Tax and Duty Civil Penalties
An outline of proposed legislation in relation to Tax & Duty Civil Penalty Regime
Section 91 and Schedule 5 of the Finance (No. 2) Bill 2008 contains proposals relating to tax and duty civil penalties. The Bill proposes the introduction of a number of new provisions and makes a number of other miscellaneous and consequential amendments to the tax and duty codes.
1. Liability to a penalty
Firstly, it is proposed (by inserting a new section 1077B into the TCA 1997) that a person will be given an opportunity to have a court examine whether that person is liable to a civil penalty for contravention of tax or duty legislation. In other words, a penalty will not be imposed against the wishes of a person unless a court has determined that such penalty is, in fact, due.
However, there is nothing to prevent, as heretofore, a person agreeing with, and paying, a penalty without court intervention.
This new provision as regards a liability to a penalty applies to both existing unsettled cases and new cases as regards tax geared and fixed penalties where agreement cannot be reached as to the liability to a penalty.
2. Recovery of a penalty
Secondly, it is proposed that a new section 1077C will be inserted into the TCA 1997 to provide that where a person is found by a court to be liable to pay a penalty, that penalty may be collected and recovered in the same way as tax is collected and recovered.
3. Recovery of a penalty in death cases
Thirdly, a new section 1077D will be inserted in to the TCA 1997 to place on a statutory footing the practice of the Revenue Commissioners as respects the recovery of penalties from the estate of a person after death. Penalties will only be recovered from an estate where the person either agreed in writing to pay the penalties or a court has determined, before the person’s death, that the person was liable to the penalties.
4. 'Tax geared' Penalties
Fourthly, the current practice of the Revenue Commissioners as respects the level of tax-geared penalties sought in settlements arising out of Revenue audits and investigations (as set out in the Code of Practice for Revenue Auditors) is to be put on a statutory basis.
Specific provisions giving effect to this will be inserted into each tax code.
In addition, the new provision changes the behaviour giving rise to a civil penalty from 'fraudulently’' and 'negligently' to 'deliberately' or 'carelessly'.
| Category of Default giving rise to a penalty | Base Penalty | Co-operation only | Co-operation and | |
| Prompted Qualifying Disclosure | Unprompted Qualifying Disclosure | |||
| Deliberate behaviour | 100% of underpaid tax | 75% | 50% | 10% |
| Careless behaviour with significant consequences | 40% of underpaid tax | 30% | 20% | 5% |
| Other careless behaviour | 20% of underpaid tax | 15% | 10% | 3% |
"Significant consequences" means that the difference between the tax or duty underpaid is greater than 15% of the correct tax or duty payable for the relevant period.
Where a second qualifying disclosure is made within a 5-year period, and where the nature of the default is in either the "deliberate behaviour" or "careless behaviour with significant consequences" category, the legislation will provide that the level of mitigation will be reduced as per the Code of Practice.
5. Fixed Penalties
Finally, a range of fixed penalties are to be brought up to date and standardised and the amounts of such penalties (which have not been changed in many years) are to be increased.
6. Miscellaneous
A number of consequential amendments are also proposed to various provisions of the tax and duty codes