Background

On 16 July 2015, Minister for Finance Michael Noonan published the first draft of the Finance (Tax Appeals) Bill 2015 ("the Bill"). This follows many years of taxpayers and tax practitioners campaigning for reform of the current tax appeals system given the long periods of delay in processing appeals. While many of the provisions are welcome (and long overdue), some provisions are definitely to the detriment of the taxpayer, for both legal and commercial reasons. The main features of the Bill are:

The Good

Streamlined Process

  • The new Bill introduces 3 dedicated fulltime Commissioners to oversee tax appeals going forward. It also provides for a Circuit Court judge to temporarily sit as an Appeals Commissioner in cases of absence of one or more Commissioners.
  • A "fast track" appeals procedure will be put in place where Revenue and the taxpayer can dispense with oral arguments and request that the appeal be dealt with by paper submissions only. This should facilitate faster processing of appeals instead of requiring the physical presence of both sides at oral hearings which can result in scheduling issues.

Maintaining Taxpayer Privacy

  • The Bill retains the "in camera" (ie heard in private) rule for taxpayers via an opt-in system. Under the current system, all appeals before the Appeals Commissioners and the Circuit Court are in camera in order to maintain a taxpayer's privacy. Under the proposed new system, provided that the taxpayer requests in writing that an appeal be heard in camera when lodging their appeal, it shall be heard in camera.

Publication of Determinations

  • Determinations of the Appeals Commissioners will be required to be published. This is in contrast with current practice whereby only "significant" determinations are published. Indeed, only 34 determinations have been published since 2000. This should allow taxpayers to assess the strength of their cases against similar claims before launching into a costly appeal. Published determinations, as with current practice, will be redacted to keep taxpayer's identity anonymous where they have opted for an in camera appeal.

The Bad

Rejection of Appeals without a Hearing

  • The Appeal Commissioners will be allowed to reject appeals where they are satisfied that the appeals are without "substance or foundation" and without any right of appeal from such decision. While the aim of the Bill is to streamline and improve the efficiency of the Tax Appeals system, such rejection of claims out of hand without any recourse for the taxpayer can be viewed as quite a heavy handed way of reducing appeals. In addition, the authority of the Appeals Commissioners to reject such claims on this basis can be delegated to staff members of the Commission ie civil servants.

Removal of Circuit Court Appeal

  • Currently, appeals to the Circuit Court are a full rehearing of the taxpayer's appeal and allow the taxpayer to correct any errors in fact which have arose previously and is invaluable in terms of minimising legal costs to the taxpayer. The Bill removes the taxpayer's ability to appeal cases from the Appeals Commissioners to the Circuit Court. The only avenue now available is an appeal on a point of law to the High Court. The costs of running a High Court appeal are substantial and it is arguable that the removal of the right of appeal to the Circuit Court denies a taxpayer right of access to the courts by placing a substantial cost barrier to such actions. The issue of the amount of legal costs (and the associated non recoverable VAT) that a taxpayer is willing to incur is more significant in tax appeals as generally parties to the appeal pay their own legal costs, regardless of the outcome.
  • Currently Circuit Court appeals are heard in camera. There is no provision for appeals to the High Court to be heard in camera. While such High Court appeals were always held in public, this is another deterrent placed before the taxpayer in appealing a decision of the Appeals Commissioners.

Requirement to Pay Tax before Appeal to High Court

  • Most importantly, should a taxpayer lose its appeal before the Appeals Commissioners, the taxpayer is liable to pay over the full amount of any tax in dispute notwithstanding that they may have lodged a further appeal to the High Court. This represents a massive "stick" in Revenue's arsenal to encourage taxpayers into settling a case or from appealing a decision of the Commissioners in the first instance. While the appeals process for the Appeals Commissioners may be streamlined, appeals to the High Court certainly have not and it could be years before a taxpayer's appeal is heard. Even where the taxpayer wins before the High Court on a point of law, the impact on a taxpayer's cashflow caused by this provision cannot be underestimated.