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Wednesday, 24th April 2024 |
| Illegal forestry fees persisted despite rulings |
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| The collection of a 5 per cent fee levied on 6,200 applicants for EU-financed forestry grants was continued by the Department of Marine and Natural Resources, even though the EU and Attorney General found against it. Eamonn O’ Flanagan relates the saga |
Citizens may be naive in assuming that there is a legal basis for all fees charged by the State. In this regard, Note 26 to the 1998 Annual Report of the Comptroller and Auditor General and Appropriation Accounts makes very interesting reading. During an audit, the Comptroller and Auditor General (C&AG) found that the State collected £4.5 million of what the Grocery Trade calls ‘Hello Money’.
Since July 1997, the Department of the Marine and Natural Resources has been responsible for the EU Afforestation Grant and Premium schemes, which are co-financed ( 75 per cent by the EU and 25 per cent by the State. (Prior to 1997 responsibility lay with other Departments). The C&AG has reported that, between April 1992 and December 1995, some 6,200 forestry grant applicants were charged a 5 per cent administration fee which yielded £4.5 million. The fee has since been refunded.
The C&AG found that the charge was introduced without legal advice and that the Department continued with the charge despite being made aware by the Chief State Solicitors Office [CSSO] in January 1993 that the legal basis for the collection of this charge was doubtful". The C&AG sought the Department's observations on the fee and was told ‘the introduction of the administration fee arose as a consequence of Government policy in the late 1980s to reduce the National Debt’. An aspect of that policy, developed by the Department of Finance, was the introduction of charges for services, which were being supplied free by the State. Administrators cannot impose taxation. As policy is no substitute for legislation, the fee/tax process was flawed.
Legality flawed
Not only was collection not put on hold when, in January 1993, the CSSO questioned its legality, it was not even dropped when, circa January 1995, both the Attorney General (AG) and the EU also found against the practice. Despite the views of such authorities, collection continued until the end of 1995 and refunds only commenced in December 1997. A brief review of public domain records throws some further light on the saga.
The Department's legal advisers and the EU were not the only ones asking questions. On the 16th May 1995, a Dail question asked about the "---amount collected by virtue of deductions from forestry grant payments". The answer given was "--- the total amount collected since the introduction of this charge is £3.2 million." As £4.5 million was collected up to the 31st December 1995, it is evident that at least £1.3 million was collected after "January 1995 when the EU informed all Member States that the imposition of administration charges on payments was unacceptable".
The announcement of the abolition of the fee was included as a minor item in a press release, 29th December 1995, which said that it was being dropped because the benefit of increased administrative efficiencies within the Department was being passed on to forestry developers. There was no mention of the EU decision.
There was also a multi-part Dail question on the 26th January 1996. The significant part of the question was ‘ in relation to private afforestation grants if [the Department] will refund these fees in view of recent EU decisions -- and the date on which refunds will commence". The answer did not address the core issue of refunds.
A more open approach was adopted in a press release on 23rd November 1997, which expressed concern "that while collection of the administration charge had been discontinued nearly two years ago, no decision was taken at the time in relation to the amounts collected between 1992 and 1995; it is entirely appropriate and equitable that the charges collected should be refunded and the situation be resolved immediately".
No estimate has been given for the cost of the ‘Grande Olde Duke of York’ exercise of collecting and refunding the £4.5 million. In addition to the unquantified staff and administrative overheads, there may yet be significant costs arising from claims for interest on the fees collected and retained for many years. In the light of the findings of both the Attorney General and the EU, claimants could be pushing an open door. Furthermore, there is uncertainty concerning £3.25 million refunded to thirty forestry contractors who "were required to sign an indemnity to refund the amount to the Department should another party prove better title to it". Shortly after the refunds were announced the chairman of the IFA National Forestry Division was reported as saying "the refunds must go direct to the farmers who planted the land because they are the people entitled to the money". In the interest of their members, the various forestry representative bodies should study the findings of the C&AG.
The Department, which is effectively the Forestry Regulator, may have acted in good faith when introducing the administration fee but it is arguable that it did not exercise the duty of care owed to its customers. The 6,200 forestry grant applicants, whose ranks include large companies and small farmers, owe a debt of gratitude to the CSSO, the AG and the EU without whom they would be much poorer today. The C&AG has done a good job in bringing ‘Hello Money’ to the attention of the Public Accounts Committee. |
Eamonn O Flannagain is a retired member of the Chartered Institute of Management Accountants.
eamonn_oflannagain@hotmail.com
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| Article appeared in the December 1999 issue.
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