Judgments Of the Supreme Court

Judgment

Title:

McNamee -v- The Revenue Commissioners

Neutral Citation:

[2016] IESC 33

Supreme Court Record Number:

84/13

High Court Record Number:

2012 51 JR

Date of Delivery:

06/22/2016

Court:

Supreme Court

Composition of Court:

Clarke J., MacMenamin J., Laffoy J., Dunne J., Charleton J.

Judgment by:

Charleton J.

Status:

Approved

Result:

Appeal dismissed


Judgments by	Link to Judgment	Concurring
Laffoy J.	Link	Clarke J., MacMenamin J. Dunne J.
Charleton J.	Link	Clarke J., MacMenamin J. Dunne J.

An Chúirt Uachtarach

The Supreme Court

Clarke J
MacMenamin J
Laffoy J
Dunne J
Charleton J

Record number 2012/51/JR

Appeal number 084/2013

[2016] IESC

Between

Ronan McNamee

Applicant/Appellant

and

The Revenue Commissioners

Respondent/Respondent

Judgment of Mr Justice Peter Charleton delivered on Wednesday, June 22nd 2016

1. This appeal concerns the proper interpretation and application of s. 811(6)(a) of the Taxes Consolidation Act 1997. This is designed to limit the efficacy of what otherwise would be lawful schemes of tax avoidance. Like its predecessor, s. 86 of the Finance Act 1989, this section reduces the room which taxpayers have to manoeuvre out of paying tax through schemes which ostensibly meet the conditions for an exemption or allowance but which are in nature so artificial as to be contrary to the apparent purpose in reducing tax for which the legislation provides. Under the system of government inherited by the State, all forms of taxation result from legislation in parliament. One of the guiding maxims of revenue law is that it does not carry any overriding equitable principles: an activity either does or does not come within the statute imposing a charge to tax. Hence, this is a matter of definition and circumstance and not one of fairness. Thus, it is proper for taxpayers to seek to structure their dealings so as to minimise their exposure to liability. Prior to the enactment of anti tax avoidance measures, apart from a technical challenge to the application of legislation or the reality of the circumstance alleged by the taxpayer, the Revenue Commissioners had no means to overrule schemes which minimised tax liability. Section 811, however, now allows tax avoidance to be analysed on a basis akin to conformity with the underlying purpose of the taxation code. Tax avoidance, nonetheless, remains lawful. Where tax is evaded, that is a criminal offence. The result of unsuccessful tax avoidance sounds only in liability to pay and, possibly interest and surcharges.

2. The taxpayer, Ronan McNamee, is a distinguished businessman. As appellant, he seeks to quash a notice of opinion issued by the respondent Revenue Commissioners on 24th August 2011 pursuant to s. 811 of the Act of 1997. This notice of opinion related to a series of transactions which minimised the taxpayer’s and his wife’s liability to capital gains tax. This liability came from substantial profits on transactions in 2007 and amounted to about €57.87 million. The transactions which are now under question were with Schroders, a global asset management firm in London, and seem to have resulted in a loss of €25.60m. This is said to represent 44% of the capital gains in 2007. Under s. 811 of the Act of 1997, the Revenue Commissioners, or an officer nominated by them, in this case the late Frank Mullen (his familiar name, but he was also called on some correspondence by the name of Peter, or Peter F Mullen), may disallow an avoidance measure. While it is necessary in this judgment to reference elements of the transactions presented to the Court, neither on this appeal nor in the High Court, is this process of judicial review concerned with the facts of the transactions impugned by the Revenue Commissioners. Rather than any issue as to whether the tax planning measure came within the scope of the powers of the Revenue Commissioners to disallow it, it is the process leading to the decision by the nominated officer of the Revenue Commissioners that is in issue. In addition to initiating a judicial review, the taxpayer has appealed the factual decision to the Appeal Commissioners. Since they will be concerned with the facts of the transactions and will be deciding liability to taxation, any reference herein to those circumstances is in no way binding or even suggestive.

3. On this appeal, three issues are raised by the taxpayer arising from the High Court judgment of McGovern J [2012] IEHC 500.

(1) Whether the High Court judge’s acceptance that none of the Revenue Commissioners nor the nominated officer on behalf of the Revenue Commissioners formed an opinion that the transaction in question involving Ronan McNamee and his wife was a tax avoidance transaction at any time prior to the 24th August 2011 is sustainable in light of the evidence. Once an opinion is formed by the Revenue Commissioners, or as in this case by the nominated officer, under the legislation the taxpayer should be informed immediately. Thus it is argued delay has undermined the validity of the notification;

(2) Whether the involvement of Commissioner Michael O’Grady or Peter Mullen the nominated officer in the assessment of the transaction within the Revenue Commissioners in 2009-2011 was such that the formation of the opinion is tainted by objective bias through pre-judgement;

(3) Whether the refusal of the Revenue Commissions to furnish to the taxation advisors of Ronan McNamee a copy of the submission which they made to the nominated officer, and the relevant expert reports, for the purpose of persuading him to form an opinion that the transaction in question was a tax avoidance transaction, constitutes a breach of constitutional justice where unfair procedure results in the purported formation of the relevant opinion by the nominated officer is void.

The background to this should now be set out.

The transaction
4. It must be stressed that it was entirely legitimate for the taxpayer to seek to minimise liability to taxation through avoidance measures. At issue is conformity with s. 811 in the procedure engaged in by the nominated officer of the Revenue Commissioners. As explained by the taxpayer and his wife on this appeal, the transactions in question were virtually identical in structure to 25 other transactions entered into at various times by taxpayers who all sought to limit their exposure to a capital gains tax liability. All of these 26 transactions, although differing in terms of personnel, dates and amounts of money, are said to be otherwise identical in all material respects. It seems that all of the transactions were arranged with Schroders and the 26 such transactions which came to the attention of the Revenue Commissioners were referred to internally within the Revenue Commissioners as, variously, the “Schroder losses” scheme, the “Capital losses” scheme, the “ready made scheme”, or the “matching contrived capital loss” scheme. Apart from this taxpayer, other taxpayers involved in this scheme commenced judicial review. A memorandum entitled “Capital Loss Transaction”, dated 20th January 2010, from Breda Ruddle to Frank Mullen, provides a short convenient summary of the transaction.

5. The taxpayer would summarise the essence of the transaction as being that the taxpayer was facing a potential capital gains tax liability on profits from a large property sale and so entered into an arrangement with Schroders whereby the taxpayer bought a quantity of Irish government bonds and agreed to sell them to Schroders at a future date at a price to be determined on that date. The price to be paid was to be determined by the level of a specific stock exchange index on the date the resale was due to take place but it was intended that the government bonds would be sold at a price which would also generate a significant capital gain approximately equal to the amount of the capital gain the taxpayer was trying to shelter from the earlier commercial transaction. Gains on Irish government bonds are exempt from tax. Simultaneously, the taxpayer entered into another agreement with Schroders to buy and sell foreign currency, again at a price to be determined in the future but which was intended to be sold at a price which would generate a capital loss about equal to the capital gain on the sale of the Irish government bonds. The taxpayer claims that, from a commercial perspective, the transaction was broadly neutral for the taxpayer and Schroders. The taxpayer, it is claimed, makes a gain on the sale of the Irish government bonds and an offsetting loss on the foreign currency transaction. Thus, the capital gains tax which would otherwise arise on the property transaction was claimed to be either mitigated or eliminated depending on the prices at which the financial straddles were ultimately executed. Insofar as that might vary, in reality a truly shocking earthquake in the world economy would be required to put the transactions outside expected parameters of return. While this matter will in due course come before the Appeal Commissioners, the taxpayer has correctly reserved the right to argue that this was not a tax avoidance transaction as defined by legislation; hence that issue is not now before this Court. Referring to the kinds of transactions, most of which were apparently akin to that described and some of which were contracts for differences, a memo to Frank Mullen dated 20th January 2010 states that the Revenue Commissioners “consider that these are artificial losses.”

6. That point of view is reflected in the submissions on this appeal by the Revenue Commissioners. Their understanding of the transaction is that in 2007, the taxpayer and his wife jointly entered into a foreign exchange straddle contract through Schroders resulting in a total loss of about €25.6 million and also a gilt forward contract using Irish government gilts resulting in a total gain of around €25.4 million. The taxpayer and his wife incurred a monetary loss of under €250,000, equating to the fee paid to Schroders. This related, separately, to the property transactions which the taxpayer undertook in 2007 giving rise to a gain of €57.8 million. Ordinarily, capital gains tax would arise on that total gain; however, the transactions with Schroders ensured that the total gain was not taxed in this way because Irish government gilt profits are not chargeable. The overall tax effect of the Schroders transactions was to generate an allowable loss of in or about €25.6 million from the foreign exchange losses which was available to be set off against the gains made on the earlier disposals; although the Revenue Commissioners claim that the monetary loss actually incurred by the taxpayer and his wife was under €250,000. In terms of the tax advantage of the Schroders transactions, it is claimed by the Revenue Commissioners that by this process, the taxpayer avoided paying capital gains tax in the amount of €5,121,107.60.

7. Those possibly conflicting accounts and the motivation behind such transactions are for the Appeal Commissioners. No view is expressed here. The issues on appeal all turn on the text of s. 811 of the Act of 1997 and the contrary view taken by the parties as to the procedures and safeguards to be implied therein.

Tax avoidance
8. Despite the referencing of almost all of s. 811 of the Act of 1997, as amended, on the appeal, it is beneficial to quote only those sections relevant to the particular questions in issue. In essence, the power vested in the Revenue under the section is to describe a transaction as a tax avoidance measure. On that happening, the exposure to tax otherwise avoided is annulled and tax becomes payable in the ordinary way. Whereas the power under statute is vested in the Revenue Commissioners, subs. 12 enables those three officials to nominate a person to analyse the transaction and to give the opinion which operates to change a transaction which avoids liability to tax into one attracting that liability. In that regard, perfectly ordinary definitions are used in respect of what a business is and as to the nature of taxation and advantage arising from a transaction. Subsection 2 gives part of the complex definition of what sort of transaction may be regarded as avoiding tax:

For the purposes of this section and subject to subsection (3), a transaction shall be a “tax avoidance transaction” if having regard to any one or more of the following—

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

the Revenue Commissioners form the opinion that—

(i) the transaction gives rise to, or but for this section would give rise to, a tax advantage, and

(ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage,

and references in this section to the Revenue Commissioners forming an opinion that a transaction is a tax avoidance transaction shall be construed as references to the Revenue Commissioners forming an opinion with regard to the transaction in accordance with this subsection.

Subsection 3(a) uses the definitional approach, namely that describing what something is not, elucidates what that particular something in fact is:

Without prejudice to the generality of subsection (2), in forming an opinion in accordance with that subsection and subsection (4) as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that—

(i) notwithstanding that the purpose or purposes of the transaction could have been achieved by some other transaction which would have given rise to a greater amount of tax being payable by the person, the transaction—

(I) was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person, and

(II) was not undertaken or arranged primarily to give rise to a tax advantage,

(ii) the transaction was undertaken or arranged for the purpose of obtaining the benefit of any relief, allowance or other abatement provided by any provision of the Acts and that the transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.

9. Furthermore, it is made an imperative that the analysis by the Revenue Commissioners should be as to the true nature of the transaction claimed to be set up to avoid tax. Thus subs. 3(b) provides:

In forming an opinion referred to in paragraph (a) in relation to any transaction, the Revenue Commissioners shall have regard to—

13. the form of that transaction,

(ii) the substance of that transaction,

(iii) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and

(iv) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.

10. Where such an opinion is arrived at, the Revenue Commissioners must then calculate the relevant taxation consequences under subsection 4. This process might shortly be explained, as in subsection 5(a)(iii), as being a process whereby the Revenue Commissioners “recharacterize for tax purposes the nature of any payment or other amount.” Logistically, once the relevant opinion is reached, a notice similar to that sent to this taxpayer is sent out under subsection 6. This, under the subsection, must be sent straight away. The text of subsection 6(a) reads:

Where pursuant to subsections (2) and (4) the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction, they shall immediately on forming such an opinion give notice in writing of the opinion to any person from whom a tax advantage would be withdrawn or to whom a tax advantage would be denied or to whom relief from double taxation would be given if the opinion became final and conclusive, and the notice shall specify or describe—

13. the transaction which in the opinion of the Revenue Commissioners is a tax avoidance transaction,

(ii) the tax advantage or part of the tax advantage, calculated by the Revenue Commissioners which would be withdrawn from or denied to the person to whom the notice is given,

(iii) the tax consequences of the transaction determined by the Revenue Commissioners in so far as they would refer to the person, and

(iv) the amount of any relief from double taxation calculated by the Revenue Commissioners which they would propose to give to the person in accordance with subsection (5)I.

11. Subsections 7 and 8 preserve the familiar appeal to the Appeal Commissioners within 30 days, with an appeal by way of rehearing to the Circuit Court and a further appeal on a point of law to the High Court. The Revenue Commissioners are not granted any of those appeals. The grounds of appeal under subs. 7 are limited to the recharachterisation and this would clearly not include matters of procedure. It is important for the purposes of this appeal that the nature of the hearing before the Revenue Commissioners is an enquiry into the case to be made on each side. Further, while the grounds of appeal are limited to the issue of the nature of the transaction, in no sense is that appeal limited to the papers that were before the Revenue Commissioners when the opinion was formed. This is made plain by subs. 7 which, while confining the issue on appeal to the relevant avoidance analysis, also states that the hearing is to be:

… only on the grounds that, having regard to all of the circumstances, including any fact or matter which was not known to the Revenue Commissioners when they formed their opinion or made their calculation or determination … the transaction specified or described in the notice of opinion is not a tax avoidance transaction.

12. In Revenue Commissioners v O’Flynn Construction [2012] 3 IR 533, this Court, dealing with the predecessor to this provision, made some comments which remain relevant to the analysis of s. 811 of the Act of 1997. In that case the substance of the transaction was the main issue in the appeal. After a consideration of the relevant decided cases, O’ Donnell J for the majority stated at para. 65:

Prior to s.86 the only question was whether or not the transaction came within the strict words of the statute some times literally and narrowly construed. In the case of a tax statute, if the component parts of the transaction did not come within the provision, then it was not possible to look at the substance of the transaction to contend that tax should be applied. Similarly in the case of a relief, if the transaction came within the words of the provision granting relief then the relief must be granted, no matter how contrived the scheme, nor how far removed it was from the activity sought to be encouraged by the relief. But under s.86 the potential tax benefit to a tax payer may be disallowed if the Revenue comes to the conclusion that the transaction is one designed to confer a tax advantage and constitutes a tax avoidance transaction. As the Appeal Commissioners in this case observed, the essential starting point to the application of s.86 is a determination that absent its provisions the taxation charge would not apply, or in the case of an exemption, that its benefit would be available to the tax payer, on a literal construction of the language of the relevant statute.

13. Hence, it is only reliefs and benefits that are covered which might, ascribing motivation in this regard to a proper construction of the legislation, be regarded as targeted towards the legitimate use of the proper and intended purpose of taxation exemption or relief measures. Artificial or contrived schemes do not properly attract a tax exemption or relief. The indicators in that regard, the only ones capable of being brought to bear on the analysis, are those as set out in legislation. As O’Donnell J commented at para. 66:

Looked at in this light, sections 86(2) and 86(3) appear to be directed towards making the difficult distinction between a commercial transaction which has been legitimately structured in such a way as to mitigate the tax view on the one hand, and a purely tax driven transaction designed to give rise to a tax advantage on the other. This is apparent from the provisions of s.86(2)(ii) and its mirror image in s.86(3)(a)(ii). The fact that any given transaction gives rise to a tax advantage is not in itself enough to disallow that benefit. Such a transaction only becomes a tax avoidance transaction if it satisfies the requirements of s.86(2). That subsection directs the Revenue Commissioners to have regard to the results of the transaction, and its uses and means of achieving those results and any other means by which part of the results could have been achieved. In considering this issue the proviso to s.86(3) requires that the Revenue Commissioners have regard both to the form and substance of the transaction. The transaction will be a tax avoidance transaction if the Revenue Commissioners (having considered the matters set out above i.e. results, use, form and substance) form the opinion that the transaction gives rise to a tax advantage and that “the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage”.

14. As to the burden of proof on the hearing before the Appeal Commissioners, the Revenue Commissioners have conceded that, at such a hearing, they bear the burden of demonstrating that the use by the taxpayer of the system of allowances or exemptions in question amounted to avoidance. This concession may be helpful. It is to be noted that, in his judgment in the O’Flynn Construction case, McKechnie J at para. 147, dissenting as to the result, commented expressly on that issue:

In my view, the situation arising under s.86 is at least to a certain but definite extent, different from the situation where an appeal against an assessment is raised. In the first instance the avoidance provision can only be activated by the Revenue Commissioners, who, for the provision to have effect, must arrive at a view that the scheme or arrangement is captured by it. They must assess a violation and do so by issuing a Notice of Opinion to that effect. Such a notice can only issue if by reference to certain specified matters, they have reached a definite conclusion. This exercise is conducted by way of objective assessment. In addition, they assert, not simply a breach of the section, but also what, in their opinion and judgment, are the tax consequences which arise if, such an arrangement had not taken place. All of these steps involve positive assertions on the part of the Revenue. In such circumstances, noting the wording and structure of the section, and in the absence of any provision to the contrary, it seems to me that if the notice is challenged the normal evidential rule of “he who asserts must prove”, applies.

15. While there was much comment on the hearing of this appeal as to the extent to which the taxpayer became liable to interest payments and penalties by reason of appealing a notification under s. 811 of the Act of 1997, two points might usefully be made. Firstly, it is to the benefit of taxpayers in claiming a legitimate use of the tax code, while facing such a possible determination, to fully and completely and at an early stage explain the legitimacy of the use of an allowance or of some exemption. It follows that obfuscation as to purpose or motivation may legitimately carry a monetary burden under the code. The legislative objective here must surely be the gathering by and disclosure to the Revenue Commissioners of all relevant facts. Secondly, as counsel for the Revenue Commissioners pointed out, s. 811A of the Act of 1997 as inserted by s. 126 of the Finance Act 2006 enables taxpayers to disenable the interest and surcharge provisions through a protective notification.

The immediate notification requirement
16. In the High Court, McGovern J reached his conclusion as to when the Revenue Commissioners formed the relevant opinion upon reading all the relevant affidavit evidence and after hearing oral testimony from Breda Ruddle. In submissions on this appeal, counsel for the taxpayer powerfully made the argument that the Revenue Commissioners were aware of the general nature of this case, and of the several other similar tax files under scrutiny, by mid-2009 and that the opinion was deliberately and unlawfully delayed to mid-2011. In fact, of the four cases immediately dependent upon the result of this appeal, it appears that one of them was furnished to Frank Mullen on Friday, 22nd July 2011, with a notice to client on Wednesday 27th July 2011. Another was furnished on Monday, 25th July 2011, with a notice to client on Wednesday, 27th July 2011. The third was furnished on Tuesday, 16th August 2011, with a notice to client on Wednesday 17th August 2011, while this taxpayer’s file was furnished on Monday 22nd August 2011, with his notification the following Wednesday. The Revenue Commissioners, by the way, refer to taxpayers as clients. In one affidavit, the taxpayer clearly makes the case on delay:

In general I am advised as regards the opposition papers filed that the respondents misunderstand the “formation of an opinion” and its consequences. The respondents erroneously consider that the formation of an opinion requires detailed knowledge of individual circumstances and facts and figures. Section 811(2) and (4) referred to the formulation of an opinion separately from other calculations and determinations. Section 811(6) requires a notice of opinion to be given on formation of the opinion. Inter alia it is the applicant’s case that an opinion was formed as regards the Schroders Ready Made [scheme] long before 24th August 2011.

17. While substantial evidence was also presented by the Revenue Commissioners on affidavit, Breda Ruddle was the only witness called. On this issue it was possible for the trial judge to take a view based upon both oral and affidavit evidence. The case made on appeal by the taxpayer is that the finding of the trial judge was contrary to the evidence. Further, it is argued that as regards inferences that might be drawn from the actual documents, which recorded contemporaneously both the state of knowledge and the necessity to enquire, a substantial gap of up to two years is shown between the time when the opinion was in fact formed under s. 811 and notification to the taxpayer. The case made on appeal by the Revenue Commissioners was that there was no delay because the decision by the nominated officer was made only a day or two before notification to the taxpayer. Their contention was that considerable work was required to get to the point of making a submission to a nominated officer for the purpose of an opinion, the s. 811 requirements being “desperately complex”. Further, they contend that no one from the taxpayer’s side had actually described the transactions: instead it was “bundles of documents” and answers to questions that were forthcoming from their advisers, consequently requiring “painstaking work”. According to the Revenue Commissioners, this also necessitated the engagement of two sets of experts whose reports were not completed until just before the final stage. On cross-examination in the High Court by counsel for the taxpayer, Breda Ruddle made the case that experts were necessary in order to enable the Revenue Commissioners to understand the transactions and that, in that regard, they had sought assistance from the National Treasury Management Agency and the Smurfit Business School. The date when that happened was from February 2010, according to the internal documents referenced on the appeal. Part of the result of receiving draft opinions from these experts was that there were questions asked which resulted in further correspondence in 2010 with agents for the taxpayer. She said:

Part of the draft opinions was there was quite a lot of questions they raised and asked us to go back and actually get answers to these questions. There was very substantial correspondence between ourselves … Revenue and the agents for [the taxpayers] throughout 2010. In particular, looking back at the documentation, if you look at the letters in both cases dated August 2010 it gives you an idea of the extent of the information that was still coming into Revenue at that stage. When we were getting responses to that we were actually passing it to the experts that had suggested it to us, so again the final opinion would have actually taken into account all of the replies that we had received. … There there was various points, at the end of the day we never got to a stage where we understood the transaction ourselves of what we had was we had this report from the experts which said, yes, there was no commercial rationale to it.

18. On the appeal it was confirmed by counsel that the final report from the external experts did not arrive with the Revenue Commissioners until mid-2011. The case which Breda Ruddle made was expressed by her as follows:

What I am referring to is the two people and myself that were working on these cases and actually raising the enquiries, engaging with the experts, getting the information back in. I suppose from 2009 really over a two-year period, building up a picture of what actually happened in this case, what actually gave rise in these cases to very, very substantial loss claims and to get to a situation where we understood these. Our job then was to decide from a Revenue perspective what are we going to do with these.

19. McGovern J was satisfied with two matters. Firstly, that the investigation was required to be painstaking and, as a matter of fact, continued over a lengthy period; and, secondly, that once that investigation was completed, the nominated officer formed his opinion and notified the taxpayer immediately. This emerges from paras. 33 to 35 of his judgment:

33. On completion of an investigation, if it is considered by the Inspector of Taxes that a transaction may constitute a tax avoidance transaction for the purpose of s. 811, and that a challenge under that section is the appropriate method of dealing with the transaction, the Inspector of Taxes will prepare a detailed report for the purpose of making a recommendation to the Nominated Officer who has been appointed to the role in accordance with s. 811(12). This report will only be completed after the conduct of the investigation has come to an end and will set out the relevant facts and details of the transaction which will be supported by all relevant documentation. When a report is completed, it is reviewed by the Principal Officer and transmitted to the Nominated Officer for consideration. This will be the first time that the Nominated Officer will become aware of the specific details regarding the transaction and will be the first time he will see the relevant documentation. The report is not sent to the Commissioners themselves for their consideration.

34. On 22nd August, 2011, Ms. Danielle Cunniffe, submitted a report to Mr. Peter Mullen, the Nominated Officer, for his consideration. He gave evidence that having carefully considered the report submitted by Ms. Cunniffe, on 24th August, 2011, he formed an opinion that the transaction involving the plaintiff and his wife constituted an avoidance transaction within in section 811. Immediately on forming the opinion he prepared a notice of opinion of the same date and arranged for the notice to issue to the applicant and for a copy to be issued to his tax advisers on 24th August, 2011.

35. I accept the evidence of the respondent that in relation to the applicant's tax avoidance scheme, the s. 811 notice of opinion was formed by the Nominated Officer on 24th August, 2011, having received a report two days earlier from Ms. Cunniffe. In issuing the notice of opinion under s. 811 on that date, the respondent complied with the provisions of s. 811(6)(a) of the Act.

20. It is for the appellant taxpayer to demonstrate that this finding of fact was in error. On appeal, the criticism from the taxpayer as regards para. 33 of the foregoing is that while particular details regarding contracts for difference and the specific minutiae of each transaction may not have been as apparent as it was in the ultimate report, the duty on the Revenue Commissioners was to reach an opinion at an early stage and that this was possible in the context of the detail available to them from a much earlier stage than the notification to the taxpayer. Apart from the affidavit and oral evidence, a concise analysis of the relevant papers, treated for this purpose as admissions against interest by the Revenue Commissioners, demonstrate that the view of the trial judge was properly supported.

21. The extent to which a court hearing an appeal is bound by an assessment of evidence on affidavit has not been argued on this appeal. Clearly, however, the principles set out in Hay v O'Grady [1992] 1 IR 210, at. 217 per McCarthy J are of lesser relevance where affidavit evidence is concerned; see O'Donnell v Bank of Ireland [2015] IESC 14 at para. 36 per Laffoy J. There, commenting on that judgment, Laffoy J stated that:

… to a large extent the subsequent observations of McCarthy J. as to the role of this Court on an appeal, in reality, are of no relevance, except, perhaps, that, by analogy to the statement that, in the drawing of inferences from circumstantial evidence, an appellate tribunal is in as good a position as the trial judge, in determining issues that arise on affidavit evidence alone, an appellate tribunal is similarly in as good a position as the trial judge.

This is not a case where the High Court judge made a specific finding that the evidence of the single live witness in the case was accepted by him. Rather, McGovern J’s decision is predicated on the basis of what is an amalgam of affidavit and live evidence. That must make harder the task of the taxpayer in meeting burden of proof set out by this Court in Ryanair v Billigfluege [2015] IESC 15 whereby, to succeed, an appellant must demonstrate that the trial judge was incorrect in choosing one set of facts over another. That case is also authority for appropriate deference being shown to the analysis at first instance; see the judgment of Charleton J at para. 5.

22. In a re-analysis of the affidavit evidence, and discounting for these purposes the oral evidence of Breda Ruddle, what stands out is that the Revenue Commissioners did not understand the transaction in any substantial sense until well into 2011. In that regard, the taxpayer did not offer immediate elucidation of the scheme. While no blame is to be attached to either side thereto, the level of incomprehension is demonstrated by the belief of the Revenue Commissioners that closing off a tax loophole in existing legislation must be one of their responses to the situation. That amendment was introduced by the Finance Act 2010 s. 59 through the insertion of a new s. 546A into the Act of 1997. This, however, dealt with restrictions on allowable losses for capital gains tax: which is completely the wrong issue. Nor was there any statement available to the Revenue Commissioners by the taxpayer that the foreign exchange losses and purchase of Irish gilts were entered solely to generate a tax advantage. Ultimately, while the advisors to the taxpayer eventually answered such questions as were asked of them, finding the right question required immense skill and demonstrates the sophistication of the enquiries. In the movement of this dialogue towards the right answer, genuine support is offered for the evidence of Breda Ruddle that the Revenue Commissioners were truly building up a picture in order to understand the transactions. That process took up to mid-2011. It is appropriate to briefly reference the salient points.

Sequence
23. From an early stage the Revenue Commissioners had queried and had sought to understand the various transactions at issue. By letter dated 14th April 2009, the advisers to the taxpayer had ostensibly fielded what appear to be many aspects of the transaction, but without reference to the gilts aspect, including on the end an accompanying chart. The references as between purchases in Japanese yen and in US dollars could on one reading be regarded as equivalent. An internal email to the Revenue Commissioners of 15th May 2009 indicates puzzlement by the Revenue Commissioners. Hence, this was followed up by the request of 22nd May 2009 seeking how the liability of $25.479 million had arisen. While as of 2nd June 2009 the Revenue Commissioners had identified other apparently similar transactions, their internal strategy was to “obtain all relevant documentation in each case before launching a full challenge on loss claims” and seeking expert assistance. While a brief summary of around this time, described as a “Ladybird version” in deference to its simplicity, does get some things right, issues were still outstanding as to what to look for. Hence a substantial clarification was sought of the taxpayer by the Revenue Commissioners by letter dated 11th June 2009. The reply to this indicates how the loss on the currency transaction was paid for and gives a figure of €25.750 million as the upper limit for “the amount of loss that could have been incurred”. That answering correspondence could have been clearer, referring as it does to a “future or forward contract that has a similar profile to a combination of option contracts”. Hence, the amendment to the Act of 1997 previously referenced was thought to be the appropriate response by the tax authorities. This letter is a first reference, in addition, by the taxpayer to gilts but the use of a gilt straddle contract is not explained. Whereas the formula appended might be regarded as comprehensible to brilliant mathematicians - there certainly are or have been brilliant people within the Revenue Commissioners - it is not at first sight illuminating outside such circles.

24. There was also a meeting between the Revenue Commissioners and the tax advisors to the taxpayer. A note was taken. As with other instances, where a note of a meeting is produced as evidence in a court case, this has been argued by both sides as helpful to their particular case. This one, taken by the advisers to the taxpayer, of a meeting between the parties of 16th October 2009 indicates that the Revenue Commissioners did not understand the transactions as “arrangements [which] make commercial sense.” What in fact stands out is how incomprehensible the transactions were. According to one of the paragraphs:

We highlighted to Revenue that from our point of view all of these transactions were real transactions. They were market transactions but they were sophisticated transactions that in reality would probably only be understood by somebody with a specialised knowledge in the structured products division of a large institution.

25. Reference is also made by the taxpayer to the debate on the second stage of the Finance Bill 2010 where Brian Lenihan TD, Minister for Finance, references the “general anti-avoidance measure in place.” That is not the same, however, as saying that either he as Minister or that the Revenue Commissioners had then sufficient information in a particular case to operate the sophisticated test set out in section 811 of the Act of 1997. Clearly, integral to such an analysis was the connection between the transaction in Irish gilts and the foreign exchange purchase and sale. As of 19th April 2010 the Revenue Commissioners were writing to the advisers to the taxpayer asking for an explanation and breakdown of those transactions. It was reasonable for the trial judge to regard this as genuine. That letter contains a reference to “whether a deduction has been made in respect of the premium amount paid under the foreign exchange agreement of €25.75 million.” As yet, it appears, that purchase and also the sale of foreign currencies were not yet considered to be part of the transaction. That letter also references futures; this is a point which can only indicate confusion. As of 30th July 2010 it was necessary for the Revenue Commissioners to seek further clarification as to commissions, fees and documents evidencing the transfer of funds through bank statements.

26. The letter from the advisers to the taxpayer of 27th August 2010 is notable in its clarification that gilt exchanges, as opposed to forward contracts, were involved. For anyone attempting to understand this transaction, that letter provides considerable assistance, especially as it is accompanied by a reasonably comprehensible cascade of events. This is also the first reference to the formula developed in the 1970s, the Black-Scholes model for pricing stock options, by Fischer Black, Myron Scholes and Robert Merton. Should the Revenue Commissioners be aware of the formula and the variables to be ascribed? Perhaps that is the world we are living in but it is to be noted that the variables were not ascribed particular values. Whereas it has been argued that the email internal to the Revenue Commissioners as of 6th September 2010 and the email string attached thereto is evidence that everything that was necessary was already available, in a case that was likely to be highly litigious the remainder of the internal memoranda demonstrate a search for what else could reasonably be done before moving to possibly condemning the transaction. Further, a lack of clarity is evident from the letter to the advisers to the taxpayer from the Revenue Commissioners dated 5th October 2010, enquiring as it does as to whether the currency transactions were “an incidental cost of acquisition” and noting that one of the “possible outcomes” is a reference to a nominated officer for the purposes of the Act of 1997. The advisers to the taxpayer, as of 23rd December 2010 continued to advocate for the allowance. In that respect, claims that the inputs and the pricing objective were under the Black Scholes model are irrelevant. Internal to the Revenue Commissioners is an email dated 21st January 2011 which appears to caution that nothing should be sent to the nominated officer until reports had been prepared and after meeting “with counsel.” This notes the matter as being one “with enquiries ongoing”. References within this correspondence to answers being anticipated as similar to other cases under investigation does not of itself establish that the analysis required by s. 811 of the Act of 1997 was a foregone conclusion. Individual consideration was necessary. By 24th March 2011 the Revenue Commissioners have yet to receive those necessary inputs. They are given, however, by letter dated 13th May 2011.

27. With final inputs from the expert witnesses coming to the Revenue Commissioners, according to their counsel on this appeal, in mid-2011, it is not demonstrated that McGovern J’s analysis was in error.

Precise analysis
28. It must also be commented that had the Revenue Commissioners not taken the trouble to gain the information referred to above and had not sought expert advice in relation to financial products which were targeted in a specific way to each transaction, the terms of s. 811 would not have been properly applied in this particular case. While obsessive attention to detail can hinder a process of decision making, there is nothing within the text of the section which allows a drive-by or general overview of a transaction that is uninformed as to its precise elements. The duty on the Revenue Commissioners under subs. 811(2) requires an examination of “the results of the transaction”, how such a result was to be achieved, whether there were alternative means, and whether, overall, whatever tax advantage was claimed “was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage”. It also follows under subs. 811(3) that the Revenue Commissioners should not regard a transaction as one for avoidance of tax if, despite an apparent saving in tax, the transaction was pursued “with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person”, not being one “undertaken or arranged primarily to give rise to a tax advantage”, nor whereby reference to an allowance or abatement provided within the tax code “the transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided.” In no sense is it necessary for the Revenue Commissioners to play some kind of ‘snakes and ladders’ analysis in their opinion and, indeed, in the case of this taxpayer, that was rightly eschewed. Rather, what is not excused by way of an analysis in this most demanding area of tax collection is any unthinking or lazy resort to a general overview: appropriate consideration of the nature of the transaction is, instead, demanded. This is made clear within the subsection in the requirement that regard be had by the Revenue Commissioners to the “form of that transaction” to the “substance of that transaction” and related transactions, and to the final substance of the outcome.

29. It follows from the foregoing analysis that the High Court judge was correct in viewing the almost two-year period when this matter was under analysis as having been conducted legitimately and with a view to a consideration of the particular factors relevant to this taxpayer. Much has been made by counsel for the Revenue Commissioners on the issue as to whether there should have been extensive cross-examination of Breda Ruddle, or of other deponents, by counsel for the taxpayer. The analysis in this judgment, and the analysis conducted by Laffoy J, as to the actual issues in this case makes it clear that this case was decided on the material put before the Court on this appeal. On the basis of the evidence, the case could not have been decided any other way and the outcome has nothing to do with the questions asked or not asked of Brenda Ruddle. The economy of concentration in the High Court on the substance of the points at issue is, rather, to be admired. This comment applies to all the issues in the case.

Pre-judgment allegation
30. The taxpayer claims that Frank Mullen as nominated officer was not independent of the investigation, that the depth of his involvement discloses pre-judgment and that a reasonable person would conclude, in accordance with the decision of this Court in O’Neill v Beaumont Hospital Board [1990] ILRM 419, that such a person would be committed to a view. In short, the case made is that Frank Mullen was not independent. The nominated officer, the taxpayer argues, should be someone isolated from discussion on the avoidance issue, coming to the decision with a mind untainted by the investigation. Here, the taxpayer contends, the nominated officer is no more independent than the officer of An Garda Síochána who issues a warrant to search someone’s home but who is part of an investigating team; Damache v Director of Public Prosecutions [2012] 2 IR 266. Indeed the depth of involvement of Frank Mullen was contended to be akin to those effectively prosecuting a case or recommending a dismissal while also sitting on the decision-making board, or retiring with them; see Prendiville v Medical Council [2008] 3 IR 122, O’Neill and Others v Irish Hereford Breed Society Ltd [1992] 1 IR 431, Flanagan v University College Dublin [1988] IR 724, O’Donoghue v The Veterinary Council [1975] IR 398. Reliance was placed by the taxpayer particularly on the decision of this Court in O’ Flynn Construction where at para. 83 of his judgement, O’Donnell J referred to the evaluation under s. 811 of the Act of 1997 as being “an exercise, if not of discretion, then at least of evaluation and judgement”, one which “must be reasoned and open to appeal to the Appeal Commissioners, who have shown themselves capable of careful scrutiny of such decisions.” Reference was made also to the decision of this Court in Reid v Industrial Development Agency, Ireland and the AG [2015] IESC 82 where the involvement of a member of the board of the IDA with the firm engaged to report on site selection and site evaluation in a compulsory purchase matter would have led an impartial observer to doubt that the board member, as chairman, would not be in a position “to remain as objective and is partially detached from the decision, in view of the connecting factor, as otherwise he might have been expected to be”; see paras. 78 to 81 of the judgment of McKechnie J.

31. For the Revenue Commissioners, the unfinished nature of tax assessment at this stage of the nominated officer decision was emphasised: the process was thus characterised as not being finished until such time as the Appeal Commissioners had conducted an adjudication on the correctness of any decision appealed by the taxpayer. Central to that argument was the absence of any evidence that the late Frank Mullen had been involved as an investigator, in the sense of gathering the relevant facts and pursuing a particular result. The Revenue Commissioners pointed to his affidavit which swore that he was not involved in any investigation. Some rhetorical reference was also made to his being required, by special leave of the High Court, to attend for cross-examination. That point does not advance matters.

32. As in the Reid v IDA case, issues of pre-judgement are fact dependent. Some evidence on the pre-judgement allegation was given by Breda Ruddle in the High Court. Specifically, she was asked in re-examination by counsel for the Revenue Commissioners whether either Commissioner O’Grady or the nominated officer Frank Mullen was aware of the detail of the investigation. She answered:

Absolutely not. None of this correspondence at all would have been seen by either Commissioner O’Grady or by Frank Mullen, this was the work that would go on on a normal basis. I would say the amounts here were very high and it was very concerning for us, but this is the normal work that would go on in the different units in the division and carrying out investigations.

33. Mc Govern J dealt with this point about lack of independence at para. 36 of the High Court judgment:

I am satisfied that Mr. Michael O'Grady who was a Revenue Commissioner from 2002 until his retirement in December 2011, did not have detailed knowledge of the transactions entered into by the applicant and his wife. He was aware, in a general way, of the use of a capital loss scheme involving Irish Government gilts and foreign exchange finance instruments which was under review within the Revenue. The information received by him was primarily in the context of considering possible counteracting legislation in respect of the Finance Bill 2010. The actual investigative work in the applicant's case was carried out by two tax inspectors who reported to their principal officer, Ms. [Breda] Ruddle and later Ms. Cunniffe. A reference in Commissioner O'Grady's PowerPoint presentation to certain Chartered Accountant students in which he referred to capital loss schemes, copying UK mismatched schemes was but one example of types of avoidance schemes which were a problem for the Revenue at that time. There is no evidence that the Nominated Officer, Mr. Mullen, formed his opinion earlier that 24th August, 2011 and he is the only official within the Revenue who discharges the relevant functions under section 811. Further, there is no evidence that there was pre-judgment on the part of the Nominated Officer or that his notice of opinion was tainted by actual or apparent (objective) bias.

It is not apparent from this extract that McGovern J explicitly accepted the oral evidence of Breda Ruddle. Hence, the same situation applies as to the analysis of this evidence on appeal as in relation to the delay issue. The burden of demonstrating that the trial judge was wrong is on the appellant taxpayer.

34. The late Frank Mullen, as head of the large cases division and the officer of the Revenue Commissioners nominated to make the decision on tax avoidance under s. 811 of the Act of 1997, was certainly copied on particular items of correspondence. In particular, attention has been drawn to: the internal email of 2nd June 2009; issues concerning the memorandum on the 26 cases specifically prepared for him by Breda Ruddle; he having possibly been briefed about the meeting of 16th October 2009, though not present; the internal email on general strategy of 22nd February 2010, of a general nature; the internal email of 10th May 2010 on certain types of disclosure; copying on the internal email of 21st January 2011 concerning progress in preparing “draft s.811 reports”; references in an internal email of 25th January 2011 to meeting with counsel and that report being passed to him as authorised officer thereafter; and what must have been his general knowledge of the issues in the investigation and the progress of preparing a report. Further, the decisions of the nominated officer on the days previously are attractively called in aid on behalf of the taxpayer as evidence of all taxpayers, as it were, sliding down the same slippery slope.

35. Prior to any such decision, however, what is strikingly absent in the discovered documents is any expression of opinion as to the particular facts and circumstances pertaining to this taxpayer. Nor is there any general declaration that might indicate any level of pre-judgement, not even the mildest comment such as “down with this sort of thing”. Consequently, the case made by the taxpayer is confined to what a reasonable person would assume in the context of their having full knowledge of the facts and circumstances.

Nature of tax gathering under law
36. The process of the collection of taxation is vital to the well-being of the State. Revenue statutes are self-contained, confer no inherent or undefined jurisdiction on tax collecting authorities, are precise as to the scope and limits of taxation and exemption, must be exact as to the authority to be exercised within the Revenue Commissioners, and confer sufficient administrative power in that regard. They must set up the appropriate processes whereby the taxpayer may communicate in relation to taxation matters and, finally, provide for an appeal system that is correctly weighted in favour of errors against the taxpayer being corrected, first of all, in a quasi-judicial forum before the Appeal Commissioners, subsequently by way of rehearing before the Circuit Court and, finally, on a point of law before the High Court. It is not to be readily concluded that Dáil Éireann, or in an advisory capacity Seanad Éireann, in building liabilities and the assessment of liabilities within the structure of Money Bills, and within the constraints of Article 20 and Article 21 of the Constitution, was in error in setting up an administrative scheme for the collection of tax followed by appeals that attract the fundamental principles of constitutional justice. While some academic commentators have criticised the distinction between administrative and quasi-judicial tribunals, the scheme to be operated under s. 811 of the Act of 1997 incorporates both those elements in a way which demonstrates the intention of the Oireachtas towards fair administration of liability to pay tax, first of all, and followed, secondly, by a series of rights-based hearings, if the taxpayer desires to appeal. The first process is administrative. The second is adjudicative. Within that context, at the administrative stage, it could exceptionally be the case that where a decision maker within the Revenue Commissioners has displayed some form of uncontrolled animosity towards a taxpayer for some illogical reason such as the ownership of racehorses, or has railed against particular forms of tax avoidance on some ideological or emotional basis that thereby the decision-maker will have stepped outside the bounds of good administration. That is not the case here. The process of assessment to tax is one dependent upon the honesty of taxpayers and, because of human nature, the gathering in and assessment of facts by the taxation authorities. This does not turn that administrative function into a form of judicial hearing or assessment. Furthermore, the process of assessment to taxation is one of the gathering of information and, as this case demonstrates, of increasing the knowledge to hand so that a proper decision can be made. It has nothing to do with discretion. It involves the application of precise rules to defined forms of income or profit. It lacks any of the indications of any form of quasi-judicial functioning.

37. There is nothing in this case to indicate that either the Revenue Commissioners or their nominated officer the late Frank Mullen went outside the appropriate administrative boundaries. That being so, the taxpayer still claims that he was entitled to be informed as to the thinking of the tax officials at that stage and enabled to make representations as to how the issue as to tax avoidance was dealt with.

38. The taxpayer claims that no meaningful opportunity was afforded to him to make representations. It is claimed that by withholding the expert reports and the assessment report which went to the nominated officer, the possibility of making meaningful submissions was undermined, a right which the taxpayer asserts within this administrative context. Since the effect of the decision is claimed by the taxpayer to involve, at the least, the setting up of the primary liability to pay a huge amount of tax, it is argued that the line of authority starting with East Donegal Cooperative Livestock Marts Limited –v- Attorney General (1970] IR 317 and culminating in Dellway Investments –v- NAMA (2011) IESC 14 and the authorities which postdate and apply the Dellway decision such as Treasury Holdings –v- NAMA (2012) IEHC 297, make it imperative that a right to be heard should be implied within this administrative context of tax collection and assessment. This absence of the asserted rights is claimed to constitute an unfair procedure, similar to that in Moran –v- Attorney General (1976) IR 400, where the deprivation of a taxi licence in unfair circumstances was not cured by the existence of an appeal to the District Court. This is thus said to be an instance where a person entitled to a hearing has had no real first hearing as in Carroll –v- Bus Atha Cliath (2005) 4 IR 184. For the Revenue Commissioners the administrative nature of the process is emphasised as not attracting the right to make representations. Further, Gammell v Dublin County Council [1983] ILRM 413 is claimed by them to be authority for the proposition that within an appropriate context an entirely administrative process followed by a quasi-judicial review constitutes a sufficient guarantee of the right to be heard.

39. As to whether an entitlement to fair procedures inures even within an administrative scheme is heavily dependent on the context of the legislative and factual circumstances. As Fennelly J remarked at para. 111, of his judgment in the Dellway case, these matters do not admit of any rigid answer. He endorsed the following passage from De Smith's Judicial Review (6th edition, London 2007) at page 377:

The content of procedural fairness is infinitely flexible. It is not possible to lay down rigid rules and everything depends on the subject-matter. The requirements necessary to achieve fairness range from mere consultation at the lower end, upwards through an entitlement to make written representations, to make oral representations, to a fully fledged hearing with most of the characteristics of a judicial trial at the other extreme. What is required in any particular case is incapable of definition in abstract terms.

40. McGovern J held that the particular scheme of administrative analysis followed by a quasi-judicial hearing sufficed. At para. 46 he stated:

A key factor may be that a decision does not come into effect until the appeal has been heard or, if no appeal is taken, until the period for appeal has elapsed. Section 811(7) provides that any person aggrieved may, by notice in writing within 30 days of the date of the notice of opinion, appeal to the Appeal Commissioners. The opinion of the Nominated Officer under s. 811 is not final or conclusive until the appeal process has been exhausted or if there is no appeal to the Appeal Commissioners, until after the period of appealing has elapsed (s. 811(5)(e)(i)). Section 811(7) provides that any fact or matter, which was not known at the time the Nominated Officer formed his opinion, can be taken into account by the Appeal Commissioners on the hearing of the appeal. Furthermore, if the taxpayer is dissatisfied with the outcome of the hearing of the appeal before the Appeal Commissioners, he has a right to a further appeal by way of rehearing to the Circuit Court. The taxpayer also has a right to appeal on a point of law (by way of Case Stated) to the High Court from any decision of the Appeal Commissioners, or of the Circuit Court.

41. Given the flexibility of the application of particular aspects of fair procedures even within an administrative context, it is appropriate to reference the correspondence which claims a right to the taxpayer to procedural justice in the collection of tax. On 27th June 2011, the Revenue Commissioners wrote to the advisers to the taxpayers indicating that the review of the foreign exchange and gilts transactions had been “now completed”. The letter continues:

I now intend preparing a report for submission to the nominated officer under S811 TCA 97. If you wish to make a written submission on the transaction entered into by your client please forward same to this office by 18 July 2011 and I will forward your submission with my report to the nominated officer for his consideration.

The response from the advisors to the taxpayer was that to “allow us to consider your offer, can you let us have a copy of your report.” In reply, the Revenue Commissioners, on 8th July 2011, state:

The offer to make a submission is a practice that has been in place for a number of years in cases were S811 is under consideration. The practice does not extend to Revenue providing copies of the report to the taxpayer/their agent. If you consider that this puts your client has a disadvantage you do not have to make a submission.

There is no statutory obligation on the taxpayer to make a submission. Neither is there a statutory obligation on Revenue to provide the taxpayer with a report for the purposes of making such a submission.

42. This was stern stuff, but fell on deaf ears. The advisers to the taxpayer riposted that the “onus of supporting a s. 811 opinion falls on the Revenue.” Their view was that it was “for the Revenue to establish that s. 811 applies”. By reply, it was confirmed that an “opinion under S 811 TCA [97] has not yet been formed” and that therefore “the question of where the onus of supporting [such an] opinion falls does not arise at this point.”

43. Within the process of taxation administration, there is nothing to suggest that the right to be heard could be to the benefit of the taxpayer who may be faced by a decision under section 811 of the Act of 1997. The initial process is purely administrative and is followed by the form of appeal which clearly carries the right to be heard. It is not wrong for the Oireachtas to set up such a system. Furthermore, the correspondence between the taxpayer and the advisers to the taxpayer starkly contrasts the means of knowledge of the two parties. The right to knowledge is also important. The taxation authorities of the State have an entitlement to know the basis upon which any claim for an exemption of tax is made. Entitlement to require that knowledge, through searching bank accounts and the like, is not either at issue here or decided here. Liability to pay the appropriate level of tax on a transaction depends on the definition which captures that activity within the terms of revenue legislation. Exemption from that liability depends upon the taxpayer coming expressly within the terms of the parameters defining why tax should not be paid. The duty is upon the taxpayer to put before the Revenue Commissioners sufficient facts whereby at an administrative level a conclusion can be reached that the exemption or allowance applies. The tax gathering authorities are entitled to know as much as is relevant to liability to tax, as is the taxpayer. Who knew more here? This was a case where the taxpayer’s advisers knew much more than the Revenue Commissioners. While in argument, counsel for the Revenue Commissioners sought to characterise the furnishing of information as “drip feeding”, it suffices to note that insofar as the taxation authorities were attempting to find out links between the foreign currency transactions and the gilt transactions, and eventually did so through commendable persistence, expert advisers are well capable of reading and understanding and explaining to clients what needs to be explained with a view to setting up a case that a transaction was not primarily engaged in with a view to avoiding tax or had a genuine business purpose. The notable lack of any such submission in this case cannot have helped the position of the taxpayer. There was nothing, furthermore, to inhibit the taxpayer proffering such information through their taxation advisors. The taxation code does not imply that the Oireachtas intended to incorporate into the administrative stage of tax gathering any requirement beyond the honest proffering of information by the taxpayer to the State authorities responsible. In no sense can it be contemplated that the Oireachtas intended the administration of taxation liability to morph into tribunal-like procedures. That would not be appropriate.

44. Even apart from that, this scheme of tax collection is clearly one of the cases where, with deliberation, the legislation has set up a two-tiered system of administration and analysis to be followed by an exchange before an appellate body, the Appeal Commissioners. In Gammell v Dublin County Council [1983] ILRM 413, an order was made under legislation prohibiting temporary dwellings on a caravan site. The order stated, as required by statute, that any person aggrieved by the order could appeal to the Minister within 14 days. If no application for its annulment was made, the order came into force within 30 days after a copy of the order was published. In her analysis of this similar legislative structure, Carroll J held that the making of the order did not have to satisfy the requirements of natural justice because representations could be made before the order became operative. She said:

However in this case we are not dealing with an order effective when made and an appeal therefrom to an appellate body. Under section 31 of the Act, the order has no effect until the person aggrieved has been given an opportunity of stating reasons why it should not come into effect. There is no “appeal” to the Minister from an operative order. There is machinery set up under the section whereby an aggrieved party can make representations why the order should not come into operation. If successful, the order is annulled by the Minister and it never becomes operative. This is very different to the

Ingle

case and the

Moran

case where the revocation of the licence became operative immediately and of necessity there had to be a time lag between the revocation and the determination of an appeal in the District Court

45. While other decisions have distinguished this authority, these are not in the context of the administration of taxation; see for instance Eircell Limited v Leitrim County Council [2000] 1 IR 479. Referencing Gammell v Dublin County Council, of particular assistance is the analysis in Hogan and Morgan on Administrative Law in Ireland (4th edition, Dublin, 2015) at paragraph 14-276, which considers two-tiered administrative-adjudicative systems with such rights to representation as the situation demands as confined to the second stage as appropriate:

This distinction can also be applied in other areas. Take, for instance, applications for planning permission: considered in isolation the procedure before a local planning authority might appear to violate

the audi alteram partem

rule in that (confining the discussion to the applicant for planning permission and not examining the position of objectors) the applicant is not told of the authority’s provisional thinking on his application, much less allowed any opportunity to make representations in regard to it. On the other hand, there is ample constitutional justice at the rehearing, on appeal, to An Bord Pleanála. The crucial question is thus whether the initial application stage is to be examined in isolation or whether it is to be considered together with the proceedings before An Bord Pleanála. In other words, is the structure of the decision-making system analogous to that involved in

Gammell

? It is submitted that the two systems are similar and thus that the planning application system does not violate the

audi alteram partem

rule. The key factor is that (as with the prohibition order) a local planning authority decision granting permission does not come into effect until the appeal has been heard or, if no appeal is taken, until the period for appealing has elapsed.

46. Thus it is clear that the decision of the trial judge was also correct on this point.

Result
47. In the result, the appeal should be dismissed.

Appendix: the full text of section 811 of the Taxes Consolidation Act 1997
811.—(1) (a) In this section—

“the Acts” means—

(i) the Tax Acts,

(ii) the Capital Gains Tax Acts,

(iii) the Value-Added Tax Act, 1972 , and the enactments amending or extending that Act,

(iv) the Capital Acquisitions Tax Act, 1976 , and the enactments amending or extending that Act,

(v) Part VI of the Finance Act, 1983, and the enactments amending or extending that Part, and

(vi) the statutes relating to stamp duty,

and any instruments made thereunder;

“business” means any trade, profession or vocation;

“notice of opinion” means a notice given by the Revenue Commissioners under subsection (6);

“tax” means any tax, duty, levy or charge which in accordance with the Acts is placed under the care and management of the Revenue Commissioners and any interest, penalty or other amount payable pursuant to the Acts;

“tax advantage” means—

(i) a reduction, avoidance or deferral of any charge or assessment to tax, including any potential or prospective charge or assessment, or

(ii) a refund of or a payment of an amount of tax, or an increase in an amount of tax, refundable or otherwise payable to a person,

including any potential or prospective amount so refundable or payable,

arising out of or by reason of a transaction, including a transaction where another transaction would not have been undertaken or arranged to achieve the results, or any part of the results, achieved or intended to be achieved by the transaction;

“tax avoidance transaction” has the meaning assigned to it by subsection (2);

“tax consequences”, in relation to a tax avoidance transaction, means such adjustments and acts as may be made and done by the Revenue Commissioners pursuant to subsection (5) in order to withdraw or deny the tax advantage resulting from the tax avoidance transaction;

“transaction” means—

(i) any transaction, action, course of action, course of conduct, scheme, plan or proposal,

(ii) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable or intended to be enforceable by legal proceedings, and

(iii) any series of or combination of the circumstances referred to in paragraphs (i) and (ii),whether entered into or arranged by one person or by 2 or more persons—

(I) whether acting in concert or not,

(II) whether or not entered into or arranged wholly or partly outside the State, or

(III) whether or not entered into or arranged as part of a larger transaction or in conjunction with any other transaction or transactions.

(b) In subsections (2) and (3), for the purposes of the hearing or rehearing under subsection (8) of an appeal made under subsection (7) or for the purposes of the determination of a question of law arising on the statement of a case for the opinion of the High Court, the references to the Revenue Commissioners shall, subject to any necessary modifications, be construed as references to the Appeal Commissioners or to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as appropriate.

(2) For the purposes of this section and subject to subsection (3), a transaction shall be a “tax avoidance transaction” if having regard to any one or more of the following—

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

the Revenue Commissioners form the opinion that—

(i) the transaction gives rise to, or but for this section would give rise to, a tax advantage, and

(ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage,

(3) (a) Without prejudice to the generality of subsection (2), in forming an opinion in accordance with that subsection and subsection (4) as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that—

(I) was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person, and

(II) was not undertaken or arranged primarily to give rise to a tax advantage,

(b) In forming an opinion referred to in paragraph (a) in relation to any transaction, the Revenue Commissioners shall have regard to—

(i) the form of that transaction,

(ii) the substance of that transaction,

(iii) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and

(iv) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.

(4) Subject to this section, the Revenue Commissioners as respects any transaction may at any time—

(a) form the opinion that the transaction is a tax avoidance transaction,

(b) calculate the tax advantage which they consider arises, or which but for this section would arise, from the transaction,

(c) determine the tax consequences which they consider would arise in respect of the transaction if their opinion were to become final and conclusive in accordance with subsection (5)(e), and

(d) calculate the amount of any relief from double taxation which they would propose to give to any person in accordance with subsection (5)(c).

(5) (a) Where the opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction becomes final and conclusive, they may, notwithstanding any other provision of the Acts, make all such adjustments and do all such acts as are just and reasonable (in so far as those adjustments and acts have been specified or described in a notice of opinion given under subsection (6) and subject to the manner in which any appeal made under subsection (7) against any matter specified or described in the notice of opinion has been finally determined, including any adjustments and acts not so specified or described in the notice of opinion but which form part of a final determination of any such appeal) in order that the tax advantage resulting from a tax avoidance transaction shall be withdrawn from or denied to any person concerned.

(b) Subject to but without prejudice to the generality of paragraph (a), the Revenue Commissioners may—

(i) allow or disallow in whole or in part any deduction or other amount which is relevant in computing tax payable, or any part of such deduction or other amount,

(ii) allocate or deny to any person any deduction, loss, abatement, relief, allowance, exemption, income or other amount, or any part thereof, or

(iii) recharacterize for tax purposes the nature of any payment or other amount.

(c) Where the Revenue Commissioners make any adjustment or do any act for the purposes of paragraph (a), they shall afford relief from any double taxation which they consider would but for this paragraph arise by virtue of any adjustment made or act done by them pursuant to paragraphs (a) and (b).

(d) Notwithstanding any other provision of the Acts, where—

(i) pursuant to subsection (4)(c), the Revenue Commissioners determine the tax consequences which they consider would arise in respect of a transaction if their opinion that the transaction is a tax avoidance transaction were to become final and conclusive, and

(ii) pursuant to that determination, they specify or describe in a notice of opinion any adjustment or act which they consider would be, or be part of, those tax consequences,

then, in so far as any right of appeal lay under subsection (7) against any such adjustment or act so specified or described, no right or further right of appeal shall lie under the Acts against that adjustment or act when it is made or done in accordance with this subsection, or against any adjustment or act so made or done that is not so specified or described in the notice of opinion but which forms part of the final determination of any appeal made under subsection (7) against any matter specified or described in the notice of opinion.

(e) For the purposes of this subsection, an opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction shall be final and conclusive—

(i) if within the time limited no appeal is made under subsection (7) against any matter or matters specified or described in a notice or notices of opinion given pursuant to that opinion, or

(ii) as and when all appeals made under subsection (7) against any such matter or matters have been finally determined and none of the appeals has been so determined by an order directing that the opinion of the Revenue Commissioners to the effect that the transaction is a tax avoidance transaction is void.

(6) (a) Where pursuant to subsections (2) and (4) the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction, they shall immediately on forming such an opinion give notice in writing of the opinion to any person from whom a tax advantage would be withdrawn or to whom a tax advantage would be denied or to whom relief from double taxation would be given if the opinion became final and conclusive, and the notice shall specify or describe—

(i) the transaction which in the opinion of the Revenue Commissioners is a tax avoidance transaction,

(ii) the tax advantage or part of the tax advantage, calculated by the Revenue Commissioners which would be withdrawn from or denied to the person to whom the notice is given,

(iii) the tax consequences of the transaction determined by the Revenue Commissioners in so far as they would refer to the person, and

(iv) the amount of any relief from double taxation calculated by the Revenue Commissioners which they would propose to give to the person in accordance with subsection (5)(c).

(b) Section 869 shall, with any necessary modifications, apply for the purposes of a notice given under this subsection or subsection (10) as if it were a notice given under the Income Tax Acts.

(7) Any person aggrieved by an opinion formed or, in so far as it refers to the person, a calculation or determination made by the Revenue Commissioners pursuant to subsection (4) may, by notice in writing given to the Revenue Commissioners within 30 days of the date of the notice of opinion, appeal to the Appeal Commissioners on the grounds and, notwithstanding any other provision of the Acts, only on the grounds that, having regard to all of the circumstances, including any fact or matter which was not known to the Revenue Commissioners when they formed their opinion or made their calculation or determination, and to this section—

(a) the transaction specified or described in the notice of opinion is not a tax avoidance transaction,

(b) the amount of the tax advantage or the part of the tax advantage, specified or described in the notice of opinion which would be withdrawn from or denied to the person is incorrect,

(c) the tax consequences specified or described in the notice of opinion, or such part of those consequences as shall be specified or described by the appellant in the notice of appeal, would not be just and reasonable in order to withdraw or to deny the tax advantage or part of the tax advantage specified or described in the notice of opinion, or

(d) the amount of relief from double taxation which the Revenue Commissioners propose to give to the person is insufficient or incorrect.

(8) The Appeal Commissioners shall hear and determine an appeal made to them under subsection (7) as if it were an appeal against an assessment to income tax and, subject to subsection (9), the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications; but on the hearing or rehearing of the appeal—

(a) it shall not be lawful to enquire into any grounds of appeal other than those specified in subsection (7), and

(b) at the request of the appellants, 2 or more appeals made by 2 or more persons pursuant to the same opinion, calculation or determination formed or made by the Revenue Commissioners pursuant to subsection (4) may be heard or reheard together.

(9) (a) On the hearing of an appeal made under subsection (7), the Appeal Commissioners shall have regard to all matters to which the Revenue Commissioners may or are required to have regard under this section, and—

(i) in relation to an appeal made on the grounds referred to in subsection (7)(a), the Appeal Commissioners shall determine the appeal, in so far as it is made on those grounds, by ordering, if they or a majority of them—

(I) consider that the transaction specified or described in the notice of opinion or any part of that transaction is a tax avoidance transaction, that the opinion or the opinion in so far as it relates to that part is to stand,

(II) consider that, subject to such amendment or addition thereto as the Appeal Commissioners or the majority of them deem necessary and as they shall specify or describe, the transaction, or any part of it, specified or described in the notice of opinion, is a tax avoidance transaction, that the transaction or that part of it be so amended or added to and that, subject to the amendment or addition, the opinion or the opinion in so far as it relates to that part is to stand, or

(III) do not so consider as referred to in clause (I) or (II), that the opinion is void,

(ii) in relation to an appeal made on the grounds referred to in subsection (7)(b), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the tax advantage or the part of the tax advantage specified or described in the notice of opinion be increased or reduced by such amount as they shall direct or that it shall stand,

(iii) in relation to an appeal made on the grounds referred to in subsection (7)(c), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the tax consequences specified or described in the notice of opinion shall be altered or added to in such manner as they shall direct or that they shall stand, or

(iv) in relation to an appeal made on the grounds referred to in subsection (7)(d), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the relief from double taxation specified or described in the notice of opinion shall be increased or reduced by such amount as they shall direct or that it shall stand.

(b) This subsection shall, subject to any necessary modifications, apply to the rehearing of an appeal by a judge of the Circuit Court and, to the extent necessary, to the determination by the High Court of any question or questions of law arising on the statement of a case for the opinion of the High Court.

(10) The Revenue Commissioners may at any time amend, add to or withdraw any matter specified or described in a notice of opinion by giving notice (in this subsection referred to as “the notice of amendment”) in writing of the amendment, addition or withdrawal to each and every person affected thereby, in so far as the person is so affected, and subsections (1) to (9) shall apply in all respects as if the notice of amendment were a notice of opinion and any matter specified or described in the notice of amendment were specified or described in a notice of opinion; but no such amendment, addition or withdrawal may be made so as to set aside or alter any matter which has become final and conclusive on the determination of an appeal made with regard to that matter under subsection (7).

(11) Where pursuant to subsections (2) and (4) the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction and pursuant to that opinion notices are to be given under subsection (6) to 2 or more persons, any obligation on the Revenue Commissioners to maintain secrecy or any other restriction on the disclosure of information by the Revenue Commissioners shall not apply with respect to the giving of those notices or to the performance of any acts or the discharge of any functions authorised by this section to be performed or discharged by them or to the performance of any act or the discharge of any functions, including any act or function in relation to an appeal made under subsection (7), which is directly or indirectly related to the acts or functions so authorised.

(12) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions, including the forming of an opinion, authorised by this section to be performed or discharged by the Revenue Commissioners, and references in this section to the Revenue Commissioners shall with any necessary modifications be construed as including references to an officer so nominated.

(13) This section shall apply as respects any transaction where the whole or any part of the transaction is undertaken or arranged on or after the 25th day of January, 1989, and as respects any transaction undertaken or arranged wholly before that date in so far as it gives rise to, or would but for this section give rise to—

(a) a reduction, avoidance or deferral of any charge or assessment to tax, or part thereof, where the charge or assessment arises by virtue of any other transaction carried out wholly on or after a date, or

(b) a refund or a payment of an amount, or of an increase in an amount, of tax, or part thereof, refundable or otherwise payable to a person where that amount or increase in the amount would otherwise become first so refundable or otherwise payable to the person on a date,

which could not fall earlier than the 25th day of January, 1989.