Tax Appeals and Administration

Developments in the tax landscape both at home and abroad have focussed with renewed energy on tax transparency, so it is unsurprising that issues around tax controversy have taken centre stage for many taxpayers. For some organisations, this may be taking the form of tax risk mitigation and being proactive in the face of rapidly changing and increasingly complex tax laws. For many organisations the focus may already be on tax audit management and tax dispute resolution. In our view, an efficient and timely process to resolve such disputes in a manner which respects the rights of the taxpayer is absolutely vital to the attractiveness of Ireland as a place to do business whether from the perspective of inward investment or indigenous growth. However, a number of factors present within the Irish tax system currently impose inequitable treatment between parties to an appeal, as outlined in our pre-Budget submission to the Department of Finance. In particular, our core recommendations in this area are as follows:

• Currently, an Appeal Commissioner can dismiss an appeal where one party has not responded to directions issued. In our view, the dismissal of a taxpayer appeal would be a wholly inappropriate outcome in the case of a Revenue failure to respond to a direction of the Appeal Commissioner.

• No interest is payable on tax which is ultimately refunded to the taxpayer who ultimately succeeds in an appeal; such treatment discriminates against a taxpayer who has paid the tax liability pending appeal and should be reconsidered.

• When a matter is disputed between Revenue and a taxpayer, the taxpayer can make an appeal to the Appeal Commissioner. In many cases the basis for Revenue’s assessment is unclear, however the taxpayer will be required to produce a Notice of Appeal and Statement of Case outlining their arguments against the assessment. Such lack of visibility creates challenges for taxpayers in terms of how to proceed with the appeal, or whether to proceed at all.

Such measures directly impair Ireland’s pro-business status-and as a result impair our global competitiveness. Such provisions should be amended to ensure balance. In addition, there are a number of other improvements that could be made in the area of Revenue disputes:

• Reduction in the interest rate on underpaid taxes which at circa 8% per annum is one of the highest interest rates in Europe.

• The introduction of an Alternative Dispute Resolution (ADR) mechanism with the assistance of a mediator would in our view save time and money for both the taxpayer and the Revenue and would reduce the already heavy workload of the Tax Appeals Commission.

We would suggest that these proposals be considered to ensure equity in the tax appeals process and strengthen the dispute resolution procedures.

Our view

In recent years, Irish tax legislation has experienced a significant shift and increasing complexity, driven in no small part by the OECD BEPS process. In the past 4 years alone, we have seen complex tax concepts introduced into law for the first time including anti hybrid rules, interest limitation rules, controlled foreign company legislation and mandatory reporting of cross border transactions (DAC6). With the imminent introduction of Pillar Two minimum tax rules from 1 January 2024, the existing complexity in Irish tax law looks to be here to stay. Tax disputes are therefore projected to increase in the short term, with the result being that timelines for dispute resolution are expected to increase unless efficiencies can be introduced into the tax appeals process. It is vital that Ireland creates a pro-business environment through having an efficient and fair tax appeals process and that disputes as to legislative interpretation are addressed in a timely manner to allow businesses to focus on growth in the long term.