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Redress for Taxpayers, a Special Report by the Ombudsman to the Houses of the Oireachtas.

Redress for Taxpayers, a Special Report by the Ombudsman to the Houses of the Oireachtas.

The Ombudsman, Mr Kevin Murphy has today published and submitted a Special Report to the two Houses of the Oireachtas of an investigation carried out by him into complaints against the Office of the Revenue Commissioners. The investigation report, entitled 'Redress for Taxpayers' is the first ever special report presented to Dáil and Seanad Éireann following a rejection by a public body of recommendations by the Ombudsman. The reasons for taking this step are outlined in page 3 of the Report

The Revenue Commissioners have rejected three recommendations from the Ombudsman viz.,

• that they should pay 12 named complainants interest or compensation for loss of value arising from delays on the part of Revenue in making tax rebates properly due to them;
• that they should compensate for loss of value, public service widows who, the Revenue Commissioners have accepted, should now receive retrospective repayments of income tax, wrongly withheld from them for many years;
• that they should introduce a scheme to compensate taxpayers generally in the future where tax is incorrectly levied due to maladministration on Revenue's part.

The Ombudsman considers that:

• the Revenue Commissioners have failed to meet the standards required by fair or sound administration in their dealings with the 12 complainants covered in his report;
• the basis on which the Revenue Commissioners have decided to reject his recommendations viz. that they have no statutory authority to pay compensation and that all taxpayers could benefit from any concession involves a serious misrepresentation of the position;
• such misrepresentation is a direct and unprecedented challenge to the authority vested in his Office by the Oireachtas;
• the failure to introduce a scheme to compensate taxpayers flies in the face of a recommendation of the Joint Oireachtas Committee on the Strategic Management Initiative on this issue in a report on Quality Customer Service in the Office of the Revenue Commissioners which was published in December 2001 and
• in light of the rejection of his recommendations it is clear that the Revenue Commissioners are not serious about their "Charter of Rights", which declares as priority objective the fostering of the highest degree of public confidence in the Revenue's 'integrity, efficiency and fairness'.

He has requested the Houses of the Oireachtas to consider his report and to take whatever action they deem appropriate in the circumstances.

Background: In 1988 following a decision of the High Court in Ó Coindealbháin (Inspector of Taxes) v Breda O'Carroll [1988] ITR 221, many widows of public servants became eligible for a refund of income tax paid on their children's pensions. However, following the High Court decision, the Revenue Commissioners decided to limit retrospection to the five years preceding the date of the claim. Two widows, Mrs Kelly* and Mrs Nolan*, who had paid tax on their children's pensions for periods in excess of five years, requested a * not their real names retrospective payment with interest covering the full period of their pension payments. This was refused by the Revenue. They also sought interest on the repayments actually made - this was also refused. In addition 10 other taxpayers complained to the Ombudsman that a request for an interest payment on tax which had been incorrectly levied and refunded only after a considerable lapse of time had been similarly refused by the Revenue. Following an investigation the Ombudsman recommended that: 1. Revenue should undertake to make a refund of income tax levied on Mrs Kelly and Mrs Nolan, and not already refunded, covering a 10 year period preceding the date of their claim.

2. Revenue should put in place as soon as possible arrangements whereby refunds of income tax levied, and not already refunded, over a similar ten year period, can be made to all individuals who were similarly affected by the O'Carroll judgement i.e. those who submitted a claim after the O'Carroll judgement and whose refund was limited to five years.

3. Revenue should pay compensation for loss of value to all widows receiving refunds.

4. Revenue should make a compensation payment for loss of purchasing power or loss of interest on the refunds of income tax made in each of the other six cases dealt with in the investigation report.

5. Revenue should similarly make compensation payments for loss of purchasing power or loss of interest in four other cases listed in the investigation report where a complaint had been made to the Ombudsman after he had started his investigation.

6. Revenue should within six months make provision for a general scheme for payment of compensation for loss of purchasing power in respect of tax refunds made to taxpayers of income tax levied and paid. It would be invidious and discriminatory if only those taxpayers who complained to the Ombudsman should benefit where Revenue were solely or significantly at fault for the delays.

The Revenue Commissioners accepted recommendation 1. in full and recommendation 2. subject to certain reservations. They said that they could not implement the remaining recommendations involving compensatory payments claiming that they did not have the statutory authority to do so. This means that the repayments now being made will be based on 1980's money values.

The Ombudsman considers the Revenue Commissioners should introduce a scheme of compensation without further delay so as to bring it in to line with the practice in other public service bodies such as the Department of Social and Family Affairs. The rejection of these three recommendations represents an unprecedented event in the history of the Office of the Ombudsman and this is the reason why he considers it necessary to present a special report to each of the Houses of the Oireachtas on the matter under Sections 6(5) and 6(7) of the Ombudsman Act, 1980.

Office of the Ombudsman 6 November 2002 The full text of the report is available on the website.  For further information please contact Matthew Merrigan at Telephone no 01- 6395613 e-mail: matthew_merrigan@ombudsman.irglov.ie