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Saturday 23 August 2014

Charlie Weston: Farcical blitz by Revenue generates tears not taxes

Published 10/01/2012 | 05:00

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THE Revenue Commissioners have treated us to a masterclass in the past few days on how not to tackle the thorny issue of taxation and pensioners.

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They have spread panic, fear and needless anxiety among a cohort of the population that, more than any other group, hates uncertainty.

Reports of elderly people ringing the Pensions Ombudsman's office in tears because they could not get through to Revenue helplines are testament to just how badly the issue has been handled.

Blind people, those with Alzheimer's and people in nursing homes have all been targeted in the blitz on those the tax officials believe are hiding a pension.

It is as if some in the tax office believe there is a group of dodgy pensioners out there sneaking down a dark alley every week and having €200 in notes slipped into their hands by some shady character.

"Psst. Here's your state pension. Don't tell the taxman," the slippery character tells them.

The tax officials seem to have got it into their heads that 115,000 people who get an occupational pension have set out to conceal the fact that they also get a state pension.

The truth of the matter is that there appears to be nothing like the numbers attempting to hide a state pension payment on top of an occupational one as we were led to believe.

Everywhere one turned yesterday there were reports of the tax officials getting it wrong when it came to the accusations that pensioners were under-declaring or even failing to declare their state pension.

And in a bizarre new twist, it emerged that 15,000 people have got letters from the tax authorities telling them they will be taxed, even though they are exempt from tax.

The whole affair risked descending into farce when it emerged that these people earn so little that they are not due to pay any income tax.

Revenue discovered these people had a state pension -- which the tax office did not know about -- in addition to a modest occupational pension.

When the two pensions are added together, the 15,000 still earn so little that they are under the threshold for older people paying tax. But they will be taxed anyway, for now.

Instead of leaving these people alone to enjoy their retirement, the strange logic of the bureaucrat came into play. The 15,000 were written to and told they would have to pay more tax.

But in time a new tax certificate -- the official document that sets out what your tax credits are and so how much tax you have to pay -- would be issued to them.

When this new tax cert is issued they will then get the income tax taken off them refunded.

It is as if these people are being punished for not telling the Revenue about their state pension even though it makes no difference.

This bureaucratic muddle is explained by Revenue as necessary because the tax officials did not know these people had a state pension in addition to their occupational pension.

And many of those who got letters saying they had under-paid tax on their pensions have, it now transpires, correctly declared their income.

Pensions Ombudsman Paul Kenny is deeply unhappy with the way the whole affair has been handled. Many of the elderly people in contact with his office have been upfront and honest with the tax authorities.

These people were in tears after getting letters over Christmas accusing them of under-declaring their income.

So annoyed is Mr Kenny that he has called senior Revenue officials into his office today to explain why the pensions tax issue was handled so badly.

It appears that in the rush to deal with the matter, corners were cut and mistakes made.

Revenue officials received a fat file from the Department of Social Protection in November. In this file were the details of pension payments being made to 560,000 people from the department.

It was the first time the two state agencies had exchanged information on pensions payments, despite having the powers to do this since 2005.

Officials appear to have dispensed with their normal slow-motion approach and quickly looked at the files and concluded that 115,000 people have state pensions that were either not declared or under-declared to the tax offices.

But it is increasingly as if the taxman has acted too quickly and mistakes have been made. Many of those accused of tax irregularities are actually tax compliant.

Senior Revenue officials are expected to be questioned about their handling of the issue at an Oireachtas Committee tomorrow.

Most older people assume that since the State pays them a pension the State, which includes the tax office, knows that they are paid a state pension.

There may well be those who have generous private pensions in addition to a state pension that the Revenue did not know about.

These people, who are unlikely to number more than 2,500, are likely to be pursued for back taxes.

It is hard to escape the conclusion that the vast majority of people are not hiding anything from Revenue. And it appears that was dawning when Declan Rigney of the Revenue Commissioners admitted yesterday the organisation would need to review its communications strategy.

Many of the letters that have gone out are incorrect, and any money that is gathered may not amount to much.

Revenue, it appears, has engaged in a fishing expedition, hoping to frighten people into coughing up. They have wrongly assumed the silver generation is hiding a pot of gold.

But tears, and not taxes, may be all we get out of this.

Irish Independent

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