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Saturday, 19th September 2020
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The Revenue Reassure
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The Finance Act 1999 greatly increased the Revenue's powers to enter and search premises, and remove records, and to obtain information regarding a taxpayer from third parties. The legislation placed very few restraints on the Revenue powers and provided little protection to taxpayers. The Revenue Commissioners have issued two statements of practice providing reassurance as to the manner in which the powers will be used.

The Revenue Commissioners say:
"These more exceptional powers will not be focused on smaller cases where the potential tax loss from evasion is unlikely to be significant."

This reassurance implies that the new powers will be used only where evasion is suspected. The legislation does not confine the Revenue Commissioners to using their powers only where they suspect evasion. This aspect was criticised when the Finance Bill was being debated, by many commentators. It would now seem that the Revenue Commissioners require these powers only where they suspect evasion. Why then did the Finance Act not limit the application of the powers to that situation? Taxpayers must now rely on the goodwill of the Revenue Commissioners to ensure that the powers are not used in a routine fashion across the broad body of compliant taxpayers.

The Revenue Commissioners are entitled to require a bank or other financial institution to disclose all information they have regarding a customer. In their statement of practice they say in relation to this power "Although there is no statutory requirement to do so, authorised officers will, before issuing a notice, advise the taxpayer concerned of the intention to issue a notice." That the Revenue have also stated that notices served on third parties will confirm that the issue of the notice does not imply that the taxpayer has not complied with his tax obligations. What value is the statement that the notice does not imply non compliance when the Revenue have already said they will only use these powers where they suspect evasion? The issue of a notice will damage the reputation of the taxpayer. Irish people are not slow to detect statements made with tongue in cheek. It is reassuring that the taxpayer will be given an opportunity to forestall the issue of a notice to a third party demanding information on his affairs, by supplying the Revenue with whatever it is they feel they lack. But why was this important protection not placed in the legislation in the first place? Why is the protection being provided only through the goodwill of the Revenue Commissioners?

Finance Act 1999 granted the Revenue Commissioners, (for the first time) the right to enter bank premises and examine all records in the premises, without a search warrant. In their statement of practice the Revenue say that they "are extending their current programme of desk audits of financial institutions to systematically use this new power."

To balance this extended activity the Revenue Commissioners have announced a strengthening of their internal review and appeal procedures which are available to taxpayers. These review procedures now operate on three levels:

* An aggrieved taxpayer may ask that his case be reviewed by a Revenue official not involved with the case.
* The taxpayer may request a specific Revenue official called "the Director of Customer Services" (who is otherwise uninvolved in Revenue audits) to review the history of his relationship with the Revenue.
* The taxpayer may request that the review by the Director of Customer Services be carried out by him jointly with an independent person selected from outside the Revenue and outside the Civil Service. The Revenue Commissioners are selecting a panel of such "independent experts", who will be bound by the Official Secrets Act.

These reviews are non statutory review mechanisms which do not affect the right of a taxpayer to take the matter through the statutory appeal procedures (the Appeal Commissioners, the Circuit Court, and the superior Courts). Neither do they interfere with the taxpayer's right of access to the Ombusdman.

On the one hand the strengthened review procedures (especially the new independent element being introduced into them) are to be welcomed. But there is too much of a flavour of "the Irish solution to an Irish problem" to the whole affair. These review procedures are prompted by the fact that the powers granted are so unrestrained and wide. If the powers had been subject to adequate legislative checks and restraints, would these Statements of Practice and new procedures be necessary?

There is something disquieting about the manner in which the Finance Act was rushed through Dail Eireann with minimum opportunity for representations, debate, or reflection, and within weeks of it being signed into law those to whom the powers have been so generously granted are acknowledging the need for checks and balances in the exercise of the powers. Would the financial position of the State have been put at serious risk had the extension of Revenue powers been put into an Act, separate from the Finance Act, which could have been considered by the Dail at greater leisure, so as to enable the Dail, rather than the Revenue Commissioners, to decide on what protections and reassurances are appropriate?

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