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InDisputes: The Importance of Expert Evidence in Tax Disputes

AUTHORs: Dara Higgins  co-author(s): Colm Brussels Services: Tax DATE: 29/03/2023

Expert evidence is often required for the purposes of establishing issues of fact (e.g. foreign law, accounting, economics, valuation, etc) in tax cases before the Tax Appeals Commission ("TAC") or the Courts.  A failure to properly assess the evidentiary requirements and to engage appropriate expert witnesses in a correct manner can have significant consequences for a taxpayer's appeal. 

Potential Pitfalls

A number of recent cases illustrate the potential pitfalls associated with the use of expert witness evidence in the context of tax disputes, as follows:

  • Failure to provide an expert report: In the recent High Court case of NcNamara v Revenue [1]  the taxpayer failed to produce an expert report on valuation, instead seeking to rely on oral evidence proffered by their expert at the hearing.  In finding in Revenue's favour, Stack J noted in this context that:

"Litigation and disputes such as this before the TAC, are two-way streets. Parties cannot complain about an issue, which could have been resolved had they chosen to engage proactively with the process. The fact that the decision maker has to deal with the issues "on the hoof" during the course of the hearing, was largely due to the appellant's inaction".

  • Evidence as to foreign law: The interpretation of foreign law is often a fundamental issue in Irish tax disputes.  In TAC determination 137TACD2020 the taxpayer presented expert evidence as to foreign law from a suitably qualified lawyer, whereas Revenue did not present a counterview or call an expert witness.  In allowing the evidence of the taxpayer's witness to stand largely unchallenged, the TAC cited the following extract from the decision of the Supreme Court in Walsh v National Irish Bank Limited [2]:

"…foreign law is treated as a matter of fact to be established, in the Irish courts, in the ordinary way by sworn evidence of that fact. An affidavit from an appropriately qualified lawyer is the normal way in which evidence as to foreign law is to be established. Likewise, a party who wishes to dispute such evidence is required to put forward its own contrary evidence from a likewise suitably qualified lawyer. In the case of a dispute, then it may well be necessary that both lawyers be cross-examined so as to assist the Irish court in coming to a conclusion"

  • Requirement for impartiality: In Duffy v McGee[3] the Court of Appeal disregarded expert evidence which was considered to be less than fully independent noting that there was "such an abject failure to comply with the most basic obligation of an expert, namely, to be objective and impartial, as to render all of [the expert's] evidence inadmissible".  The decision in McGee emphasises the importance of calling only competent and independent expert witnesses and ensuring that those expert witnesses are fully aware of their duties.

Takeaway for Clients

Care should be taken at the outset of a tax appeal to ensure that all evidentiary requirements are identified and managed.  We recently discussed the importance of contemporaneous documentary evidence in discharging the taxpayer's burden of proof in tax cases (see here).  Expert witness evidence can be equally important in this context.  It is particularly important when identifying and instructing expert witnesses to ensure that, among other things, all experts are appropriately qualified and fully aware of their duties in acting as an expert witness.

[1] [2023] IEHC 15.  We recently discussed other aspects of the NcNamara decision here.

[2] [2013] 1 IR 294.

[3] [2022] IECA 254