The benefits of having privacy in tax matters come with a cost

Whatever his role in politics, Mr Charles Haughey is certainly testing almost to destruction a number of stress points or anomalies…

Whatever his role in politics, Mr Charles Haughey is certainly testing almost to destruction a number of stress points or anomalies in our system of public law.

The first of these centres upon Mr Ronan Kelly, the appeal commissioner who heard his case. Mr Kelly's role has been attacked as (to put the matter in rather clearer legal terms than those used by Opposition deputies) a violation of the principle that no one should be judge in his own case (sometimes given in Latin as nemo iudex in sua causa).

This is a fundamental precept of fair procedure in both the courts and in public administration. It lay at the root of Gen Augusto Pinochet's unprecedented and successful request to the House of Lords to set aside its own previous decision.

His contention was that one of the judges, Lord Hoffman, who had taken part in the previous decision on immunity, may have been partial because of his links with Amnesty International.

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In Ireland, this principle is cast as the first rule of constitutional justice and a similar case to that of Gen Pinochet went the same way in the Irish Supreme Court some years ago.

This arose when a High Court judge who had been chairwoman of the Commission for the Status of Women and who, in that capacity, had made submissions to the Government on the availability of abortion information, refused to disqualify herself from hearing a case against a centre which had been supplying abortion information.

However, especially in a relatively small environment, like the professional middle classes of Dublin, some element of familiarity between a decision-maker and the person affected will often arise.

This reality has been recognised in a number of cases in which the courts have been tolerant of this sort of connection.

A case in point is Dublin and County Broadcasting v Independent Radio and Television Commission, which arose out of the allocation of contracts to provide sound broadcasting services. One of the commission members had formerly been the chairman and director of a company which owned 70 per cent of the shares in one of the successful applicants.

Nevertheless, a case brought by an unsuccessful applicant failed, with the judge saying: "It seems to me that in the nature of the functions being discharged there was no real likelihood of bias and that no right-minded man would have thought so."

Against this background, it seems that the position of Mr Kelly, as the appeal commissioner who decided the case, is probably not open to criticism.

In the first place, consider his appointment. The fact that he was nominated by the minister for finance, then Mr Ahern, flows from the relevant legislation and so was unavoidable. Many other appointees, among them judges, are in the same position.

The other point made is that he was the brother of the then minister's estranged wife. As against this, he seems to have been well qualified for the job.

Next take what is really the central point, namely that he was hearing an appeal involving Mr Haughey.

Yet Mr Kelly's relationship with Mr Ahern had become rather distant, as had Mr Ahern's relationship with Mr Haughey.

Moreover, it can hardly be thought that Mr Kelly's determination last week did Mr Ahern any good.

The only way in which Mr Kelly might be criticised would be if one invoked the more stringent standard for bias, which a minority of judges have used, namely that justice must not only be done; it must be seen to be done.

In any case, such speculation is of particularly academic interest for this reason. It is based upon a legal standard yet this standard could never be used in a court in this situation as constitutional justice applies only if a breach of the rule has caused damage to an individual.

An example would be that if Mr Haughey had lost he might have been able to complain if Mr Kelly were appointed by Mr John Bruton.

It is a striking point - and one of the many ways in which our law has been given a very pro-individual slant - that if the community suffers loss through partiality, constitutional justice does not apply.

Let us turn to the design of the machinery for determining tax liabilities.

Money and the richer classes have always had powerful voices and when taxation was first established in Britain, the houses of parliament were made up mainly of representatives of great landowners or the merchant classes. Accordingly, it seemed a natural policy that taxation should be hedged around with numerous protections for the taxpayer.

As it has developed in independent Ireland, the system has followed the same policy, both in regard to substantive law (it being even more favourable to what is delicately known as tax avoidance than is British law) and in the machinery for administration.

As regards administration, there are ample opportunities for appeal.

The initial decision as to tax assessment is taken by the Revenue Commissioners. The taxpayer may then appeal to the appeal commissioners. This is where we have reached in Mr Haughey's capital acquisition tax assessment.

Next, either side may go to the Circuit Court, where again there is a full rehearing. Afterwards, there is an appeal - but on a point of law only - to the High Court, and then on to the Supreme Court. Again the Revenue Commissioners are independent of the Department of Finance and the appeal commissioners are independent of the Revenue Commissioners. By contrast, in the case of welfare benefits, the decision-makers are buried in the womb of the Department of Social Welfare.

All these tax proceedings go on in private, an exception being criminal prosecutions, of which there have been very few.

While everyone can see the virtues of privacy (especially in the case of their own tax affairs), this also carries a disadvantage. For in matters of public interest, people can be assured that their judicial, political or administrative system is working correctly only if they can see what is going on.

This idea - that sunshine is the best disinfectant - underlies both the constitutional precept that "justice . . . shall be administered, save in limited cases, in public" and the Freedom of Information Act 1997. However, the tax system is not quite an administration of justice and even the 1997 Act exempts individual taxpayers' affairs from its sweep. Be it so (as judges like to say).

Yet one of the advantages of publicity is that without it there will often be suspicion and disquiet. Even if one takes the view that, in most cases, the advantages of confidentiality outweigh the disadvantages, certainly in the present case it is the disadvantages which are stronger.

Let us broaden the discussion to compare what happened before the appeal commissioner with what happened before the McCracken tribunal, which gave it as its opinion that Mr Haughey was liable for the tax.

The tribunal was a fact-finding body which meant it had an entirely different function from a rights or liability-determining body, like the appeal commissioners.

This rather substantial difference justifies safeguards for the individual in the case of the appeal commissioners. These include privacy; the onus of proof being on the Revenue Commissioners; and, crucially, that facts proved before the tribunal still have to be demonstrated afresh before the appeal commissioners.

Yet, if fact-finding bodies and rights-determining bodies are different in their function, then this should mean that the individual cannot insist on the same rights before a tribunal as before a court.

It seems to me, therefore, that it is a major defect in our law that, in the interests of individual reputations, tribunals are increasingly expected to behave as if they are courts.

One instance of this occurred last summer. The Supreme Court upheld Mr Haughey's contention that the Moriarty tribunal should follow the same kind of elaborate procedure in obtaining discovery of documents as would govern a court.

And, earlier, the beef tribunal made the damaging and, I respectfully believe, legally incorrect ruling that - in effect - State legal aid should be given to pay for the lawyers of the parties represented before it, just as if a tribunal was a criminal trial empowered to jail.

If the move continues for tribunals to assume the same rigorous, pro-individual rules as apply to courts, the result will be a case of heads the individual wins, tails the community loses.

David Gwynn Morgan is professor of law at UCC