The Office of the Revenue Commissioners has made a "direct and unprecedented" challenge to the authority of the office of the Ombudsman, the current incumbent Mr Kevin Murphy said today, because it refused to implement his recommendations.
The Ombudsman said 12 people should be compensated for delays in paying tax rebates due. The Revenue Commissioners has rejected this.
They also rejected a recommendation that they should compensate public service widows for loss of purchasing power despite accepting the widows should now receive retrospective repayments of income tax, wrongly withheld from them for many years.
In a report to both Houses of the Oireachtas, Mr Murphy said the Revenue Commissioners had "seriously misrepresented the position" in claiming they had no statutory authority to pay compensation and that all taxpayers could benefit from the occasion.
The origins of the dispute stem from a 1988 High Court case which ruled that many widows of public servants became eligible for a refund of income tax paid on their children's pensions.
Following the High Court decision, the Revenue Commissioners decided on the basis of legal advice to limit retrospection on this issue to the five years preceding the date of the claim.
Two widows, who had paid tax on their children's pensions for periods in excess of five years, requested a retrospective payment with interest covering the full period of their pension payments.
Revenue refused their request. Ten other taxpayers complained to the Ombudsman at a refusal to pay interest on incorrectly levied tax which was refunded only after a considerable lapse of time.
Following an inquiry by the Ombudsman, the Revenue agreed to refund income tax to the two widows. But it refused to take inflation into account, meaning the repayments were based on 1980s money values.
In total the Ombudsman made five recommendations. It claims the Revenue Commissioners fully implemented only one of these and partially implemented a second.
Mr Murphy said the rejection of the other recommendations was an "unprecedented event" in the history of the Office of the Ombudsman.
In a statement today, the Revenue Commission said it has no fundamental difficulty with the principle that taxpayers in certain circumstances should be paid compensation for loss of purchasing power.
However, the Commission said it "simply does not have the statutory authority to make such payments".
The Minister for Finance, Mr McCreevy said the report needed to be studied in detail although he could "certainly sympathise with the individuals concerned".
