THE pensioner tax controversy descended into farce last night after thousands of retirees were told to pay income tax they do not owe.
Revenue officials admitted they will hit 15,000 people who have small occupational pensions with a higher tax bill.
But the tax hit will only be temporary because these people are exempt. That means the taxman will take the money -- for a while -- and then return it to the pensioners.
The bizarre decision raises serious questions about Revenue's handling of what has now become a fiasco.
However, the reality for thousands of elderly people now is confusion and a sense of alienation, according to Pensions Ombudsman Paul Kenny.
He revealed yesterday that dozens of pensioners had been upset on the phone because of the anxiety and fear generated by the tax demands.
"They were not able to get through to the Revenue so they rang us and they were in tears," he said.
Mr Kenny said it was "disturbing" that people who were not liable for any extra tax on pension income had received letters about the issue.
He has called tax officials into his office today to explain why the issue has been handled so badly.
The controversy will also put enormous pressure on Revenue Commissioners' chairman Josephine Feehily to publicly explain the strategy behind the developments.
Mr Kenny, meanwhile, said there had been a range of errors on the part of Revenue, which chose to send letters to 115,000 pensioners last week telling them that they had underpaid their tax.
Many of those making contact with the ombudsman's office got these letters. But it now appears they had correctly declared their income.
Other people have received two letters -- one saying they owe more tax and another saying they owe nothing.
And some got letters saying they had underpaid their income tax, but the tax certificate accompanying the letters contradicted this.
Mr Kenny criticised the Revenue Commissioners for sending the letters to some people who were not even retired.
"There is no doubt that the Revenue have made mistakes. There are errors of different kinds," he said.
The latest controversy involves another group of 15,000 people whose earnings are below the threshold for paying income tax.
Despite this they will be taxed, for now. They will then be issued with a new tax certificate.
When this new tax cert is issued they will then get a refund on the income tax taken off them, the Irish Independent has learned.
A tax certificate is the official document that sets out what your tax credits are and how much income tax you have to pay each year.
In the meantime, it effectively means that a pensioner will have to make do on a reduced income, even though they may not actually be liable for the tax. While the taxman is sorting out the mess, the Revenue will be sitting on the money that would otherwise be in the pensioners' pockets.
A spokesman for the Revenue defended the bizarre move, claiming the tax officials had not known these people had a state pension in addition to their private pension.
However, Revenue official Declan Rigney stressed that tax officials could not be completely sure these people were exempt from tax. He denied the letters were causing anxiety and also denied any letters were sent out with incorrect details. "There is no widespread situation of people getting letters with errors in them," he said.
Taoiseach Enda Kenny yesterday said: "I accept that there's been confusion and therefore anxiety and concern for a numbers of people as a result of the letters that were sent out by the Revenue Commissioners."