Irish tax litigation – the role of witness and documentary evidence

Taxpayers who are dissatisfied with a decision or assessment of the Irish Revenue Commissioners (Revenue) have the right to make an appeal. Depending on the circumstances, appeals can be brought before the Tax Appeals Commission (TAC) or the Irish High Court. In this insight, we set out some of the key matters for consideration when it comes to the role of evidence (witness and documentary) and discovery in the context of civil tax appeals.

For further information on the process regarding a TAC proceeding see our insight here or a High Court proceeding see our insight here.

Burden of proof

The TAC is the primary fact-finding body within the Irish tax appellate system. The findings of facts made by the TAC will not generally be disturbed by the High Court (or other Superior Courts) in the event of a subsequent Court process that will more likely be focused only on questions of law. The burden of proof in the TAC weighs on the taxpayer to show that, on the balance of probabilities, the tax assessment made by the Revenue was incorrect. It is incumbent on the taxpayer, therefore, to present evidence at the appeal hearing that will discharge that burden.

Witness evidence

There are two types of witnesses in a TAC case: witnesses of fact and expert witnesses.

Witnesses of fact

A witness of fact is a person who is called upon to give direct evidence in respect of the facts within their own means of knowledge. Although there can be a value in parties preparing witness statements to ensure that they can assess the strength of their evidence and to facilitate without prejudice negotiations, witnesses are generally required to give evidence orally at hearing with the opportunity for each party to cross-examine the other's witnesses. Unlike expert witnesses, discussed below, witnesses of fact can only give evidence of facts and not opinion.

S. 949AE Taxes Consolidation Act 1997 (TCA)  provides scope for the TAC to summon any person before it for examination where they consider such a person to be in a position to give evidence relating to a matter under appeal. That summons should be sent to that person not less than 21 days before the date of a hearing (unless the person consents to a shorter period). The witness summons will also highlight the entitlement of a witness to apply for the summons to be varied or set aside and the consequences under S. 949AU TCA of failure to comply with the summons (which broadly involve the application of a financial penalty).

Expert witnesses

Tax disputes can arise in a range of different scenarios and involve a multitude of structures, agreements, supply chains and commercial / individual arrangements. It may therefore be necessary to engage an expert witness at hearing to assist the TAC in the consideration of an appellant's argument on, amongst others, the nature of a payment, structure, agreement, arrangement or foreign law interpretation in the given scenario. Whilst experts will typically be required to give evidence orally, it is advisable to prepare an expert report in advance of the hearing and sometimes those reports will be the subject of a directed exchange and furnished to the TAC. An expert witness must have expertise and qualifications in the relevant field and be in a position to give an independent opinion on the matters at issue.

Importantly, the primary duty of the expert is to the TAC such that the person is obliged to deliver evidence in an impartial manner and the appointment of an expert should serve to assist the TAC Commissioner in its statutory duty to make a determination.

Documentary evidence

Tax disputes frequently relate to historical periods and the passage of time often creates difficulty for parties seeking to adduce compelling witness evidence because of changes in personnel, faded recollections or a lack of access to contemporaneous documentary evidence. Where contemporaneous documents are available they can be of central importance but parties will often need a witness to prove the documents in evidence. A combination of strong witness evidence with appropriately supportive documentary evidence is always important to put a taxpayer in the best possible position at a hearing. Board minutes and presentations or structuring documents and management documents can be helpful in assisting a taxpayer seeking to discharge the burden of proof.

Discovery

Discovery is a process by which parties to litigation may obtain disclosure of documents that are within the possession, power or procurement of the other party and are relevant to the matters in dispute. The purpose of discovery is to ensure the full facts relating to the matter in dispute can be presented to the court.

Discovery does not typically arise in the TAC but the TAC does have power to direct the production of records. Parties cannot be compelled to hand over documents to which legal professional privilege applies.

Hearing Bundle

It is important for the smooth running of a tax appeal that there is an agreed and easily navigable hearing bundle. Typically, the hearing bundle is served on the TAC a number of weeks before the hearing so that the Appeal Commissioner can review the parties' filings, evidence and outline of legal arguments. In terms of logistics at hearing, the TAC has the capability to conduct hearings in-person or remotely. The TAC continue to utilise remote hearings (and online Case Management Conferences) to progress appeals and increase accessibility.

For more information on this please contact Bryan Hughes, Senior Associate, Enda Hurley, Partner, or any member of A&L Goodbody's Tax Disputes and Enquiries team.

Date published: 9 May 2023