Interest on tax rebates debated

If a scheme to pay interest on income tax repayments is introduced it would have to be "prospective" rather than retrospective, the Minister for Finance has warned the Dáil.

Mr McCreevy said, however, that such a scheme could raise "all sorts of problems", because of the "constrained public finances". Nonetheless it was being "actively examined" in advance of next year's Finance Bill.

But he said he would have to examine whether such a scheme would be "an efficient use of resources", given the current state of the public finances.

Fine Gael's finance spokesman, Mr Richard Bruton, claimed that if such a scheme were not implemented, the Revenue would "deny justice and fair treatment to all taxpayers on an equal basis" and he said it was damaging to the Revenue Commissioners to be seen to "oppress" compliant taxpayers.

He was commenting during Finance Questions on the special report by the Ombudsman about the Revenue Commissioners' refusal to pay interest on tax wrongly charged on widows of public-sector workers.

The women were taxed on the portion of their pensions related to their children.

The Revenue failed to implement three of five recommendations the Ombudsman made, including the introduction of a scheme of interest payments on tax wrongly raised, but Mr McCreevy said the Revenue "did not lightly reject the recommendations".

The Revenue had legal opinion on the issue, as he was sure the Ombudsman had done.

"Lawyers enrich themselves every day in the courts of Ireland because of differences in legal opinion," the Minister added.

He pointed out, however, that the Revenue "pay out billions of euros in tax rebates each year". Interest was repaid to "certain categories of taxpayers, normally those under schedule D on which an assessment has been raised".

But Mr Bruton said it was a "question of justice" and asked where was the equity, when the Revenue "gives refunds with interest to certain people but denies it to the most deserving cases".

He insisted that the tax collectors had a "duty of care not to extract from any taxpayer more than is due. That means when people overpay, they must be recompensed in full and in real terms, so they do not lose out."