It is a fact, at least as it affects the field of direct taxation (Personal Income Tax and Corporation Tax), which withholdings and payments on account often exceed the amount of the final tax liability. There from the high percentage of self-assessments resulting in an amount to be refunded.
Before the excess amount is demanded, the Administration verifies the reality of income (deductions, payments in instalments, payments, etc...) and practices a provisional settlement.
Once practiced such settlement, the Administration agrees the taxpayer the right to a refund of the amount requested or the lower amount resulting, in the case of discrepancy.
The rules of each tax set specific deadlines for the Administration to practice the provisional settlement (six months for personal income tax and twelve months for corporation tax). Nevertheless, it is very common that the expiry of these periods occur without the Administration having practiced the provisional settlements. In that case, securing the rights of taxpayers, the law requires the administration to proceed to the immediate return within thirty days after the expiration of the term.
This means that, quite often, the Administration returns to the taxpayer the excess amounts paid many months after the tax return has been filed (seven months personal income tax and thirteen months in corporation tax).
The interesting thing is that the taxpayer will not recognize the interest on arrears, unless the return is made beyond the previously mentioned "legal" terms, and as long as it had been claimed prior to the payment of such interest.
A taxpayer who presents a self-assessment of their personal income tax, eligible for a refund the 20th June, 1995, may “not see a penny” until January 1996. If there are shortcomings in the functioning of the Administration the return delay won’t be until, say, February 15th, 1996, the taxpayer is only entitled to corresponding legal interest to the 15 days of February, and if so, provided that a prior written request has been sent of the payment of such interest.
This contrast with the strict surcharges which the law imposes to the taxpayer assuming payments are made out of time, even if it’s a day late (See section 1.6). The unequal treatment given to taxpayers and the Administration in comparable cases seems devoid of any justification.