REVIEW OF SUBMISSIONS TO THE COMMITTEE OF PUBLIC ACCOUNTS AND RECOMMENDATIONS
1. TERMS OF REFERENCE
The Committee set itself the following terms of reference:
“To consider the effectiveness with which the Revenue Commissioners:-
utilise their staff and other resources, in:
-identifying their income sources, and
-level of income;
and in the assessment of tax of all such income;
and collection of all tax finally assessed,
including the enforcement of collection in cases of default; and the adequacy of control in view of recent developments.”
2. LIST OF SUBMISSIONS
3. SUMMARY OF THE WORK OF THE COMMISSION ON TAXATION
The Commission on Taxation was established in March 1980 with the following terms of reference:
“To enquire generally into the present system of taxation and to recommend such changes as appear desirable and practicable so as to achieve an equitable incidence of taxation, due attention being paid to the need to encourage development of the national economy to maintain an adequate Revenue yield; and to provide interim reports on such matters as the Commission considers desirable or as may be referred to it by the Minister for Finance for specific consideration”.
Five reports were prepared on the following topics:-
(ii)Taxation - the Role of Incentives
In the conclusion to the 5th Report published in October 1985, the Commission said that:
“Tax administration should contain the following elements:
(i)legislation which is precise and free from ambiguity. Loosely-worded or vague legislative provisions cause uncertainty as to what is taxed, when it is taxed and how much is due,
(ii)adequate arrangements for identifying the taxpayer and obtaining other information necessary to impose the tax. Only as much information as can be processed efficiently should be gathered and there must be an efficient system for converting the selected information into a form usable for enforcement purposes,
(iii)adequate control and enforcement in order to protect those who comply voluntarily. Otherwise compliance will deteriorate,
(iv)a procedure for resolving disputes between the taxpayer and the administration. Ultimately judicial review is the only reliable and satisfactory check against arbitrary, erroneous or unfair administration,
(v)a high level of collection of tax. A sure sign of ineffective tax administration is the existence of large default in tax payments, and
(vi)effective sanctions available through the courts where there has been serious and deliberate fraud.
The present administration of taxation in Ireland falls too far short of these requirements. The measures proposed in our first four reports would simplify taxation so that the risk of breakdown is reduced and administration in general is improved. However, reform of assessment, collection and enforcement procedures is also necessary.”
4. SUMMARY OF MAIN RECOMMENDATIONS OF THE PUBLIC ACCOUNTS COMMITTEE
Following the submissions received the Committee recommends:-
(i)That the Revenue Commissioners seek independent advice on the desirability of decentralisation of tax collection. This was a constant theme in submissions to the Committee about difficulties with collection.
The Committee feels that economy and efficiency may well be served by decentralisation of collection and would welcome an independent evaluation of this proposal at an early date.
(ii)Reduction in Revenue preference in insolvencies. Some of the submissions recommended the abolition of the Revenue preference in insolvency situations. The result, it is said, is that without this advantage over ordinary creditors, the Revenue would pursue non-payers more energetically, which may actually be more beneficial to the State. The Committee asks the Revenue Commissioners to examine this proposal and to urgently report to the Committee on the costs/benefits involved.
(iii)Consolidated Tax legislation. The Acts on Income Tax, Corporation Tax, Value Added Tax, etc. are in the region of 20 years in existence. To establish the current law, one has to have regard to as many as 20 Finance Acts. This does not create an environment for speedy assessment, agreement and collection of taxes and therefore, the various Statutes should now be consolidated.
(iv)Simpler forms - there is a widespread view that tax forms are hard to understand and difficult for ordinary individuals to complete. This could result in underpayments of taxes, or overpayments giving rise to later refunds. The Committee recommends that tax forms be simplified and made more user-friendly.
(v)Self Assessment - Several of the suggestions of the Commission on Taxation have already been introduced, at least to some extent, such as Self Assessment.
Simpler assessment procedures facilitate easier collection. Self Assessment is therefore a welcome development and the Committee recommends that this be extended to other taxes where feasible.
(vi)Streamlining of Administration - Particular attention should be given to the Fifth Report of the Commission on Taxation dealing with administration and the Revenue Commissioners should outline at an early date precisely how they intend streamlining administration of tax assessment, collection and management.
(vii)Taxpayers’ Charter - In the U.K. the Inland Revenue have published a Taxpayers’ Charter (a copy is attached). To facilitate maximum tax collection and greater public awareness of responsibilities to meet tax requirements and entitlements to claim full allowances, the Committee recommends the early introduction of a Charter of Taxpayers’ Rights along the lines of the U.K. Charter.
(viii)Diversion of Resources to Non-complying Taxpayers - Most of the Revenue’s resources are directed towards supervising complying taxpayers. With the introduction of Self-Assessment this system is changing. The Committee recommends that the resources be directed at non-complying taxpayers to a greater extent.
(ix)The setting up of a Technical Advisory Committee - The Committee feels that a Technical Advisory Committee would assist in bringing about a more efficient tax assessment and collection system. This committee would be made up of practitioners and taxpayers so that difficulties in collection of and assessment to taxes can be kept at a minimum. This technical committee should be available to advise the Department of Finance and the Revenue Commissioners and the Public Accounts Committee.
(x)Improved communication: There is a demand for easier access to information on taxation from the Revenue. A free phone service, tax information offices - perhaps some mobile - and after hours opening at special times, particularly after the Budget would, in the Committee’s view, maximise co-operation from taxpayers and would facilitate easier assessment and collection of taxes at the present.
(xi)The creation of a Section for the measurement of taxpayer compliance. This would involve the creation of a special team within the Revenue Commissioners to measure the extent of evasion and to profile likely tax evaders.
(xii)The publication of Revenue Practices so that they are available equally to all taxpayers.
(xiii)A Review of Systems and Control in the Collector General’s Office - In view of developments within the Collector General’s Office, a special in-depth review of accounting systems and internal control in the Collector General’s Office should be carried out as soon as possible and reported on to the Public Accounts Committee without delay.
The tax system in Ireland has been the subject of considerable public discussion and a number of reviews, including particularly the Commission on Taxation. The overall clamour is for a simplification of the system and eventually a reduction in the burden of tax, particularly on the P.A.Y.E. taxpayer. The problem can be divided into three broad headings:-
*The Tax System itself;
*The Administration of the Tax System;
*The Tax Burden.
5.1 The Tax System
The existing tax system is a complex patchwork of legislation much of it dating back to the last century. It is difficult for professional people specialising in tax advisory work to stay up to date with the constantly changing legislation and it is almost impossible for the man on the street to complete a Tax Return without professional assistance. For example, to finalise the Income Tax affairs for a particular year of assessment, it is necessary to refer to two and sometimes three Tax Returns.
Much of the complexity in the tax system is caused by the desire to use the tax system as an instrument of social, fiscal and economic policy. For example, savings are encouraged through the tax system by the various reliefs for life insurance, pension contributions and certain Government saving schemes such as Post Office Savings Certificates. As a result, a simple decision as to how an individual might save for the future can be a highly complex one and depends on his tax status as much as the returns on offer from the investment media.
The lack of integration of the Social Welfare system and the tax system also creates many practical difficulties. For example, Unemployment Benefit and Disability Benefit are exempt from Income Tax, whereas a disability pension and the Old Age Pension (even the Non-Contributory Old Age Pension) are taxable. An employers is obliged to deduct P.A.Y.E. on income in excess of IR£6.00 a week, whereas the Department of Social Welfare pays pensions of up to IR£6,000 per annum and does not operate P.A.Y.E. This sometimes gives rise to large underpayments by taxpayers who are under the impression that Social Welfare pensions are exempt from tax.
The very complexity of the Tax and Social Welfare systems means that good and efficient administration is difficult to achieve. A first aim, therefore, might be to try and achieve less complex and integrated Tax and Social Welfare systems.
5.2 The Administration of the Tax System
The officials who are attempting to operate the complex system have as much difficulty, if not greater difficulty, than the professional advisors in keeping themselves up to date on changes in the tax system. The complexity of the system makes the agreement of tax liabilities time consuming and generates numerous opportunities for delay and protracted correspondence on fine technical points.
It is to be hoped that the recent interest amnesty and the introduction of self assessment will improve matters. However, the current picture emerging from the office of the Collector General is one of continuing difficulties. These are caused by a substantial backlog of work arising from the interest amnesty and the decision to relocate the staff from Earlsfort House to Shelbourne House and other locations in response to numerous complaints about the accommodation in Earlsfort House.
The essential ingredients for economy and efficiency in administration are:-
- well informed and well motivated staff
- a non-complex Tax system
- no arrears of work
- a spread through the year of inflow and outflow of paper
5.3 The Tax Burden
The overall tax burden is determined by political and economic factors outside the control of the Revenue Commissioners. However, the way the burden is spread at present gives rise to a lot of the dissatisfaction with the tax system itself.
There is no doubt that no matter what improvements are made in the system of taxation, unless the burden is perceived to be spread fairly, there will continue to be widespread dissatisfaction and a tendency to blame the system for the level of taxation.
This particular aspect is outside the brief of the Committee and must remain with the Oireachtas, but the Committee feels that a system which is perceived to be fair will give rise to less evasion and might be implemented with greater vigour, thus reducing the incidence of evasion of tax which is a concern of the Committee.
You have important rights and entitlements as a taxpayer. You are entitled to expect that:
Help and information
•the staff of the Inland Revenue and Customs and Excise will help you in every reasonable way to obtain your rights and to understand and meet your obligations under the tax laws. So that they can do this, the Inland Revenue and Customs and Excise are entitled to expect that you will give them the full facts they need to decide how much tax you should pay.
Courtesy and Consideration
•the staff of the Inland Revenue and Customs and Excise will at all times carry out their duties courteously considerately and promptly
•you will have your tax liability decided impartially and be required to pay only the amount of tax property due according to the law
•you will be treated in the same way as other taxpayers in similar circumstances
•you will be presumed to have dealt with your tax affairs honestly unless there is reason to believe otherwise
Privacy and Confidentiallty
•information about your tax affaira which is supplied to the Inland Revenue or Customs and Excise will be treated in strict confidence and used only for purposes allowed by law
Costs of Compliance
•the Inland Revenue and Customs and Excise will have regard to the compliance costs of different taxpayers (including the particular circumstances of smaller businesses). In applying their procedures. they will recognise the need to keep to the minimum necessary the costs you incur in complying with the law, subject to their duty to collect the tax that is due from you efficiently and economically.
Independent Appeal and Review
You may ask the Inland Revenue or Customs and Excise to look again at your case, if you think your tax bill is wrong or they have made a wrong decision, or they have handled your tax affairs badly. Your case can be reviewed by the head of the local office you are dealing with. If you are still not satisfied, you may take the matter up with the Inland Revenue Regional Controller or the Collector of Customs and Excise, or with their Headquarters. Beyond that, you have important rights to independent appeal.
For Inland Revenue taxes, you may appeal against your tax bill to an Independent tribunal, the appeal Commissioners, and if necessary to the Courts.
For Customs and Excise taxes and duties you may appeal against a VAT decision to the Independant VAT Tribunals; or in the cases of other taxes or duties directly to the Courts.
You may ask your Member of Parliament to take up your case with the office you are dealing with or with Treasury Ministers. Your Member of Parliament may also ask the Independent Parliamentary Commissioner for Administration (the Ombudsman) to review your case, if you think that the Inland Revenue or Customs and Excise have handled your tax affairs improperly.