The taxpayer is going to have to foot the bill for interest and penalties on enormous underpayments of tax by some of the country’s most senior civil servants.
Internal records reveal how “serious and systemic” failures led to the miscalculation of salaries and payments for thousands of people including ministers, civil servants, and retired public service workers.
In some cases, there were massive underpayments of tax from individuals who were retiring with gold-plated pensions.
In such circumstances, the person involved would normally be hit with both interest and penalties for the unpaid tax.
However, internal records show the government plans to pick up the tab itself and take the money from the budget of the National Shared Services Office, which made the mistake.
An internal briefing for Minister Jack Chamber said: “As this is an administrative error, there would seem to be no basis for seeking interest and any potential penalties from the individuals affected.”
The scale of the miscalculations is laid bare in a series of internal documents that were released under FOI by the Department of Public Expenditure.
Around thirty top civil servants had underpaid tax on pension lump sums and retirement benefits, in amounts ranging from a few hundred euro to almost €280,000.
A further 1,300 retirement files have had to be examined, dating back as far as 2016, to see if further errors can be found.
There were separate errors involving pension deductions for Cabinet members, which were only noticed after a number of ministers noticed a big drop in their monthly pay cheque.
A briefing document said: “A small number of Ministers have queried [the] NSSO about what seemed significant reductions in ‘take-home’ pay.”
Every member of the current government had to have their pay recalculated this summer with amounts owed of between €2,000 and €30,000.
Some are also due refunds because of miscalculations, ranging from just a couple of hundred euro to figures in the low €20,000s.
An internal review found that the payroll system had been incorrectly managing voluntary salary reductions taken by some ministers.
They failed to impose superannuation charges because they treated that income as if it did not count for pension purposes, even though it did.
During that review, officials realised the problems ran even deeper potentially affecting thousands of former staff.
A spot-check was carried out by the Revenue Commissioners which found some retirees had exceeded a €2 million pension fund threshold but not been charged tax.
It said that only 10 of 26 cases had been handled correctly and that €2.39 million in unpaid tax needed to be refunded along with €469,000 in interest.
The bills are only likely to grow as the NSSO tries to untangle the fiasco and as additional cases are notified to Revenue.
The state is also bracing itself for a large bill from retired civil servants who previously worked part-time or on job-share arrangements.
Thousands of them could be owed arrears stretching back up to twenty years because their pensions were not calculated correctly.
Some of the cases will be even more complicated, as the person involved has since died, and their estate may be owed money.
The briefing said the failures were “serious, systemic, and operational” with a full external audit commissioned.
In the documents, officials warned that the state’s payroll system is likely to be put under strain as it tries to resolve the issues.
A briefing said: “This work… could well put pressure on the NSSO’s resources, on top of its other demanding objectives.”
Asked about the records, a Department of Public Expenditure spokeswoman said all current ministers were now on the appropriate pension scheme with corrected contributions.
She said that of the larger pension overpayments €1.1 million had been paid to Revenue along with €226,000 worth of penalties and interest.
The spokeswoman said considerable progress had been made in addressing issues around underpayments to potentially 13,000 retirees although it might be that only 20 percent are directly impacted.
She said: “Independent auditors, RSM Ireland, have commenced their Audit of the NSSO’s Pension and Payroll Processes. The audit is expected to take up to six months.”
The records were released to Right to Know following an internal review under FOI laws.