Tax Defaulters: Legal Challenges and Fairness in Revenue Penalties

The article examines the statutory framework governing tax penalties, the obligations of the Revenue Commissioners, and proposes solutions to address the shortcomings in the current system.

Introduction

The Revenue Commissioners’ right to publish the names of tax defaulters is contingent on the quantum of tax penalty imposed, A challenge to the legality or appropriateness of the penalty requires the intervention of a court,  As justice must be administered in public, the  shield of anonymity is lost, as the entitlement to impose a penalty must be first challenged,  Consequently, there is no effective legal remedy to contest what many consider to be the  severest of Revenue sanctions,

A recent decision from the European Court of Human Rights and the possible unconstitutionality of the obligation to publish details of tax defaulters brings into focus the legality of a provision that names and shames a person in the absence of the ability to challenge, on an anonymous basis, a Revenue-imposed penalty that ultimately leads to publication.

This article considers the statutory mechanism of the penalty provisions the consequent obligation of the Revenue Commissioners (Revenue) to  publish tax defaulters, and also highlights the potential shortcomings of the current position and proposes a possible solution.

Revenue Penalties

Tax-geared penalties are based on a sliding scale and depend on the seriousness of default, the extent and timing of taxpayer disclosures and the level of cooperation provided during a Revenue intervention. Failure to notify and regularise a tax deficiency by an uncooperative taxpayer gives rise to default penalties of 100%, 40% and 20% for deliberate behaviour, careless behaviour with significant consequences and careless behaviour without significant consequences, respectively. The interpretation of these terms can be subjective Where a penalty has been imposed that is not accepted by the taxpayer, a Revenue official “shall” issue a notice of opinion to 

the taxpayer specifying the circumstances of the penalty and the amount thereof (s1077B TCA 1997). A notice will also issue if there is a failure to pay a previously agreed penalty. The taxpayer has 30 days to pay the penalty; otherwise, an application may be made to a relevant court to determine a person’s liability, Therefore the “opinion of the Revenue officer that a person is liable to a penalty is the first step in the statutory procedure which ultimately leads to a determination by the  court of competent jurisdiction” (Howley v  Lohan [2024] IECA 236, para, 18).

A relevant court that has decided that a person is liable to a penalty will also make an order as to the recovery of the penalty as if it is an amount of tax (Howley, para, 4).

There is no statutory definition of “deliberate” or “deliberately”, Deliberate is an adjective that  attaches a requirement of intentionality to the  action that it describes, namely, “behaviour”,  Despite the absence of a statutory definition, Revenue, in its Code of Practice for Revenue  Compliance Interventions (2022), describes the  failure to keep proper records, provision of false information, concealment of bank accounts and serious failings to operate fiduciary taxes as  indicative of deliberate behaviour (para. 4.6.1).

There is a statutory definition of “carelessly”, and it applies where there is a “failure to take reasonable care” (s1077F(1) TCA 1997). Revenue’s Code expands that meaning to situations where “a taxpayer of ordinary skill and knowledge, properly advised, would have foreseen as a reasonable probability or likelihood, the prospect that an act (or omission), would cause a tax underpayment, having regard to all of the circumstances” (para. 4.6.2), In essence, this is the standard definition of negligence. Furthermore, a genuine and principled difference of opinion on tax matters that is neither careless nor negligent cannot be discounted.

The High Court in Joseph Tobin v Eileen Foley [2011] IEHC 432 considered whether Ms Foley was liable to a penalty for having negligently submitted an incorrect capital gains tax return (para. 2). In considering the concept of negligence in s1053 TCA 1997, the precursor to s1077F, Peart J made the following observation (para. 30):

“Negligence is a term which implies more culpability than mere carelessness or oversight..Negligence in the context of this legislation means that a person having a duty to make a tax return truthfully and honestly fails to make all appropriate inquiries in order to ensure that the details contained in the return were complete, accurate and truthful.A person completing such a return must be expected to make appropriate enquiries if she herself does not have the necessary facts and information in order to complete the return. If she has to rely on others for information, she is under an obligation to ensure as far as reasonably possible that the information given is correct and truthful.”

In Thomas McNamara v the Revenue Commissioners [2023] IEHC 15 Barr J at paragraph 98 made specific reference to the decision of the Special Commissioners in AB (A firm) v Revenue and Customs Commissioners [2007] STC (SCD) 99, in which it was confirmed that negligent conduct amounts to more than “taking a different view from Revenue” (para. 105). It is the symmetry between “carelessly” and “negligence” that gives McNamara direct relevance.

As noted in McNamara (para, 99), a distinction is drawn:

“between circumstances where the accountant is merely a functionary, who  makes a return on behalf of his client; and a situation, where there is a complex question of tax law involved and upon which the taxpayer takes the advice of an accountant/tax adviser, In the former case, the taxpayer remains liable for the erroneous return. In the latter case, he may be able to avoid a finding of negligence, where he has relied on the advice given by the tax adviser.” 

A return can be prepared and submitted by either the chargeable person or an authorised agent. If the return is prepared and filed by an agent, it is considered to have been completed and filed by the chargeable person (s959L TCA 1997). Although prudent taxpayers assign the responsibility for such compliance obligations to their accountants and tax advisers, the Code, as confirmed by settled law (McNamara), attributes any errors or defaults in the return made by the agent directly to the taxpayer.  Therefore, while a taxpayer may act prudently by appointing an agent, any mistakes made by an agent in the completion of a tax return are deemed to be made by the taxpayer.

However, McNamara suggests that a taxpayer relying on expert advice for non-routine tax matters acts otherwise than negligently,

Publication

Revenue is required to publish the names, addresses and occupations of persons who have been convicted of tax offences by a court or where Revenue has refrained from initiating court proceedings by agreeing to accept a settlement that includes, tax, interest and penalties (s1086A(2) TCA 1997). Statutory exclusions from publication apply where: 

• the penalty does not exceed 15% of the 
• amount of additional tax due,
• the settlement does not exceed €50,000 of
• the additional tax due or
• a qualifying disclosure has been accepted by  Revenue (s1086A(8) TCA 1997),

The seminal case on the lawfulness of publication of tax defaulters is B. Doe, R. Doe v The Revenue Commissioners [2008] IEHC 5, in which it was held that there was not a constitutionally based right to taxpayer confidentiality and that any entitlement that a non-compliant taxpayer has to confidentiality is confined to a statutory entitlement (para. 4.3).   However, in circumstances where there is a challenge to the lawfulness or merit of a decision to publish based on the rules of negligence, Doe can be distinguished as in that case, despite agreeing a settlement with Revenue that included penalties (para, 2,12), the taxpayer unsuccessfully argued that the  publication provisions were “badly worded” and “ought to be construed against Revenue as a  taxation statute” (para. 2.9).

Recently, in Barth O’Neill v The Revenue Commissioners [2024] IEHC 337, the High Court considered the issue of the right to erasure contained in Article 17 of the General Data Protection Regulation, regarding a right to be forgotten. The court, influenced by B. Doe, refused the application for an in-camera hearing or anonymisation, concluding that the substantive judicial review proceedings should be conducted fully in public (para. 64).

Right to Your Good Name

Article 40.3.2 of the Constitution mandates the State to protect from unjust attack and “in case of injustice done, vindicate the life, person, good name..of every citizen”.

In In Re Haughey [1971] IR 217 Ó Dalaigh CJ observed that “Article 40, s.3 of the Constitution is a guarantee to the citizen of basic fairness of procedures. The Constitution guarantees such fairness, and it is the duty of the Court to underline that the words of Article 40, s.3, are not political shibboleths but provide a positive protection for the citizen and his good name.”

This right, however, is not absolute and must be balanced against other fundamental rights, such as the right to freedom of expression (Article 40.6.1.i) or, indeed, in accordance with the law. Although the publication of the names of tax defaulters adversely impacts the reputation and good name of a person, it is arguable that such a measure could be justified as it serves the public interest by promoting transparency and deterring tax evasion.

Furthermore, the Defamation Act 2009 consolidated various common law principles into a statutory framework and seeks to balance freedom of expression with the protection of reputation.

European Court of Human Rights

In the Case of L.B. v Hungary (Application no, 36345/16) the European Court of Huma Rights (ECHR) ruled that the publication of a taxpayer’s personal data, including his name and address, on a list of major tax debtors violated their right to respect for private life under Article 8 of the European Convention on Human Rights. It was argued that the “public shaming list was a modern form of pillory, was extremely humiliating and caused huge distress” (para. 61), a view shared, no doubt, by many who have appeared on a tax defaulters’ list.

The court found that the publication of personal data constituted an interference with his right to respect for private life under Article 8. While acknowledging the legitimate aims of enhancing tax compliance, the court held that Hungary failed to demonstrate that the impugned provisions struck a fair balance between the competing individual and public interests (para. 139).

In an interview with The Irish Times on 16 April 2023 the then Tánaiste, Micheál Martin TD, confirmed that the Government will be studying the ruling to establish if it has implications for Ireland. However, Revenue continues to publish tax defaulters, as the giving effect to the ECHR in our domestic law is subject to the provisions of the Constitution and, therefore, it does not have direct effect (O’Neill v Revenue [2024] IEHC 337 at para. 52).

Right of Appeal: Penalty Provisions

The Department of Finance in the “Corporation Tax: Tax Strategy Group (TSG) – 20/03” (September 2020) paper reviewed the right of appeal against a surcharge, noting that it “is a type of penalty that applies where tax returns are not submitted on time, It takes the form of the inclusion of an additional amount (the surcharge) in the tax assessment to which the  return relates” (para. 103). The TSG concluded that it was appropriate to ensure that there are sufficient safeguards for the taxpayer to enable a specific right of appeal against the imposition of a surcharge (para. 109) where a return was filed late and where there is a dispute regarding whether a person has deliberately or carelessly delivered an incorrect return of income. Those recommendations were approved by the Oireachtas and implemented by s58(2)(b) Finance Act 2020 through the insertion of   sub-section (1A) in s959AF TCA 1997.

As noted above, there is no statutory right to appeal to the Tax Appeals Commission a tax-geared penalty imposed by s1077F TCA  1997. Instead, disputes over penalties leading to the mandatory obligation to publish must be challenged in a court. Court challenges to Revenue’s decision to impose a penalty are unfair, particularly where there is a legitimate basis to contest the lawfulness of a penalty that leads to publication. They can also undermine the fairness of the legal process, as individuals may feel pressured to accept penalties without contesting them.

Consequently, the imposition of a severe sanction – publication as a tax defaulter – without adequate safeguards lacks due process and fair procedures and is contrary to the protections guaranteed by the Constitution.

Limited Powers and Functions of a Judicial Nature

The Supreme Court in its judgment in Zalewski v Workplace Relations Commission [2021] IESC 24 held that the powers exercised by adjudication officers of the Workplace Relations Commission constituted an administration of justice but were “saved” under the provisions of Article 37 of the Constitution, which permits the performance of “limited functions and powers of a judicial nature” by non-judicial bodies authorised by law. In a significant judgment, with three judges dissenting, the majority ameliorated the previous test for the administration of justice in McDonald v Bord na gCon [1965] IR 217 to a more flexible approach, recognising the enormous increase in the administrative work of executive power, thereby permitting the functioning of a modern society¹. O’Donnell CJ, speaking on behalf of the majority in his consideration of administrative bodies, made six references to Revenue as an indicative body that had decision-making capabilities that “may be of enormous, even ruinous, impact on a person or a company” (para.114).

Adapting a flexible approach to Article 37 has led to debate among commentators and academics about whether administrative bodies can perform limited judicial functions. It has been argued that the adjudicative role that Revenue performs affects the legal rights and obligations of taxpayers, a characteristic of a judicial function, with a right of appeal ultimately to the courts, thereby ensuring judicial oversight. Furthermore, Revenue’s powers are defined and limited by legislation, ensuring that its functions are exercised within the bounds of the law. As confirmed in Zalewski, such powers “must comply with the fundamental components of independence, impartiality, dispassionate application of the law, openness, and, above all, fairness, which are understood to be the essence of the administration of justice” (para. 138). In the absence of any checks or balances permitting a challenge to the imposition of a tax-geared penalty and the associated right to publish as a tax defaulter, the shield of anonymity is lost, as the legitimacy of the penalty must be first contested in open court. Therefore, the process of challenging with a view to avoiding adverse publicity is defeated.

Conclusion

That the “ignominy of being..labelled ‘tax dodger’, even if incorrectly so, is something that stays with one for life and it is a topic that the media/public are fixated with and would have lasting consequences on my right to earn a living” (O’Neill v Revenue [2024], para. 14) resonates with many taxpayers. Although the Revenue- imposed financial penalties are unpalatable for many taxpayers, publication as a tax defaulter is the most severe. The possibility of damage to reputation or brand prompts many taxpayers to settle disputes not only for the financial penalties but many are prepared to pay a premium to avoid publication.

Although taxpayers can feel aggrieved by the severity of Revenue-imposed penalties, the intervention of a court to consider the lawfulness or, indeed, the appropriateness of the sanction is more disconcerting. The public nature of court proceedings also denies taxpayers the ability to remain anonymous, leading to no effective opportunity to contest the legitimacy of Revenue’s decision to publish.

It is the author’s view that the decision of a Revenue official to impose a penalty that gives rise to publication is an exercise of a judicial function of a limited nature and is a power without appropriate protection for taxpayers. This unfettered power, which lacks fairness, is contrary to the administration of justice as envisaged by O’Donnell CJ in Zalewski. There should be no Constitutional or statutory impediment to prevent the Tax Appeals Commission considering appeals that impose penalties as it can hear appeals relating to the imposition of a penalty surcharge. The Tax Appeals Commission can also summon a witness and impose penalties for failing to attend a hearing (s949AU TCA 1997). Penalties can also be imposed for the giving of false evidence (s949AD, Oath, and s1066, Perjury, TCA 1997). In both cases the intervention of a court is required to enforce and collect those penalties.

Furthermore, the recently enacted Competition (Amendment) Act 2022 specifically permits ministerially appointed Adjudication Officers who have been nominated by the Competition and Consumer Protection Commission to conduct hearings, summon witnesses and impose fines, subject to High Court consideration and confirmation. There are also other non-judicial bodies that have the authority to impose fines, such as the Central Bank of Ireland. It is only the enforcement and collection of those penalties that require the intervention of the courts.

Therefore, to overcome the unfairness of challenging Revenue penalties and the associated right to publish before a judge in open court, it is proposed that there should be a right of appeal to the Tax Appeals Commission, whereby the lawfulness and proportionality of a tax-geared penalty and the associated obligation to publish can be considered on a case-by-case basis.

Over time, a body of decisions would become available whereby the principles of negligence/carelessness relating to behaviour considered to be deliberate or having significant consequences will evolve that will be of assistance not only to all taxpayers, tax practitioners and Revenue but also to the Tax Appeals Commission itself. Thereafter a procedure of due process and fair procedures will exist that permits the right to challenge a decision of Revenue to publish a taxpayer as a tax defaulter.

The author wishes to acknowledge the contribution of his colleague Frank O’Neill to the writing of this article.

Central Bank Act 1942, s33AQ and s33AW,

3 Barry Doherty, “Are We There Yet? Administrative Financial Sanctions under the Competition (Amendment) Act 2022”, Irish Journal of European Law, 25/25 (2023), pp 23–

First published in the Irish Tax Review, Issue 2, 2025