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Redress for Taxpayers (Special Report)

Chapter 1 - Context - The Ombudsman's Role

Chapter 1

Context - The Ombudsman's Role

By way of background I would like at this stage in the report to raise a number of issues which are relevant to this investigation. These are the role of the Ombudsman and the Courts, the Ombudsman and administrative accountability and the discretionary powers of the Revenue under the care and management provisions of the Tax Acts.

The Ombudsman and the Courts

The question may legitimately be asked as to whether the issues arising out of these complaints are more appropriate for consideration by the courts rather than the Ombudsman. In this regard I think it is important for me to clarify my role as Ombudsman. My functions, as set out in Section 4 of the Ombudsman Act, 1980, require me to examine the actions or inactions of specified public bodies which have adversely affected complainants and which were or may have been:

"(i) taken without proper authority,
(ii) taken on irrelevant grounds,
(iii) the result of negligence or carelessness,
(iv) based on erroneous or incomplete information,
(v) improperly discriminatory,
(vi) based on an undesirable administrative practice, or
(vii) otherwise contrary to fair or sound administration."

It is important to emphasise that, unlike the courts, I do not make binding decisions, only recommendations based on my assessment of the merits of particular cases and the appropriateness or otherwise of the actions or decisions of public bodies in such cases. Nevertheless, and bearing in mind that my actions are open to judicial review, it is incumbent on me to ensure that, in judging the actions of public bodies against the criteria set out in the Ombudsman Act, I act in a way which would not bring me into conflict with the courts. At the same time, I must make my own decisions about what is "contrary to fair or sound administration" having regard to the general principles developed by the Irish courts as well as by, for example, the Court of Justice of the European Communities and the European Court of Human Rights. I also take into account the various principles of good administration developed by international bodies such as the Council of Europe which the State has accepted, even though they may not be enshrined in domestic statutory law. These principles would, in any event, be most unlikely to conflict with any similar principles developed by the Irish courts. As Ombudsman, I am not, therefore, precluded from developing incrementally, and on a case by case basis, rules of good practice the infringement of which by public bodies would be "contrary to fair or sound administration" subject, of course, to the avoidance of conflict with the courts.

The Ombudsman and Administrative Accountability

An Ombudsman operates in the area of administrative accountability, i.e., the process of ensuring that public service activities and, in particular, the exercise of decision-making powers, whether discretionary or otherwise, are carried out not only in a proper legal manner but in a manner consistent with fairness and good administrative practice. Just as financial auditors examine the activities of the public service in accordance with certain financial principles and criteria, an Ombudsman examines public service activities against the background of what are commonly referred to as the principles of good administration.

I have used these principles to develop a Guide to Standards of Best Practice for Public Servants which I published in conjunction with my Annual Report for 1996. The Guide explains to public servants how to deal properly, fairly and impartially with their clients. These "accountability parameters" are derived from the categories of maladministration referred to in Section 4 of the Ombudsman Act, 1980, from the practical experiences of thousands of complainants, and from Ombudsman colleagues throughout the world.

The Discretionary Powers of the Revenue under the care and management provisions of the Tax Acts

Section 849 of the Taxes Consolidation Act, 1997 (TCA 1997) provides that all duties of tax shall be under the care and management of the Revenue. The Section also enables the Commissioners, by reason of their responsibility for the care and management of the tax, to:

"... do all such acts as may be deemed necessary and expedient for raising, collecting, receiving and accounting for tax in the like and in as full and ample a manner as they are authorised to do in relation to any other duties under their care and management ..."
The terms 'care' and 'management' are not defined.

The Fifth Report of the Commission on Taxation (October 1985) considered the broad issue of 'Revenue Practice'. The Commission defined 'Revenue Practice' as the way in which the Revenue Commissioners apply the tax system where:

(i) the legislation does not cover the case in question or is unclear;

(ii) the legislation cannot be implemented strictly or in a cost-efficient manner;

(iii) the legislative detail appears deficient, unjust or in conflict with the general spirit of the legislation in question; or

(iv) the legislation confers some discretionary powers in its operation on the Revenue Commissioners.

In its report the Commission noted:

"Revenue practice in Ireland is not directed by legislation. It is established by Revenue decision. When requested the Revenue Commissioners may express their view on the interpretation or application of the tax system. There is however, no general clearance or rulings procedure for transactions."

The Commission went on to note, at pages 74 and 75:

"Some legislation confers specific discretionary powers on the Revenue Commissioners ... In addition the Revenue Commissioners are charged with the care and management of all taxes and duties ...The extent of the discretion conferred on the Revenue Commissioners by this general provision has never been clearly defined."

The Commission asked the Revenue Commissioners for their view on the powers conferred on them by the care and management provisions. They replied that:

"... the care and management provisions have not as far as we are aware ever been legally interpreted. However, these provisions place on the Revenue Commissioners the responsibility for administering the law in relation to taxes, subject to the general direction of the Minister for Finance and subject to the right of appeal to the Appeal Commissioners and the courts. The management provision enables us to exercise administrative discretion in allocating the resources available to us. We are not required to implement the letter of the law in all cases, regardless of cost. Under the care provision we mitigate the application of the law if its literal interpretation would not be in accord with the intention of the Oireachtas or if it would result in hardship." (my emphasis).

(Source: paragraph 3.16 of the Fifth Report of the Commission on Taxation, 1985)

Commenting on the care and management provisions, the Institute of Taxation has noted that:

"The Revenue Commissioners, by reason of their responsibility for the care and management of the tax, have power to grant concessional treatment that is not in strict accordance with the legislation where circumstances suggest to them that it is proper to do so."

(Source: The Institute of Taxation The Taxation of Capital Gains 1998 Tony Appleby & Frank Carr).

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