Sometimes the taxman fails to pay his fair due

For most PAYE workers, the delight of filling out a tax return is something they can happily skip: their total liability to tax is conveniently, if depressingly, deducted at source by their employer.

But self-employed people and PAYE workers with other sources of income will have to submit to the process of itemising invoices and digging out crumpled receipts on an annual basis.

The process can be confusing at the best of times, but now the Irish Taxation Institute (ITI) is arguing that new measures adopted by the Revenue Commissioners have eroded taxpayers' rights. New rules on interest payments that came into effect on January 1st mean that "in 99 cases out of 100", no interest will be paid if people overpay their tax, says Mark Redmond, the ITI's chief executive.

"If a taxpayer underpays their tax, they are hit with an interest rate of 10 to 12 per cent per annum, with no latitude at all on the part of the Revenue. But if they overpay their tax, they have to wait between six and 18 months to get a refund and they get no interest in most cases."

Self-assessed taxpayers are required to make a payment of tax well in advance of filing their tax return.

By October 31st of every year, they must submit their return for the previous year but also pay preliminary tax for the current year.

Preliminary tax must be at least 90 per cent of their estimated total tax liability for the current year or match the full liability for the previous year.

Businesses will often pay more than their estimated liability in order to avoid underpaying and being charged interest of 10 to 12 per cent.

They can claim that back in their tax return the following October but, under the new rules, the Revenue only starts paying interest from six months after they receive the claim. This means they could be waiting up to 18 months to get their money back without receiving any interest. Even where interest is paid to the taxpayer, the rate is much lower at just 4 per cent.

Tax advisers strongly recommend that people file their returns as early as possible in order to avoid the September-October rush.

"The time to commence gathering the information and passing it on to advisers is now," says Billy Burke, associate tax director with KPMG.

"If this is left until the last minute, difficulties can arise in obtaining all the relevant information which, in turn, can lead to deadlines being broken and surcharges arising."

Once a person is registered for self-assessment, the Revenue should send them the 22-page Form 11 tax return with their name and PPS number on it. But even if they are not sent a tax return, chargeable people are required to get a blank return.

Employees and pensioners who are paying tax on income received outside the PAYE system or who are making claims for tax reliefs use Form 12.

If the return is up to two months late, the surcharge is 5 per cent of the individual's tax liability. Two months after the filing deadline, the surcharge doubles to 10 per cent. Eventually, people who fail to file a return and pay their tax bill may be prosecuted for tax evasion and have their names published in the tax defaulters' list, which appears in the quarterly Government publication, Iris Oifigiúil.

This year's Finance Act raised the threshold at which tax defaulters' names are published from a liability of €12,700 to €30,000.

The move was welcomed by the ITI, which is concerned that workers who underpaid by €3,000 to €5,000 are being included in the list because the interest and penalties meant they crossed the €12,700 threshold. These people are currently listed side by side with people who deliberately dodged tax to the tune of half a million.

"There is no discrimination between the two. Is that right?" asks Redmond. "They are also publishing the names of dead people. Is it right that the families should have to suffer the humiliation of seeing their late relatives' names published?"