioners acknowledged that the "Equality of Treatment" principle applies in tax law.
It is regrettable that this Charter of Rights was withdrawn in 2004, without any prior consultation with the professional bodies and was replaced by the Charter of Customer Service, which, as the title suggests, imposes obligations on taxpayers without providing them with requisite comparable enforceable rights.

To the extent that any safeguards now exist, they are contained in Revenue Statements of Practice and Internal Revenue Operations Manuals. Suffice it to say that internal guidelines or operations manuals are of questionable legal standing and offer little comfort to a taxpayer or to his adviser. 

Revenue Powers Group Report (November 2003) & Law Reform Commission Report on a Fiscal Prosecutor and A Revenue Court (LRC 72-2004)

The Revenue Powers Group was established in 2003 to advise the Government in relation to a number of issues relevant in the context of the main statutory powers available to the Revenue Commissioners to establish tax liabilities, including investigation with a view to prosecution of Revenue offences. One of the main issues considered by the Revenue Powers Group was “the appropriate balance between the need to secure the revenue of the State and the rights of the taxpayer”.

The Revenue Powers Group made a number of recommendations to address the lack of safeguards in the Taxes Consolidation Act 1997 however, disappointingly, whilst there has been very limited and selective implementation of partial recommendations, none of the attaching safeguards recommended or streamlining of powers have been implemented despite the introduction of significant new Revenue powers in each years Finance Act since 2004.

Similarly in respect of the extensive recommendations of the Law Reform Commission Report on a Fiscal Prosecutor and a Revenue Court in respect of safeguards and the appeals system. 

Commission on Taxation Report - September 2009
Whilst certain aspects of the Commission on Taxation’s 250 recommendations have received extensive media coverage, the sections dealing with the structure and administration of the tax system have received little attention.  If implemented, the recommendations in relation to the appeals system and safeguards will be of significant benefit for both the taxpayer and their advisor. 

These recommendations include implementation of proposals made in the Reports of the Law Reform Commission and the Revenue Powers Group in relation to the reform, jurisdiction and operation of the appeal system. In particular, the changes recommended include the following:  

• Access to determinations of the Appeal Commissioners should be simultaneously available to taxpayers and the Revenue Commissioners.
  
• A cost-effective route of appeal should be available to all taxpayers.
  
• The jurisdiction of the Appeal Commissioners should be extended to include appeals regarding:
  
• The categorisation of penalties
  
• The application of interest rates in certain defined situations
  
• The facts defining a voluntary disclosure, and
  
• Breach of proposed time limits regarding length of audits to protect against unjustified disruption to a taxpayer’s business
  
• The Appeal Commissioners should be empowered to adjudicate in a “Monday morning” type session
  
• Whether the Revenue Commissioners have a right in law to seek particular information
  
• Breach of proposed statutory time limits on audit and/or a request to stay in audit
  
• Unreasonable disruption to business from the removal of current records,
  
• Any dispute as to whether a disclosure is voluntary or otherwise
  
• The independence procedure for appointment of the Appeal Commissioners should be provided for in legislation
  
• The establishment of an open and formal selection and appointment process for future Appeal Commissioners should be put in place.
  
• Appointment as an Appeal Commissioner should require a professional legal qualification for a specified period in any of the fields of legal practice, accounting or taxation and also that the candidate is otherwise well qualified.
  
• The relevant legislation should be amended to provide that the Appeal Commissioners should control the record of their own decisions and make them available to parties as of right.
  
• The Appeal Commissioners should issue a concise reasoned determination in appropriate cases within a short period (ideally three months) of the determination, including a summary of the facts and giving reasons for the decisions. Resources should be provided so that an effective system for the reporting of decisions of the Appeal Commissioners may be established and every appropriate decision is published.
  
• The Appeal Commissioners’ power to issue precepts should apply in relation to any party, and, if necessary, appropriate provision should be made in respect of costs.
  
• In light of the European Convention on Human Rights an appeal should lie from the Revenue Commissioners to the Appeal Commissioners in respect of the imposition of penalties but should not extend to mitigation of penalties on grounds of hardship.
  
• In respect of the imposition of penalties, a taxpayer should have a right of appeal from the Appeal Commissioners to the Circuit Court and, to the High Court and Supreme Court on a point of law by way of case stated.
  
• The Revenue Commissioners should have the same rights of appeal as a taxpayer from decisions of the Appeal Commissioners.

Conclusion

In light of the very significant economic pressure which affects all taxpayers in these turbulent times, appropriate consultation between the Revenue Commissioners and professional bodies would be welcomed, with a view to the introduction of statutory safeguards to re-balance the rights of the taxpayer and his advisors.

The impact of the powers on the tax compliant is particularly severe as the only mechanism under the current system for an independent appeal where a taxpayer disagrees with any aspect of the Revenue audit/investigation is by way of judicial review in the High Court. This means of resolution is impractical and beyond the means of the ordinary tax-compliant taxpayer in all but exceptional cases.

It has been stated that certain of the recommendations of the Commission on Taxation will be considered in the longer term, due to the current economics conditions. However, this argument has no application in the context of the introduction of the above recommendations which should be cost neutral.    

Julie Burke is principal of the Dublin law firm J.M. Burke Tax Solicitors and works exclusively in the area of tax disputes and litigation. She is a fellow of the Irish Taxation Institute and editor of the Irish Tax Review. She was the only solicitor member of the Revenue Powers Group, whose report was published in February 2004 and the Commission on Taxation whose report was published in September 2009.  www.jmburketaxsolicitors.com/

OmniPro “Taxation Essentials – The Autumn Update
Julie will closely examine the management of the legal risks for Practitioners and their clients, following introduction of the new penalty regime and a temporary Code of Practice for Revenue Auditors at the OmniPro “Taxation Essentials – The Autumn Update” on 29 September in Dublin, on 30 September in Cork and on 1st October in Athlone.  Click here to view details of the event here.