115,000 pensioners from around the country were devastated in recent days to receive letters from the Revenue Commissioners informing them that they had underpaid their taxes and now owed sums which could vary from 4,400 euro for a single person to 8,800 euro for a married couple.
The anomaly was discovered when new computer systems were purchased, allowing Revenue Officials to access data held by the Department of Social Protection. This allowed tax details to be cross-checked with social welfare payments and it was quickly discovered that the pensioners had underpaid their taxes.
It would appear that those who were receiving an occupational pension from their former employers, as well as the contributory state pension, should have been paying tax on their occupational pension.
The upshot was a letter from the Revenue Commissioners which has deeply upset many pensioners, who are now fearful that the tax owed, in addition to interest, penalties and surcharges, will be hugely injurious to their financial wellbeing.
Within hours there were long queues outside tax offices around the country and phone lines were jammed as those who had received correspondence reacted with dismay to the letters which had issued to them.
This is undoubtedly a hugely emotive issue and the confusion of those involved has been compounded by the revelation that 15,000 people, who have small occupational pensions, will initially be obliged to pay a higher tax bill which will subsequently returned to them. That makes no sense at all and is adding greatly to the anxiety and fear of pensioners. First and foremost, those who are below the threshold for income tax, and who therefore have no liability, should be immediately removed from this exercise and allowed to enjoy their retirement without being forced to go through this distressing and fearful process.
This issue would never have arisen had both departments adequate means at their disposal to communicate effectively with one another. They did not and what has now come to light may on the one hand have been direct tax evasion but it may also have been an oversight due to a lack of understanding of the issues involved.
There are many elderly people who may have had no appreciation of the fact that they owed taxes on their occupational pensions and, whilst ignorance is no excuse, a little understanding on the part of the Revenue Commissioners will go a long way towards alleviating the distress now being experienced by those involved.
Nobody would suggest that those who blatantly engaged in tax evasion should now be allowed to escape scotfree. However, there are many who may have been naive in their dealings and may well have unwittingly failed to file appropriate tax returns, with little appreciation of the consequences of so doing.
This is a very daunting experience for the vast majority of the 115,000 people who are now the target of this probe.
There is little doubt that this entire issue was not handled with the sensitivity which it deserved. It is now imperative that Revenue Officials move speedily to alleviate the fears and concerns of the pensioners involved and that those who have tax liabilities be treated as compassionately as possible. There is nothing to be gained from adopting a trenchant attitude - other than alienating a large section of society who should be enjoying well-earned retirement rather than engaging in a running-battle with the taxman.