2.1 Taxpayers involved in disputes with revenue authorities usually follow a resolution process set out in law which may include internal review, such as objections or appeals processes, as well as external review such as those afforded by tribunals and courts. In addition to these statutory processes, revenue authorities may establish administrative procedures for their staff and taxpayers which are aimed at resolving disputes earlier, at lower cost and with less formality.

2.2 This chapter first describes the evolution of these processes in Australia. Thereafter, the current processes and structures of certain overseas revenue authorities are set out for comparative purposes and analysis.

Evolution of Australian tax dispute resolution processes

Change from full assessment tax system to self assessment

2.3 Prior to 1986, Australia had a full assessment tax system in which the ATO bore the risk of applying the law to the facts provided by taxpayers. Taxpayers' income tax liabilities were assessed by ATO officers in the 'assessing' section on the basis of information provided by taxpayers.6 ATO assessors would generally conduct a cursory examination of the facts provided in the return before issuing the assessment. Essentially, the ATO's issuing of the assessment and its verification of the return happened at the same time. Any amendments made by the ATO were reflected in the original notice of assessment (NOA) issued to the taxpayer.

2.4 The ATO could amend an original NOA only if it transpired that the taxpayer had not provided all the facts. Taxpayers could object to the original NOA and any amendments. Such objections were initially handled by the same ATO assessor, in most cases, who was authorised to amend the assessment if there was a mistake on the facts. Where the validity of the objection 'depended on the technicalities of tax law', the assessor referred the matters to an appeals section in the ATO.7

2.5 Taxpayers dissatisfied with the ATO's objection decisions could have their matter heard by Taxation Boards of Review. These Boards were composed of three members who were appointed by the Governor-General on recommendation of Cabinet. Two members were chosen from the legal and accounting professions, whilst the chair was usually chosen from the senior officers of the ATO.8

2.6 ATO officers from a section called 'Appeals and Advisings', which was separate from the compliance sections, were responsible for the preparation and presentation of cases before the Boards of Review.

2.7 The Boards could refer questions of law to the relevant State Supreme Court for judicial determination. Taxpayers could alternatively have their matter heard by way of appeal to that Court at first instance. These Courts could hear the matter de novo as they were not subject to the constitutional constraints currently imposed on the Federal Court of Australia (Federal Court) which now has jurisdiction in federal tax matters.9

2.8 With the introduction of the self assessment system in 1986, taxpayers began to bear the risks associated with applying the law to the facts and assessing their own liabilities. The NOA became a key milestone for both the taxpayer and the ATO. Under section 175A of the Income Tax Assessment Act 1936 (ITAA 1936), taxpayers dissatisfied with an assessment may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 (TAA 1953).

2.9 The ATO also shifted its resources away from assessing tax returns to other functions such as conducting audits and providing advice.10 Audits were carried out by the Taxpayer Audit Group (TAG), whilst advice to taxpayers was provided by the Taxpayer Assistance Group. Additional advice to taxpayers and ATO officers was available from the Legislative Services Group of which the Chief Tax Counsel was a part.11 The TAG, Taxpayer Assistance Group and Legislative Services Group were all led by First Assistant Commissioners who each reported directly to the relevant Second Commissioner. The Chief Tax Counsel also reported directly to a Second Commissioner.

Dissolution of the Boards of Review

2.10 In 1986, the Taxation Boards of Review were dissolved and the administrative review of ATO objection decisions was transferred to the newly created Taxation Appeals Division within the Administrative Appeals Tribunal (AAT).12 From 1 September 1987, the State Supreme Courts' jurisdiction to hear federal tax matters was transferred to the Federal Court.13 Since that time, taxpayers have been able to apply to the AAT for a merits review, which may substitute the decision of the Commissioner for a preferable one.14 Taxpayers may appeal decisions of the AAT to the Federal Court, but only on questions of law.15 Where the AAT has re-exercised the discretion of the Commissioner (such as varying a penalty remission decision), the taxpayer may only appeal if the AAT made an error in arriving at its decision (such as taking into account an irrelevant consideration).16

2.11 Taxpayers may also appeal objection decisions directly to the Federal Court. As the Federal Court exercises judicial power under Chapter III of the Constitution, it undertakes a judicial review of the decision. Thus the Federal Court does not make a fresh decision, but may order the Commissioner to vary an assessment only if the decision is wrong in law. Effectively, this leaves the AAT as the last point of merits review for taxpayers.

Formation of the Appeals and Review Group

2.12 Additional restructuring within the ATO led to the formation of the Appeals and Review Group (ARG) in 1988 which, until 1994, handled all taxpayer objections to ATO assessments. The ARG also handled the litigation function of the ATO.17 The ARG was led by a First Assistant Commissioner who reported directly to a Second Commissioner. The formation of the ARG was a response to the prior Government reviews of the Kerr and Bland Committees18 and was designed to better support administrative review principles such as independence, fairness and accessibility. It has been noted that ARG staff were well-educated and relatively senior, with appointment to the ARG being competitive.19

Parliamentary Inquiry and the resulting ATO restructure in the 1990s

2.13 In 1993, following an inquiry, the Joint Committee of Public Accounts (JCPA) made a number of recommendations to improve the administration of the tax system including that the resources of the ARG be allocated to the general decision making areas of the ATO.20 In the JCPA's view, the ARG's main function of internally reviewing ATO decisions before assessments were finalised or prosecutions were undertaken should have been applied in all cases and not only those cases in which taxpayers had objected.21

2.14 In 1994 the ATO made structural changes in response to those recommendations by subsuming the appeals function into the compliance area. The ARG was disbanded and subsumed into the then newly created compliance business lines22 which replaced the TAG.

2.15 Each compliance business line focused on a particular market segment such as 'large business', 'small business' and 'individual non business' or specific types of taxes, such as 'withholding and indirect taxes'.23 Each line was led by a Deputy Commissioner who reported to a Second Commissioner.

2.16 As a result of this restructure, each compliance business line now contained the audit and objections functions as well as 'solicitor-type' work.24

Restructure of ATO technical and legal areas

2.17 During the early 1990s, the Tax Counsel Network (TCN) was established as a source of internal advice as well as oversight of the rulings system. The TCN has been responsible for managing the development of the ATO's view of the law25 and for providing technical advice to other ATO areas including compliance teams and objections officers.26 The TCN reported to a Deputy Chief Tax Counsel (DCTC) who in turn reported to the Chief Tax Counsel.

2.18 In 1999, the ATO established the ATO Legal Practice which reported to a DCTC. Litigation functions previously undertaken by the compliance business lines were either centralised within ATO Legal Practice or approved by the DCTC. Case ownership, however, remained with the business lines.27 The aim of this centralisation was to ensure that the 'right issues are being litigated, at the right time, with the best arguments, and without duplication of effort' and lessons are learnt and captured.28 Under a number of service level agreements, ATO Legal Practice represented the ATO in the courts and tribunals, provided instructions to external legal service providers as well as internal legal advice to business line staff on a range of tax and non-tax matters.29

2.19 In 2004, the ATO Legal Practice was transformed into the ATO's Legal Services Branch which further centralised and nationalised the ATO's approach to litigation.30 The Legal Services Branch was part of the Law and Practice business line which was led by a First Assistant Commissioner who reported directly to the Second Commissioner – Law.

The Ralph Review

2.20 During 1999, the Review of Business Taxation (Ralph Review) was also published, which provided a comprehensive review of Australia's business taxation system. It included observations and recommendations in relation to dispute resolution processes between the ATO and taxpayers. For example, it noted that, with the move to self assessment, Australia's tax laws with respect to objections was now more likely to be a source of delay, especially where the dispute concerned the application of the Commissioner's view in a public ruling.31 As a result, the Ralph Review recommended improvements to the tax disputes resolution process which included, in certain circumstances, provision for taxpayers to 'by-pass administrative processes and refer a dispute directly to the appropriate independent tribunal or court.'32

IGT submission to the October 2011 Federal Tax Forum

2.21 In his submission to the former Government's 2011 Tax Forum (Tax Forum Submission), the IGT outlined a suite of recommendations for reform and improvement of the governance of the ATO.33 Relevantly, the IGT recommended improving the accountability of the ATO by establishing an advisory board to advise the Commissioner on the general management of the ATO. This recommendation echoes that of the 2009 Australia's Future Tax System review.34

2.22 Moreover, the IGT recommended the injection of additional private sector experience and perspectives into ATO management by the appointment of two additional Second Commissioners.35 One of these additional Second Commissioners was to head up a new appeals area, to specifically deal with objections and litigation, which would enhance the independence of the appeals function through greater separation from the compliance area.36

Previous IGT reviews

2.23 In previous reports, the IGT has examined different aspects of the ATO's approach to compliance verification in respect of large business and HWIs, namely the:

  • Report into the ATO's large business risk review and audit policies, procedures and practices (the Large Business Review);37 and
  • Review into the ATO's compliance approaches to small and medium enterprises with annual turnovers between $100 million and $250 million and high wealth individuals (the SME/HWI Review).38

2.24 Whilst these reviews may have indirectly examined the management of tax disputes, the improvements identified assisted to minimise the instances of disputes arising. Relevant aspects of these reviews are briefly explored below.

2.25 In relation to the ATO's management of tax disputes more broadly, the IGT had previously undertaken a suite of reviews to examine the ATO's management of objections,39 settlements40 and Part IVC litigation.41 More recently, the IGT undertook a review into the ATO's use of early and alternative dispute resolution (ADR Review).42

The Large Business Review

2.26 The IGT formulated a range of recommendations directed at improving the ATO's compliance approaches, risk hypothesis identification, project management and accountability, information gathering approaches, audit and risk review processes, position paper processes and interest and penalty treatments.43

2.27 Significantly, the report recommended that where a taxpayer does not agree with the ATO's position paper, the matter should be referred to a senior technical specialist for review and sign-off before the final position paper is issued.44 The recommendation provided the genesis for the ATO's development of the current IR process mentioned in Chapter 1 and explored further in Chapter 3.

The SME/HWI Review

2.28 The IGT identified key opportunities for improvement in a number of areas, including: technical capability and support; initial compliance decision making; project management; audit conduct, communication and engagement; and information gathering, including clarifying expectations for taxpayers for audits through updating a publication on the ATO's compliance approach to Small to Medium Enterprises (SME) and HWIs.45

The ADR Review

2.29 The review broadly examined the ATO's end-to-end dispute management processes across all business lines. This report, together with projects emanating from the Attorney-General's Department, was a catalyst for fundamental shifts in the ATO's dispute resolution approach.

2.30 The IGT's recommendations included bringing early engagement and alternative dispute resolution (ADR) to the forefront of ATO dispute resolution approaches by treating all disputes as suitable for use of ADR except for a few cases where the costs may outweigh the benefits, there is public interest in obtaining a judicial decision or the case involves serious criminal fraud or evasion.

2.31 A number of the other recommendations were aimed at streamlining information exchange, providing clear escalation channels, improving training for ATO officers in ADR and implementing independent evaluation of the use of ADR to resolve tax disputes.46 A specific recommendation was piloting the use of in-house facilitators to assist in resolution of disputes involving smaller taxpayers with limited resources.

2.32 In 2012, the ATO began to implement the IGT's recommendations with which it had agreed. They have reported that they have had some success and positive stakeholder feedback as a result of implementing these recommendations. For example, the ATO has reported their success in establishing and using in-house facilitators. They have advised that there are now 60 trained in-house facilitators across a range of ATO business lines.

2.33 The ATO did not agree with recommendation 6.1 which drew on the above mentioned aspects of the Tax Forum Submission relating to the establishment of a separate appeals area. Whilst awaiting the Government's consideration of the latter, broadly, recommendation 6.1 required the ATO to pilot conducting the objection and litigation function in the law area, rather than the compliance area, for the most complex cases.

Other commentary and reviews

2.34 There have been a number of recent reviews which have examined the ATO and its compliance approach to HWIs, namely those of the Australian Public Service Commission (APSC) and the Australian National Audit Office (ANAO). These are briefly discussed below.

The APSC Capability Review (2013)

2.35 The APSC completed a capability review of the ATO in 2013 which assessed its ability to meet future objectives and challenges.47 Amongst other things, the review identified that that the ATO had a culture of risk aversion, which resulted in the elevation of decision making, protected internal consultation, staff disempowerment and a perceived lack of support for staff if a mistake is made.48

2.36 The APSC's findings accord with commentary made by the now Treasurer that 'for too long the tax office has developed an insular and inward looking culture that has put it at odds with taxpayers, particularly in relation to its overly aggressive interpretations of tax laws.'49 The Treasurer also observed that the ATO needed to be less adversarial and develop a relationship with taxpayers based on mutual respect.50

ANAO report: Managing compliance of HWIs (2014)

2.37 The ANAO's report broadly sought to assess the effectiveness of the ATO's activities to promote tax compliance by HWIs by reference to a number of key criteria, including the effective conduct of compliance activities, objections and reviews.51

2.38 While the ANAO concluded that the ATO had effectively carried out a range of activities in respect of HWIs, it also observed that:

…the results of these activities have not always been commensurate with the level of effort deployed by the ATO. Over the four‐year period, 90 per cent of the cash collected was from 12 per cent of the audits and five per cent of the comprehensive risk reviews undertaken by the ATO. The majority of these audits (70 per cent) and comprehensive risk reviews (84 per cent) did not have a financial outcome.52

2.39 Moreover, the ANAO noted that HWI compliance cases often involved long initial cycle times (730 days in the majority of cases) and 40 per cent of these exceeded those timeframes by an average of 352 days.53 It further observed that notwithstanding the long cycle times, taxpayers objected to ATO decisions in 65 per cent of cases and were largely successful 50 per cent of the time.54

2.40 The ANAO concluded, and the ATO acknowledged, that the high rates of successful objections together with the large proportion of compliance activities without financial outcome suggested that there was room for the ATO to improve its approach.55

ATO changes in 2013 and 2014

2.41 Having regard to the reports and recommendations discussed above, the ATO has, in recent years, undergone significant changes in its senior personnel and internal structure. It has also sought to implement a concerted effort towards settling legacy disputes as well as focusing on strategies to prevent and resolve disputes more expeditiously.

2.42 The internal restructure includes all ATO business and services lines being reorganised into three groups in 2013. These groups are the Compliance Group, the People Systems and Services Group, and the Law Design and Practice (LD&P) Group. Each group is led by one of the three Second Commissioners.

2.43 The ATO's Legal Services Branch became part of the new Review and Dispute Resolution (RDR) business line, which not only conducted litigation and instructed Counsel but also provided other non-litigation dispute resolution processes. The RDR business line is led by a First Assistant Commissioner who reports directly to the Second Commissioner for the LD&P Group.56

2.44 The LD&P Group also contains the TCN, led by the Chief Tax Counsel who also reports directly to the Second Commissioner of the LD&P Group. The other business line belonging to the LD&P Group is the Integrated Tax Design business line which was established to provide advice to and collaborate with the Department of the Treasury (Treasury) in the formulation of policy proposals.57

2.45 The role of the LD&P Group has also been extended to include dealing with objections for larger taxpayers. On 1 July 2013, objections in relation to large businesses with turnovers over $250 million were transferred from the Public Groups & International (PGI) business line within the Compliance Group into the RDR business line of the LD&P Group. This was expanded, on 1 July 2014, to include objections by public companies and privately held entities with turnover of more than $100 million.58

2.46 Therefore, despite initially disagreeing to recommendation 6.1 of the IGT's ADR Review, objections for larger taxpayers have moved from the Compliance Group into the law area or LD&P Group to improve the level of independence.

2.47 Although the PGI business line no longer deals with objections, it does have a dedicated 'Disputes Prevention and Resolution' team. This team seeks to foster an improved dispute prevention and resolution capability and culture, identify and manage cases with a higher dispute risk and monitor and review dispute activity and outcomes.59 This team has been responsible for the delivery of dispute resolution and engagement training to PGI officers which is seen as an important means for effecting the desired capability and cultural change.60 Training is followed up with additional workshops to assess if officers have put their training into practice.

2.48 Administrative changes have also been made to provide taxpayers with additional internal dispute resolution processes prior to finalising adjustments. For example, large business taxpayers facing a potential amended assessment may request a review of the statement of audit position (SOAP) through an IR before the assessment is issued. As discussed above, the IR process was the formalisation of a previous pre-assessment review process, conducted during the position paper stage within the then Large Business and International (LB&I) business line, pursuant to a recommendation in the IGT's Large Business Review.61

2.49 The IR process is now conducted by officers in the RDR business line rather than a compliance business line to improve the level of independence from original decision-makers.62 Furthermore, the IR process considers the technical merits of the SOAP, rather than just the process undertaken by the audit team.63 IRs are purely administrative tools for addressing disputes that may arise prior to the ATO issuing an amended assessment. The IR process will be explored further in Chapter 3.

Current interaction between the different ATO areas during audits and disputes

2.50 Compliance officers may seek the advice of their manager to assist in progressing a case. If an interpretative issue arises, compliance officers are required to research the ATO's legal database for any existing ATO view and apply it to the facts where relevant. If there is uncertainty about an issue, compliance officers may seek the assistance of technical leaders within the business line. If the technical issue is not resolved, compliance officers may seek further advice from the TCN, in the LD&P Group, in accordance with each business line's processes.

2.51 Business lines are expected to adopt 'early engagement' practices, whereby taxpayers and ATO officers can discuss problems or issues before formal dispute mechanisms begin. For example, where a taxpayer is intending to object to an assessment, early engagement allows a discussion of the relevant information and issues before the objections are lodged.64 Where the compliance officer intends to amend the taxpayer's assessment, these procedures are designed to focus on engaging with the taxpayer early to reach a common understanding of the relevant law, facts and evidence.65

2.52 As stated earlier, since 1 July 2013, large business taxpayers may also request an IR. The main interaction between the IR officer, compliance team and taxpayer (and their representatives) is through a face-to-face meeting called a case conference.66 A formal protocol has recently been put in place to ensure that IR participants (including ATO participants) do not communicate with the IR officer outside of the case conference.67

2.53 As also noted earlier, objections for taxpayers with turnovers of $100 million or more are managed by the RDR business line. However, all other taxpayer objections, i.e. those with turnovers under $100 million and individuals,68 are handled by objections officers in the same compliance business line where the assessment originated.

2.54 When lodging an objection, a taxpayer may include additional facts, evidence or arguments that were either not requested or otherwise not put to the auditor. The Commissioner must make a decision in respect of the taxpayer's objection or may be required by notice to do so by the taxpayer.69 Where the Commissioner fails to make a decision following the expiry of the time for him to do so under the notice, the Commissioner is deemed to have disallowed the objection and the taxpayers' rights of appeal are enlivened.70

2.55 In making objection decisions, objections officers may communicate with other ATO officers, such as the original decision maker. They may also obtain technical advice from the TCN or other areas.71 However, the ATO's internal guidance cautions that:

Contact with the original decision maker should not be used as a substitute for independent re-examination of the dispute.

Whilst it is acknowledged that efficiencies can be gained through contact with the original decision maker (particularly in complex disputes) such contact should not be used to replace the reviewer's own understanding and research.72

2.56 Where an objections officer obtains additional information as a result of contact with other areas of the ATO, the objections officer is expected to contact the taxpayer before finalising their decision.73

2.57 Objections officers are also expected to seek input from technical specialists where required. These specialists may be from within the same business line (technical or case leadership) or from the TCN. However, internal ATO guidance discourages technical specialists within the same business line providing advice on a review of a decision on which they have already advised.74 More recently, the ATO has also stated that TCN officers who provided advice on the audit are effectively excluded from subsequent stages of the disputes.75

2.58 Where the ATO makes an objection decision which is wholly or partly unfavourable to the taxpayer, the taxpayer may seek external review to either (or both) the AAT or Federal Court. Litigation matters are handled by the Dispute Resolution team in the RDR business line for tax matters. Other stakeholders, such as the compliance business line or the TCN have different responsibilities depending on the particulars of the case.76

2.59 At each stage of the tax disputes process, ATO officers are required to ensure that views on interpretative issues, contained in designated 'ATO view' documents, were consistently applied.77 Accordingly, objections officers would be obliged to apply the same ATO precedential view that the original decision maker applied during the audit. Similarly, litigation officers would be required to argue matters consistently with the existing ATO view or brief Counsel to advance arguments along those lines.

2.60 Where taxpayers seek a review or appeal of an objection decision in the AAT or Federal Court, they are limited to grounds stated in the objection. Taxpayers may include additional grounds at the discretion of the AAT or Federal Court.78 At any stage during a dispute with a taxpayer, the ATO and taxpayer may agree to a settlement. The ATO Code of Settlement Practice (the Code) sets out the requirements for officers entering into settlement negotiations. All officers engaging in settlement discussions must do so in accordance with the instructions set out in the Code.79 Each business line is required to have assurance and governance measures in place to ensure compliance with the Code. For example, in the Private Groups and High Wealth Individuals (PGH) business line settlement proposals are developed by compliance staff and provided to a panel of senior executives for assurance purposes. Final decision makers on settlements must be duly authorised.80

2.61 During the course of this review, the ATO refreshed its Code of Settlement which streamlined the former Code and provided additional guidance through practical examples and model deeds of settlement.81 The refreshed Code of Settlement was subsequently issued in the form of a practice statement on 15 January 2015.82

2.62 Whilst decisions to settle tax disputes are made by duly authorised officers in the compliance business lines,83 the RDR business line has a custodian role in relation to all ATO settlements. In this respect, the RDR business line ensures that all settlements are appropriately recorded and reports to the ATO's Integrity Adviser on the completeness and accuracy of the recorded information.84

Extent of disputation within large business and HWIs

2.63 The numbers of disputed cases within the large business and HWI market segments are generally lower than other market segments, reflecting the smaller number of large business and HWIs within Australia when compared with other taxpayer classes. However, the proportion of disputed cases involving large businesses and HWIs is generally higher than for other market segments. This may be attributable to a number of factors including the complex nature of the transaction in these market segments and the resources of these taxpayers to challenge ATO decisions.

2.64 Furthermore, the disputes involving large businesses and HWIs represent high revenue impacts as reported by the ATO in its submission to the Committee. The ATO notes that of the $5.333 billion in liabilities which were subject to objection dispute, $3.378 billion (or 63.3 per cent) was attributable to large businesses.

2.65 The IGT initially sought to examine the extent of disputation within the large business and HWI market segments by considering quantities of cases and liability amounts at each stage of the dispute process. The information initially sought related to the numbers of completed compliance cases (e.g., audits and reviews) and the levels of liabilities raised as a result, any objections lodged and their outcomes of those and as well as whether matters proceeded to litigation or were otherwise settled.

2.66 The ATO has advised the IGT, however, that its present reporting systems do not track the progress of cases throughout the end-to-end process. As a consequence, the ATO is unable to provide the required data, without resorting to manual processes, for the IGT to assess the extent of initial adjustments made by the ATO, the sustainability of those decisions (and therefore the robustness of ATO technical decision making) and the key points in the process at which matters are resolved or otherwise finalised.

2.67 The IGT had observed in prior reviews that such limitations constrained the ability of the ATO to assess its performance on a whole-of-case basis throughout the end-to-end compliance process.85 Whilst the ATO has taken steps in recent years to improve its reporting, in the absence of such data, the ATO cannot truly assess the taxpayer experience in tax disputes.

2.68 As the ATO was unable to provide the original key information from their system reports, the IGT requested aggregated statistics of compliance activities and disputes over a seven year period in order to conduct a basic trend analysis. However, owing to the limitations set out above and the long-running nature of larger dispute cases, it is not possible to draw any connections between the different stages of the dispute process. These statistics are set out and discussed in the sections which follow.

2.69 The ATO has advised that even with the overall aggregated numbers there have been difficulties in extracting and providing figures for all years across all the areas that the IGT has requested. In part, the ATO explains that this was as a result of transitions from older legacy reporting systems to the ATO's enterprise case management system, Siebel. Certain other data (such as HWI appeals to the AAT and the Federal Court) are not captured automatically by ATO systems and therefore have to be manually extracted through reviewing case information and taxpayer records.

2.70 In the absence of ATO data provided to this review, the IGT has had to use more dated and less specific information to draw some conclusions in this regard.

Large business dispute statistics

2.71 Tables 1 and 2 below set out disputation statistics in relation to large business over a seven year period from 2007–08 to 2013–14. These tables provide information in relation to quantity of disputed cases and the quantum of disputed amounts respectively.

Table 1: Quantity of ATO large business compliance activities and disputes
    2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Average
Compliance activities Total number 7,976 12,138 13,314 17,764 18,596 14,486 12,767 97,041 13,863
Number resulting in adjustments 526 3,933 1,966 1,033 780 813 829 9,880 1,411
Percentage resulting in adjustments 6.6 32.4 14.8 5.8 4.2 5.6 6.5 10.2  
Risk Reviews and Audits Number of risk reviews completed 139 262 365 396 434 328 342 2,266 324
Number of risk reviews resulting in an outcome 43 84 104 127 99 106 109 672 96
Number of risk reviews escalated to audit 21 48 42 65 27 29 39 271 39
Number of audits completed 33 44 36 51 61 57 71 353 50
Number of audits resulting in an outcome 21 35 23 36 29 36 36 216 31
Percentage of audits resulting in an outcome 63.6 79.5 63.9 70.6 47.5 63.2 50.7 61.2  
IR Process Cases completed The IR process commenced operation in 2013–14 14 14 14
Number supporting taxpayer position 7 7 7
Number supporting ATO position 7 7 7
Objection stage Total cases lodged 138 256 253 290 179 317 253 1,686 241
Number of decisions issued 95 174 163 195 116 168 161 1,072 153
Number of ATO decisions varied 61 95 127 121 77 129 122 732 105
Percentage of ATO decisions varied 64.2 54.6 77.9 62.1 66.4 76.8 75.8 68.3  
Number of ATO decisions upheld 34 79 36 74 39 39 39 340 49
Percentage of ATO decisions upheld 35.8 45.4 22.1 37.9 33.6 23.2 24.2 31.7  
AAT stage Total appeals lodged 68 14 12 7 9 12 4 126 18
Number of cases finalised 17 10 68 15 4 6 7 127 18
Number of ATO decisions varied 15 8 61 11 2 5 4 106 15
Percentage of ATO decisions varied 88.2 80.0 89.7 73.3 50.0 83.3 57.1 83.5  
Number of ATO decisions upheld 2 2 7 4 2 1 3 21 3
Percentage of ATO decisions upheld 11.8 20.0 10.3 26.7 50.0 16.7 42.9 16.5  
Federal Court Total appeals lodged 125 31 47 21 18 33 16 291 42
Number of cases finalised 60 39 155 30 26 31 35 376 54
Number of ATO decisions varied 49 24 141 15 13 28 20 290 41
Percentage of ATO decisions varied 81.7 61.5 91.0 50.0 50.0 90.3 57.1 77.1  
Number of ATO decisions upheld 11 15 14 15 13 3 15 86 12
Percentage of ATO decisions upheld 18.3 38.5 9.0 50.0 50.0 9.7 42.9 22.9  

Data source: Australian Taxation Office

Note 1: Values have been rounded to the nearest whole number. Percentages have been rounded to one decimal place.

Note 2: Compliance activities are counted on an activity basis (e.g., if three activities are undertaken in relation to one taxpayer return then three will be counted).

Note 3: 'Risk reviews and audits' only include numbers of income tax risk reviews and audits undertaken by the PGI business line and does not include those relating to GST, other heads of tax or activities by other ATO business lines (with the exception of the 2013–14 financial year in which the PGI business line undertook risk reviews and audits in relation to resources rent tax).

Note 4: Objections cases are counted on a correspondence basis (e.g., if a taxpayer lodges three separate objection applications, each for a different year of return, it will be counted as three objections).

Note 5: Litigation cases are counted by the number of applications received and outcomes on that application (e.g., if a taxpayer lodges multiple applications, each will count as a litigation case). Litigation figures in the Federal Court include matters in the Full Federal Court.

Note 6: Due to different case counting rules at each stage of the process and limitations of the ATO's automated reporting systems, these numbers are not directly reconcilable.

Note 7: During the objection stage 'varied' includes cases allowed in full or in part. During the AAT and Federal Court stages 'varied' includes cases determined fully or partially in the taxpayer's favour, those resolved prior to hearing (such as by settlement) or those conceded by the ATO.

Note 8: During the objection stage 'upheld' includes cases which were disallowed. During the AAT and Federal Court stages 'upheld' includes cases decided in the ATO's favour or those which were withdrawn by the taxpayer.

Compliance activity outcomes

2.72 As set out in Table 1 above, the ATO has reported that over the past seven years it has undertaken a total of 97,041 compliance activities which averages to 13,863 per year. The level of total compliance activities steadily increased between 2007–08 (7,976) through to 2011–12 (18,596) before falling in the most recent years to 14,486 and 12,767 activities in 2012–13 and 2013–14 respectively.

2.73 Notwithstanding the high levels of compliance activity undertaken by the ATO, the level of adjustments is low. Over the seven year period, the ATO made a total of 9,880 adjustments which accounts for 10.2 per cent of all compliance activities. The level of adjustments increased considerably between 2007–08 (526) and 2008–09 (3,933) before slowly declining in later years with only minor increases in 2012–13 and 2013-14.

2.74 However, the compliance activities not only represent audits but also include a range of lower level verification activities applicable to the large market segment including outbound correspondence and outbound calls.86 As a result, the ATO has advised that a measure of the ATO's performance against total compliance activities alone is inconclusive as not every compliance activity is designed to lead to an adjustment.

2.75 Table 1 also sets out the numbers of risk reviews87 completed with outcomes, those referred to audit and the numbers of audits88 completed with outcomes. Such outcomes may be financial or non-financial and may also be favourable to the taxpayer.

2.76 Table 1 shows that over the seven year period, the ATO completed a total of 2,266 risk reviews and 353 audits. Over this period, the ATO averaged 324 risk reviews per year and 50 audits. When considering the level of outcomes against audits completed, there is an outcome in more than half of these completed cases (61.2 per cent).

Internal independent review outcomes

2.77 As discussed earlier, the IR process has provided an avenue for large business taxpayers to discuss any areas of disagreement with the ATO prior to the issue of amended assessments. Data provided in Table 1 shows that in 2013–14, 14 IRs were completed with approximately seven cases being found in favour of the taxpayer and seven in favour of the Commissioner (when the issues in those cases are counted, 54 per cent were in the Commissioner's favour and 46 per cent in the taxpayer's favour89 ).

2.78 As at 31 October 2014, a further six IRs have been completed with five found in favour of the Commissioner and one in favour of the taxpayer. In total therefore, 20 IRs have been completed, with 40 per cent of cases resulting in the taxpayer's favour and 60 per cent in the Commissioner's favour.

Objection outcomes

2.79 For large businesses, the objection stage remains the first step in the statutory disputes resolution process. Statistics from Table 1 show that over the past seven years, the ATO has finalised 1,686 objections (an average of 241 per year) from large business taxpayers and issued decisions in 1,072 of those cases (an average 153 per year). These statistics do not include cases which were invalid, withdrawn or otherwise disposed of without a decision. During the closing stages of this review, the ATO has provided data demonstrating that a large number of large business objections were not preceded by ATO compliance activity and were initiated by taxpayers. However, it is not clear how many such cases involved taxpayers seeking to ensure their tax return was in accordance with the ATO view whilst objecting to that ATO view or seeking ATO confirmation of their view in a similar manner to a private ruling application.

2.80 The data in Table 1 demonstrates that objection outcomes fluctuate from year to year. However, the IGT notes in every year, more than 50 per cent of cases resulted in the ATO's initial decision being varied (i.e., the taxpayer's objection was wholly or partly allowed). Importantly, more than three quarters of ATO decisions were varied in three out of the seven years (2009–10, 2012–13 and 2013–14).

2.81 Over the seven year period, 68.3 per cent of all objection decisions resulted in ATO original decisions being varied for a range of reasons including taxpayers not providing all relevant information during the audit stage or, initially, the ATO not adequately analysing the relevant facts and evidence or incorrectly applying the law to the facts.

Litigation outcomes

2.82 Appeals to the AAT and the Federal Court remain a relevant factor in large business tax disputes notwithstanding that the ATO's statistics show that the numbers of appeals filed in both forums have decreased from 2007–08 with only a relatively small number being filed in more recent years.

2.83 In total, Table 1 shows that the AAT has finalised 127 matters over the past seven years. The statistics highlight the high level of success that large businesses have had in the AAT with all but three years showing that the ATO's original decision was varied by the AAT in 80 per cent or more cases. The exceptions were 2010–11, 2011–12 and 2013–14 which had 73.3 per cent, 50 per cent and 57.1 per cent respectively.

2.84 In total, 83.5 per cent of cases which proceeded to the AAT resulted in a variance of the ATO's original decision.

2.85 Litigation in the Federal Court also yielded similarly high levels of favourable outcomes for taxpayers. Over the seven year period, 77.1 per cent of ATO decisions were varied as a result of Federal Court litigation. As with the AAT, the IGT notes that, on an annual basis, 50 per cent or more of cases resulted in the ATO decision being varied. Favourable taxpayer outcomes were particularly high in 2009–10 and 2012–13.

2.86 The high rates of variance resulting from objections and litigation suggest a need for more robust engagement at the compliance stage, as the IGT has previously highlighted in earlier reviews. The introduction of the IR process has assisted to divert matters away from objection and litigation disputes. However, a more concerted effort to improve decision making appears to be warranted based on the ATO's statistics. Such efforts could include a more focused approach to information gathering to expeditiously obtain relevant facts and evidence.

Table 2: Quantum of revenue in large business compliance activities and disputes
    2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Average
Compliance activities Amounts raised from compliance activities $(M) $3,325 $2,136 $3,342 $2,343 $2,391 $2,353 $2,221 $18,110 $2,587
IR Process Potential liablility amounts subject to IR $(M) The ATO has advised that data is not available as liability information was not quantifiable during the IR process
Potential amounts after IR $(M)
Objection stage Amounts disputed $(M) ATO data not available $5,445 $3,208 $8,653 $4,327
Amounts allowed in part or full $(M) $1,007 $1,276 $2,283 $1,142
AAT stage Amounts disputed $(M) $19 $184 $31 $26 $2 $14 $315 $591 $84
Amounts varied $(M) $7 $132 $3 $7 $0.6 $5 $256 $410 $59
Federal Court Amounts disputed $(M) $1,389 $2,555 $1,528 $1,873 $4,009 $516 $1,253 $13,123 $1,875
Amounts varied $(M) $195 $1,525 $1,375 $1,147 $1720 $333 $664 $6,960 $994

Data source: Australian Taxation Office

Note 1: Values have been rounded to the nearest whole number unless the number is less than 1.

Note 2: Federal Court includes matters in the Full Federal Court.

2.87 Table 2 above sets out the quantum of revenue raised and varied at different stages of dispute. The ATO has not provided information concerning liability figures during the IR process as ATO senior management have advised that liability was not quantifiable at that stage.

2.88 Over the past seven years, the ATO reports that through its compliance activities, it has raised a total of $18.11 billion which averages to $2.587 billion per year. The amount fluctuates from around $2.1 billion to $2.4 billion with spikes in 2007–08 and 2009–10. Over the last two years, $8.653 billion was the subject of objections of which $2.283 billion (26.4 per cent) was allowed in full or in part. As noted above, the objection figures may contain those which did not originate from ATO compliance activities.

2.89 In the AAT, a total of $591 million was the subject of dispute with more than half of this figure occurring in the most recent financial year ($315 million in 2013‒14). As a result, $410 million (or 69.4 per cent) was varied which is largely consistent with the outcomes in Table 1.

2.90 In the Federal Court, a significantly larger sum of $13.123 billion over seven years was the subject of dispute with a total of $6.96 billion being varied. This represents 53 per cent of the total disputed liability and an average annual adjustment of $994 million.

High Wealth Individual statistics

2.91 The extent of disputation in relation to HWIs, while not as high as those for large markets in the quantity of cases, still represents a significant revenue impact. The ATO's data reporting in relation to HWIs also has significant gaps, particularly in relation to disputes which proceed through to litigation and the quantum of adjustments in earlier years.

2.92 Tables 3 and 4 below set out the disputation statistics in relation to HWIs. The ATO has advised the IGT that owing to the transition of HWI case management legacy systems to Siebel in 2011–12, it was unable to provide much of the data prior to this year.

Table 3: Quantity of HWI compliance activities and disputes
    2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Average
Compliance activities Total number 465 964 882 717 779 798 859 5,464 780.6
Number resulting in adjustments 26 70 62 103 126 134 211 732 104.6
Percentage resulting in adjustments 5.6 7.3 7.0 14.4 16.2 16.8 24.6 13.4  
Objection stage Total cases finalised   34   199 96 94 277 700 140
Number of decisions issued 24 20 22 141 77 52 193 529 76
Number of ATO decisions varied 13 2 19 86 48 31 145 344 49
Percentage of ATO decisions varied 54.2 10.0 86.4 61.0 62.3 59.6 75.1 65.0  
Number ATO decisions upheld 11 18 3 55 29 21 48 185 26
Percentage of ATO decisions upheld 45.8 90.0 13.6 39.0 37.7 40.4 24.9 35.0  
AAT stage Total appeals lodged 3 0 1 3 3 9 1 20 3
Number of appeals withdrawn by taxpayer 1 0 0 0 1 1 0 3 0.4
Number of ATO decisions varied 0 0 1 3 2 8 1 15 2
Percentage of ATO decisions varied 33.3 0.0 100.0 100.0 66.7 88.9 100.0 75.0  
Number of ATO decisions upheld 2 0 0 0 0 0 0 2 0.3
Percentage of ATO decisions upheld 66.7 0.0 0.0 0.0 0.0 0.0 0.0 10  
Federal Court Total appeals lodged 0 0 9 5 1 3 5 23 3
Number of appeals withdrawn by taxpayer 0 0 0 0 0 1 0 1 0.1
Number of ATO decisions varied 0 0 9 5 0 1 3 18 3
Percentage of ATO decisions varied 0.0 0.0 100.0 100.0 0.0 33.3 60.0 78.3  
Number of ATO decisions upheld 0 0 0 0 1 1 2 4 0.6
Percentage of ATO decisions upheld 0 0 0 0 100.0 33.3 40.0 17.4  

Data source: Australian Taxation Office

Note 1: Values have been rounded to the nearest whole number unless the number is less than 1. Percentages have been rounded to one decimal place.

Note 2: Compliance activities are counted on an activity basis (e.g., if three activities are undertaken in relation to one taxpayer return then three will be counted).

Note 3: Objections cases are counted on a correspondence basis (e.g., if a taxpayer lodges three separate objections for three years of returns, this will count as three objections). Objections data for 2007-08 and 2009-10 was taken from information provided to the IGT during his 2011 SME/HWI review. The number of cases varied in those years is the balance of objection decisions which did not uphold the audit decision. The difference between 'total cases finalised' and 'number of decisions issued' is due to objections being determined invalid, no further action was required, were withdrawn or were otherwise settled.

Note 4: The ATO has advised that the 277 objection cases finalised in 2013-14 were as a result of a project to clear to aged cases. These included 217 objection matters received in earlier years.

Note 5: Litigation cases are counted by the number of applications received and outcomes on that application. If a taxpayer lodges multiple applications, each will count as a litigation case. Data for 2007-08 and 2008-09 only includes case numbers where the source data identified or indicated whether the matter was filed in the AAT or the Federal Court. Litigation cases in the Federal Court include matters in the Full Federal Court.

Note 6: Due to different case counting rules at each stage of the process, these numbers are not directly reconcilable.

Note 7: 'Varied' during the objections stage includes cases allowed in full or in part. 'Varied' in the AAT and Federal Court stages include cases determined fully or partially in the taxpayer's favour, those resolved prior to hearing (such as by settlement) or those conceded by the ATO.

Note 8: 'Upheld' during the objections stage includes cases which were disallowed. 'Upheld' in the AAT or the Federal Court stages include cases decided in the ATO's favour or those which were withdrawn by the taxpayer.

2.93 Over the past seven year period, the ATO has reported that a total of 5,464 compliance activities were completed (averaging 780.6 per year) with 732 of these resulting in adjustments. The level of adjustment (13.4 per cent) is low when considered against total compliance activities. The data shows that the level of adjustments has steadily increased over the past seven years, with the most recent year reporting an adjustment rate of 24.6 per cent. As with the large business statistics in Table 1, the ATO has advised that the numbers of reported compliance activities include lower level verification actions which are not designed to lead to an adjustment.

2.94 Over the same period, the ATO's data showed that 529 objection decisions were issued with 65 per cent of these resulting in the original ATO audit decision being varied (that is, allowed in full or in part). In all years except 2008–09, the proportion of objection cases resulting in variance exceeded 50 per cent.

2.95 The ATO has advised that its case management system does not separately classify HWI taxpayers in litigation cases. The IGT review team worked with the ATO to identify other sources of information from which litigation statistics may be extracted, including from information previously provided to the IGT in the 2011 SME/HWI review. Owing to the ATO's reporting limitations, the data in Table 3 should only be taken to be an indication of the litigation levels concerning HWIs.

2.96 Over the seven year period, the data shows that 20 matters were finalised in the AAT, with 15 resulting in the ATO's decision being varied (75 per cent), two in which the ATO's decision was upheld (10 per cent) and three others which were withdrawn (15 per cent). Similar outcomes were observed in the Federal Court with a total of 23 matters finalised, 18 cases in which the ATO's decision was varied

(78.3 per cent), four where it was upheld (17.4 per cent) and one which was withdrawn (4.3 per cent).

2.97 Owing to the limited nature of the data provided by the ATO and the small sample size, the IGT is unable to draw any meaningful statistical conclusions in this regard. However, the IGT notes that the low levels of litigation cases are indicative of stakeholder comments that HWIs are more likely to settle than litigate.

Table 4: Quantum of revenue in HWI compliance activities and disputes
    2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Total Average
Compliance activities Amounts raised from compliance activities $(M) $340 $525 $363 $839 $888 $1,091 $995 $5,041 $720
Objection stage Amounts disputed $(M) ATO data not available $270 $186 $726 $1,182 $394
Amounts allowed in part or full $(M) $250 $25 $313 $588 $196
Percentage of amounts allowed in part or full 92.6 13.4 43.1 49.7  
AAT stage Amounts disputed $(M) Data not available as the ATO does not separately report on HWI appeals to the AAT
Amounts varied $(M)
Federal Court Amounts disputed $(M) Data not available as the ATO does not separately report on HWI appeals to the Federal Court
Amounts varied $(M)

Data source: Australian Taxation Office

Note 1: Values have been rounded to the nearest whole number. Percentages have been rounded to one decimal place.

2.98 While the quantity of compliance activity and adjustment in relation to HWIs may not be as high as for large business, the levels of revenue involved are nonetheless significant. Over the past seven years, the ATO reports that a total of $5.041 billion was raised (averaging $720 million per year). Liabilities raised in respect of HWIs have steadily increased between the 2007–08 and the 2012–13 years with the exception of the 2009–10 and 2013–14 financial years.

2.99 Table 4 also sets out the level of disputed amounts in objections totalling $1.182 billion over a three year period from 2011–12 to 2013–14 with 49.7 per cent of that amount, or $588 million, reversed.

2.100 As with Table 3, the ATO has been unable to provide the quantum of liability in dispute during litigation because its systems do not separately classify HWI litigation cases.

International approaches

2.101 In line with the Committee's terms of reference and to provide a broader basis for comparing the ATO's dispute resolution approach, the IGT has considered the tax disputes processes currently in operation in a number of other jurisdictions. In doing so, the IGT review team undertook research into a number of regimes of comparable Organisation for Economic Cooperation and Development (OECD) countries. These countries are the United States (US), the United Kingdom (UK), Canada, New Zealand and the Republic of Ireland all of which have legal systems which have evolved from English common law.

2.102 The IGT review team engaged directly with the above revenue authorities (as well as in some cases external stakeholders) to obtain a further understanding of their tax disputes management processes in practice.

United States of America

2.103 The principal national revenue authority in the US is the Internal Revenue Service (IRS). Disputes may arise between the IRS and taxpayers following completion of an audit (known as 'examinations') and any resulting proposed amendments to the taxpayer's liability (known as 'adjustments').

2.104 Generally, where the IRS proposes to make an adjustment, the IRS issues the taxpayer with a '30-day letter' package which includes an explanation of the proposed adjustments and a notification that the taxpayer has the right to appeal the proposed changes within 30 days.90

2.105 Taxpayers who disagree with the adjustments may refer their matter to the IRS Office of Appeals for internal review. If the taxpayer does not respond to the 30-day letter, or if the taxpayer could not reach agreement with the Office of Appeals, the taxpayer is issued with a 'Statutory Notice of Deficiency'.91 The taxpayer has 90 days in which to file a petition with the US Tax Court to challenge the deficiency.92 Taxpayers may seek assistance from the Office of Appeals after the petition has been filed if the latter has not previously reviewed the case, i.e. after the 30-day letter. If the taxpayer does not file the petition within the required timeframe, the deficiency is assessed and subsequently becomes a legal liability.93 A diagrammatic representation of the appeals process employed by the IRS is contained in Appendix 3.

2.106 The Office of Appeals is an 'independent organisation' within the IRS whose mission is to 'help taxpayers and the government resolve tax disagreements' without litigation.94 The Office was established administratively in 1927 and was codified by the Internal Revenue Service Restructuring and Reform Act of 1998 (IRS Reform Act). It is headed by the Chief of Appeals who reports directly to the IRS Commissioner. The fact that the head of Appeals reports directly to the Commissioner is considered important to uphold the independence of the Office of Appeals. It should also be noted that employees of the Office of Appeals generally work in office space that is physically separate from the rest of the IRS.

2.107 In order to preserve the independence of appeals officers, the IRS Reform Act requires the IRS to implement measures to generally prohibit ex parte communication between the appeals officer and other IRS officers 'to the extent that such communications appear to compromise the independence of the appeals officers'.95

2.108 IRS procedure, therefore, prohibits certain communications between appeals officers and officers from originating functions,96 such as the examination or compliance function, unless the appeals officer provides an opportunity for the taxpayer to participate in the communication. If the taxpayer chooses not to participate, the communication between the appeals officer and the other IRS officer is no longer prohibited.97

2.109 The IRS also has a Chief Counsel who is the legal adviser to the IRS Commissioner and all IRS officers 'on all matters pertaining to the interpretation, administration and enforcement of the internal revenue laws and related statutes'.98 The Chief Counsel is appointed by the President of the United States with the advice and consent of the U.S. Senate and reports directly to the IRS Commissioner for certain matters and directly to the General Counsel of the Treasury on other matters.99

2.110 The Office of Appeals has some specialised tax expertise including in areas such as transfer pricing. Appeals officers are generally permitted, but are not required, to obtain legal advice from attorneys within the Office of Chief Counsel. Appeals officers cannot communicate ex parte with attorneys in the Office of Chief Counsel, who have previously provided legal advice to the originating function regarding the same issue in the same case. In such circumstances, an attorney, who has not previously given such advice, would be appointed or the appeals officer must provide the taxpayer with opportunity to participate in the communication.100

2.111 Appeals officers are not bound by the legal advice they receive from the Office of Chief Counsel:

Appeals [officers] independently evaluate the strengths and weaknesses of the specific issues in the cases assigned to them and make an independent judgment concerning the overall strengths and weaknesses of the cases they are reviewing and the hazards of litigation. Legal advice is but one factor that Appeals will take into account in its consideration of the case.101

2.112 As the Office of Appeals is the only administrative function of the IRS with authority to consider settlements of tax controversies, it has 'the primary responsibility to resolve these disputes without litigation to the maximum extent possible.'102

2.113 Notwithstanding the prohibition against certain ex parte communications, there are no legislative remedies or sanctions for breaches of this rule. Where a breach has occurred, however, the IRS does require the Office of Appeals to 'cure' the breach by promptly notifying the taxpayer of the communication, sharing the contents of the communication and affording the taxpayer an opportunity to respond. In some instances, the case may be assigned to another appeals officer.103 Nevertheless, some practitioners in the US have noted that the absence of enforceable remedies for ex parte breaches within either administrative procedures or legislation 'presents another challenge to the perception of Appeals' independence.'104

2.114 Breaches of the ex parte rule also require the appeals officer who received the prohibited communication to notify their manager, who in turn notifies the manager of the employee who breached the rule.105

2.115 Where a case proceeds to litigation, appeals officers are no longer responsible for the case, as the matter is then handled by either the IRS Chief Counsel or the Department of Justice, depending on the judicial forum elected by the taxpayer.

2.116 The IRS, through the Office of Appeals, also administers 'fast track' settlement procedures for a range of taxpayer markets. These are ADR processes which may take place at the request of the taxpayer if the taxpayer and the compliance division (such as 'LB&I') have exhausted their own internal dispute resolution mechanisms.

2.117 In a fast track process, the Appeals Team Case Leader and appeals officers take part in the ADR process, but not in their traditional 'appeals' role. As a result, the ex parte rule does not apply during a fast track process. Taxpayers who take part in the fast track process still retain their right to appeal to the Office of Appeals should the process not result in a resolution.106

2.118 Despite the extent of the independence of the Office of Appeals from the rest of the IRS, some stakeholders would like such independence to be further bolstered. For example, concerns have been raised that many appeals officers have been promoted from the examination function and there may be a risk that these appeals officers would still have an examination mindset.107

2.119 Particular concerns have also been raised with respect to so-called campuses which deal with high volume, low value matters. The appeals officers in campuses may be recruited from within the campuses themselves. It has been argued that these officers needed to make the transition from 'processing and production to independent thinking and discretionary judgment [which] requires a concentrated effort and focused strategy.'108

2.120 Importantly, the Office of Appeals conducts training and supervision of its junior officers to mitigate the above risks.

2.121 Recently, the Office of Appeals has been implementing the Appeals Judicial Approach and Culture (AJAC) project. The project emphasises the 'quasi-judicial approach so that Appeals hearing officers can focus on their core mission' as well as 'fair and impartial decision making free from influence.'109 As part of the AJAC project, IRS procedures have been modified to emphasise the following features of the appeals system:

  • Appeals will not raise new issues nor reopen any issues on which the taxpayer and IRS are in agreement;110
  • 'The Appeals process is not a continuation or an extension of the examination process';111
  • Appeals should receive cases from the examination function that are fully developed and documented, such that Appeals will not refer the case back to the examination function for further development, but will attempt to settle the case as submitted taking into account factual hazards;112 and
  • where the taxpayer raises new issues, information, or evidence, Appeals will forward these to the examination function for their consideration.113

New Zealand

2.122 The national revenue authority in New Zealand is the Inland Revenue Department (IRD). Taxpayers and the IRD must follow procedures set out in Part IVA of the Tax Administration Act 1994 (NZ) where either party proposes to amend the taxpayer's assessment. The IRD cannot amend a taxpayer's assessment without commencing these procedures.

2.123 Whilst there are technically two processes (depending on whether the IRD or the taxpayer seeks to amend the assessment), in practice, the process is largely the same. For ease of discussion, the process set out below is from the perspective of the IRD seeking to amend a taxpayer's assessment.

2.124 Where the investigator wishes to amend the taxpayer's assessment, the investigator must issue a Notice of Proposed Adjustment (NOPA) to the taxpayer, setting out the proposed adjustment as compared to the taxpayer's original position.

2.125 If the taxpayer disagrees with the NOPA, the taxpayer must reject the proposed adjustment by issuing a Notice of Response (NOR) to the IRD. Once the NOR is issued, a conference between the parties is usually scheduled although it is not a legislative requirement. The conference may be facilitated and managed by a 'senior IRD staff member with no prior involvement with the dispute'. The facilitator is not a decision maker, but rather seeks to assist the parties to reach their own resolution on all or some of the issues between them. There have been some calls for this role to be an accredited mediator that is independent of the IRD.114

2.126 Where a resolution is not reached, the IRD will issue the taxpayer with a Disclosure Notice, accompanied by a Statement of Position (SOP). The taxpayer must also issue the IRD with its own SOP. The IRD may reply to a taxpayer's SOP in certain circumstances,115 or otherwise either SOP may be added to by agreement with the other party.116 The SOP is a key document as the taxpayer and the IRD are thereafter limited to the issues and propositions of law contained in the SOPs when challenging the decision through external review.117

2.127 Where the matter remains unresolved, it is referred to the Disputes Review Unit (DRU) which aims to provide an impartial and objective review of unresolved disputes. The DRU was previously known as the Adjudication Unit and is part of the Office of the Chief Tax Counsel. The Chief Tax Counsel reports directly to the IRD Commissioner.

2.128 The Office of the Chief Tax Counsel is also a key IRD source of technical advice to both taxpayers, through its various rulings units and internally, through its Escalations and Advising Unit.118 When capacity allows, DRU staff may be deployed to assist with issuing rulings or other work within the Office of Chief Tax Counsel.

2.129 The independence of the DRU from the IRD's compliance areas is enforced through regulated communication protocols. As a general approach, neither the taxpayer nor the original decision maker has direct access to the DRU officer considering the matter. For example, if a member of the DRU team requires clarification of some matter concerning the dispute, all communications must be in writing and a copy of the letter needs to be sent to the other party to the dispute. Such communication is undertaken through the Senior Technical Liaison Officer, who is also part of the Office of Chief Tax Counsel. This reinforces independence and impartiality of the DRU.

2.130 The DRU's role is to make a decision as to whether the proposed adjustments should be made. This is based on the better view of the law and what it is considered a court would decide, rather than being based on any revenue-protective position. The decision is based on the information provided in the NOPA, NOR and each parties' SOPs. The DRU does not perform a mediation or arbitration function. It considers the dispute based on the materials provided and does not conduct further investigation into the matter.

2.131 Each dispute is considered by a team of three people who all have professional legal and/or accounting qualifications and experience in researching and analysing tax issues. The team members have differing levels of seniority and involvement in the consideration of the dispute. The final adjudication decision is made by a Disputes Review Manager.119

2.132 A comprehensive adjudication report is produced and provided to the parties. In addition to providing the adjudication decision and the reasons for that decision, the report also sets out the facts of the dispute, the issues that need to be addressed, the analysis of the legal issues involved, the application of that legal analysis to the facts of the dispute and the conclusions reached on each issue.

2.133 In the event the DRU decides in favour of the taxpayer, the IRD is bound by the DRU decision and the compliance area cannot appeal the matter further. However, where the DRU has found in favour of the IRD, the adjusted assessment will be issued by the compliance area staff involved in the dispute. The taxpayer may dispute the assessment by applying to challenge the decision in the Taxation Review Authority (TRA) or to the High Court within two months of the assessment.120 Taxpayers may also appeal to the High Court from an adverse decision of the TRA on a question of law.121

2.134 As will be discussed later in this report, a protocol exists between the IRD and the Solicitor-General of New Zealand whereby the Solicitor-General, with the assistance of the Tax and Commercial Team in Crown Law oversees all IRD litigation. However, in practice, the IRD is often represented at litigation by its own officers from the Litigation Management Unit except in more complex matters.

2.135 It is important to note that whilst New Zealand has a structured legislative pre-assessment process for resolving disputes, there is a statutory option for the IRD and the taxpayer to agree in writing to truncate the full process and to apply for external review directly to the TRA or the High Court.122 The IRD's policy is to agree to a taxpayer's request to opt-out after the NOPA, NOR and conference phases in certain cases, effectively empowering taxpayers to unilaterally elect to proceed directly to external review.123 However, elections to proceed directly to external review have been rare.

United Kingdom

2.136 Tax disputes between taxpayers and the UK's national revenue authority, Her Majesty's Revenue and Customs (HMRC), have undergone significant changes since 2009 following the reform of the civil tribunal system and the introduction of a statutory right of internal review for certain tax decisions.

2.137 Following the reform of tribunals in the UK, taxpayers dissatisfied with certain HMRC decisions, such as those that amend a taxpayer's self assessment,124 may appeal directly to an external review body.125 These external review bodies include the Tax Chamber of the First-tier Tribunal which is an administrative tribunal that can review HMRC decisions on its merits. Decisions of the First-tier Tribunal may be appealed to the Upper Tribunal on a point of law. Further appeals may be made to the Court of Appeal with leave of the Upper Tribunal or the Court itself.126

2.138 Simple matters referred to the First-tier Tribunal are often dealt with 'on the papers' meaning they do not require a hearing or appearances on behalf of either the taxpayer or HMRC. More complex matters or those which progress through to the Upper Tribunal and other appeal courts are managed through HMRC's Solicitor's Office and Counsel is generally briefed to appear for the revenue.

2.139 In addition to this direct right to appeal externally, taxpayers also have the right to request HMRC to first have the matter internally reviewed. Upon request of the review, HMRC is obliged to review the matter.127 This is known as a statutory review. It is HMRC's experience that the statutory review process is used most typically by self-represented individual taxpayers.

2.140 Statutory reviews are carried out by review officers, who are, in most cases, outside the 'direct line management chain of the decision maker and [were] not involved in making the decision'.128 Review officers are members of dedicated teams which are separate from original decision makers. They are, however, generally located in the same compliance business units, for example, Local Compliance, and are ultimately managed by the same Director-General who reports to the Chief Executive.

2.141 Taxpayers who are dissatisfied with the internal review process may appeal their case further to the First-tier and Upper Tribunals.

2.142 HMRC has an internal scrutineer in the Tax Assurance Commissioner. The Tax Assurance Commissioner oversees the overall HMRC dispute resolution process, providing assurance that disputes with taxpayers are resolved in a way that is consistent with the published HMRC Litigation and Settlement Strategy.129

2.143 The Tax Assurance Commissioner, along with two other Commissioners, is directly involved in decisions on resolving disputes for the most sensitive cases or where the potential tax at stake in the case is over £100 million. These decisions are considered after receiving recommendations from the Tax Disputes Review Board, which is an internal board composed of senior officers across HMRC.

2.144 Whilst the Tax Assurance Commissioner (who is also the Second Permanent Secretary for Tax) reports directly to the head of HMRC (being the Chief Executive and Permanent Secretary), he also reports publicly through his Annual Report on how HMRC resolves tax disputes. This includes summary details of the decisions taken by the Commissioners and other tax dispute resolution boards, together with details of the outcomes of statutory reviews and appeals to the tribunal.130


2.145 The principal national revenue authority in Canada is the Canada Revenue Agency (CRA). Disputes between taxpayers and the CRA follow a similar path to that in Australia.

2.146 Canada has a self assessment system where taxpayers self-assess their tax liabilities and lodge returns with the CRA. Taxpayer returns are examined by the CRA's Assessment and Benefit Services Branch (ABSB) to identify any clerical or administrative errors, whereupon an adjustment may be made as a result of those errors. The assessment made by the ABSB gives rise to a right for the taxpayer to lodge a notice of objection with the Appeals Branch for review as to whether or not the assessment accepts the taxpayer's filing position.

2.147 Taxpayers may also be subject to an audit undertaken by the Compliance Programs Branch (CPB).131 During the course of the audit, taxpayers are encouraged to engage directly with audit officers to resolve any disagreements or disputes prior to the assessment being issued. Where an impasse is reached between the taxpayer and audit officer, matters may be escalated through the CRA's CPB and/or Legislative Policy and Regulatory Affairs Branch at headquarters in Ottawa.

2.148 Ultimately, it is the relevant regional office of the CRA (known as a tax services office) that issues an assessment (or re-assessment) notice accordingly. If the taxpayer disagrees with the re-assessment, they may lodge a notice of objection with the Appeals Branch which then allocates an officer to impartially review the issue and render a decision on the taxpayer's objection. The taxpayer may object to all matters within the return, not only those which were the subject of assessment/reassessment.

2.149 The ABSB, the CPB and Appeals Branch are separate and independent branches of the CRA, each headed by an Assistant Commissioner who reports directly to the Commissioner of Revenue, being the Chief Executive Officer of the CRA.

2.150 The relationship between the CPB and the Appeals Branch is governed by a protocol which clarifies the roles of the appeals officer and the auditor and aims to offer taxpayers a fair and impartial review of disputed assessments.132 The protocol emphasises that:

An appeals officer handling an objection has complete decisional independence relative to the recommendation to confirm, vacate, or vary the assessment. Appeals officers will keep taxpayers informed of any discussion with auditors in the course of resolving the objection to ensure that the process is fair, open, and transparent. (original emphasis).133

2.151 The protocol does not prohibit ex parte communication between the appeals officer and the auditor. It does, however, require the appeals officer to advise the taxpayer that such discussions have taken place and to provide copies of records of these discussions.

2.152 Where the taxpayer provides additional information not produced at the time of the audit, the appeals officer may request the auditor to consider this information and advise the appeals officer in writing of their reconsideration of the material. The appeals officer then in turn will make a decision.134

2.153 Where the appeals decision is in favour of the taxpayer, the decision is final. Where the decision is not favourable to the taxpayer, the taxpayer has the option to appeal to the Tax Court of Canada. Judgments of the Tax Court of Canada may be appealed to the Federal Court of Appeal and up to the Supreme Court if required.135

2.154 Legal services are provided by the Tax Laws Services (TLS) Portfolio of the Department of Justice.136 The TLS is led by an Assistant Deputy Attorney-General, who together with its staff, are employees of the Department of Justice who are allocated to the CRA.137 The TLS Portfolio provides two separate services to the CRA: legal advice and litigation, on a cost-recovery basis wherein the TLS issues a bill to the CRA for services rendered.

Republic of Ireland

2.155 The Revenue Commissioners (RC) is the national revenue authority in the Republic of Ireland responsible for the administration of Irish taxes and customs matters.

2.156 The RC has a number of administrative dispute resolution mechanisms which seek to resolve issues arising in its interaction with taxpayers. These procedures can operate in relation to any disputed issue covered by the procedures. There is also a statutory right of appeal to independent Appeal Commissioners and the Courts in relation to a number of issues including disputed tax assessments and claims for exemptions and reliefs.

2.157 The RC encourages taxpayers at first instance to engage directly with the officer handling their case to resolve any disputes which may arise. The RC considers this to be part of its day-to-day engagement with taxpayers and expects that most issues will be resolved during this process.138

2.158 Where issues cannot be resolved through day-to-day engagement, taxpayers may lodge a complaint with their local Revenue Office. The RC's procedures provide that where a taxpayer seeks to speak with a manager, they should be able to do so without delay.139

2.159 If the issue cannot be resolved through the complaints process, taxpayers may avail themselves of the review procedure which comprises two stages.

  • local review; and
  • internal review or external review.140

2.160 Local reviews are usually conducted by the relevant Local District Manager. However, the RC recognises there may be instances in which the taxpayer may not want to raise their concerns with the Local Revenue Office. In these circumstances, they may request that their local review be carried out by the Principal Officer in the Regional or Divisional Office.141

2.161 If the taxpayer remains dissatisfied after the local review has been completed, they can request an internal review or an external review but not both. When either is requested, the matter is referred to the Review Secretariat. This Secretariat is responsible for acknowledging the request, checking that a local review has been completed, assigning the case to a reviewer, co-ordinating the documentation for the reviewer and communicating directly with the taxpayer on behalf of the reviewer.142

2.162 Internal Review is undertaken by a reviewer chosen from a panel of senior Revenue officials at Principal Officer Level. They cannot have had any operational or management function in the original decision.143 External reviewers are chosen from an external panel of qualified experts with a minimum of 10 years relevant experience in law, accountancy and/or related academic fields. External reviewers are selected from an open competition which is not open to existing civil servants.144

2.163 Where a taxpayer submits additional information, the Review Secretariat will decide if the material warrants consideration. If so, the case will be referred back to the Local Reviewer, before referral for internal or external review.

2.164 Internal and external reviewers complete their review 'on the papers', in that reviewers usually have no direct contact with taxpayers or the original decision maker when reviewing the matter.

2.165 Local, internal or external reviewers may overturn an original decision generally on the basis of findings of fact. Where the dispute is in relation to the interpretation of a legislative provision, reviewers generally do not challenge the original decision maker's interpretation unless it is clearly wrong. The role of adjudicating on points of law lies with the Appeal Commissioners and the Courts.145

2.166 The RC is bound by the decision of its reviewers (local, internal or external) except in circumstances where the 'Revenue Board is of the view that the decision of the reviewers is not in accordance with the relevant legislation.'146

2.167 Separately from the RC review procedures, the taxpayer has a statutory right of appeal against the RC's assessments. The taxpayer has thirty days to appeal an assessment to the Appeal Commissioners, who are appointed by law and are external and independent of the RC. Taxpayers may still engage with the RC notwithstanding the lodgement of an appeal. It is open for the taxpayer and the RC to reach a settlement of an appeal prior to an appeal hearing by the Appeal Commissioners or the Courts.

2.168 An appeal by the taxpayer is made to the Appeal Commissioners, but currently this is done by notice in writing to the appropriate Revenue officer rather than to the Appeal Commissioners directly. Revenue officers process these appeal applications and may form an opinion that the taxpayer is not entitled to make an appeal to the Appeal Commissioners and refuse the application. Taxpayers can appeal such refusals directly to the Appeal Commissioners.147

2.169 The Appeal Commissioners are considered a Tribunal,148 but it is not a tribunal of record.149 Generally, appeals are heard in private. Appeal Commissioners decisions are 'based on findings of fact made from the evidence presented and interpretation of taxation law'.150

2.170 Appeal Commissioners are not members of the judiciary and only a small fraction of the cases decided have been published. Taxpayers may appeal decisions of the Appeal Commissioners to the Circuit Court for a full rehearing, where the Circuit Court exercises the same powers as the Appeal Commissioners,151 or directly to the High Court on a point of law.152 The RC may only further appeal a decision of the Appeal Commissioners to the High Court on a point of law, except in relation to Capital Acquisitions Tax appeals for which a rehearing request is available to the RC.153

2.171 In litigation before the Appeal Commissioners, the RC is usually represented by the relevant officers who were responsible for the original decision. However, where matters involve significant issues or proceed to the Circuit Court or High Court, the Appeals Committee within the RC will ordinarily approve the engagement of Counsel to represent the RC.

2.172 The position as outlined above in relation to appeals is currently under review. The Irish Government, following a public consultation process, is presently considering legislative reforms to the tax appeals system. Among the reforms under consideration is one from the RC to eliminate the Circuit Court stage and have appeals from Appeal Commissioners' decisions made direct to the High Court on a point of law.154 This proposal arises from concerns raised by the RC that the option for a rehearing of an entire case, including findings of fact, by the Circuit Court creates incentives for taxpayers to not fully engage with the Appeal Commissioners process as well as contributing to delay in finalising appeals.155

6 Australian Taxation Office (ATO), Working for all Australians 1910–2010 (2010).

7 Ibid.

8 Administrative Review Council (ARC), Review of Taxation Decisions by Boards of Review (1983) p 8.

9 Wayne Gumley, 'The Taxation Appeals System: An Administrative Law Perspective' (Working Paper, No 96/5, Monash University, Syme Department of Banking and Finance, October 1996) p 17.

10 Above n 6.

11 Joint Committee on Public Accounts (JCPA), Parliament of Australia, Report No. 326 An Assessment of Tax, A Report on an Inquiry into the Australian Taxation Office (1993) pp 32 and 266.

12 Ibid p 23. The AAT was already in existence from 1976 but did not have jurisdiction over taxation decisions until 1986.

13 Jurisdiction of Courts (Miscellaneous Amendments) Act 1987.

14 Administrative Appeals Tribunal Act 1975 s 43(1).

15 Administrative Appeals Tribunal Act 1975 s 44(1).

16 Waterford v The Commonwealth of Australia (1987) 163 CLR 54 at 57.

17 Above n 11, p 270.

18 Commonwealth Administrative Review Committee Report (Chair JR Kerr) Parl Paper No 144 of 1971; Final Report of the Committee on Administrative Discretions (Chair Henry Bland) 1973. These reviews into administrative decision making highlighted both the need for Government departments to strengthen their internal review processes and for reform to the system of external administrative review of government decisions.

19 Bernard Marks, Submission 26 to the House of Representatives Standing Committee on Tax and Revenue, Inquiry into Tax Disputes (12 August 2014) p 6.

20 Above n 11, p 271.

21 Ibid.

22 JCPA, Parliament of the Commonwealth of Australia, Report 344 – A Continuing Focus on Accountability – Review of the Auditor-General's Reports 1993-94 and 1994-95 (1996) p 12.

23 Above n 6. See also: Michael D'Ascenzo, 'Current status of tax in Australia and the directions of the Australian Taxation Office towards 2000' (Speech presented to the Brisbane and Regional Winter Tax Schools, 10 May 1996).

24 ATO, 'ATOextra' (internal ATO document, 5 July 1999) p 11.

25 ATO, 'Law Design and Practice Plan 2014-15' (internal ATO document, undated) p 4.

26 ATO, 'Guidelines on the Audit, Objection and Litigation end to end process in PGH' (Internal ATO document, 13 January 2014). See also: ATO, 'Engaging Tax Technical Expertise (PG&I)' (Internal ATO document, 28 March 2014).

27 Above n 24.

28 Ibid, p 10.

29 ATO, 'ATOextra' (internal ATO document, 20 September 1999) p 25.

30 Inspector-General of Taxation (IGT), Review of Tax Office management of Part IVC litigation (2006) p 51.

31 Review of Business Taxation (J T Ralph, chairperson), The Treasury (Cth), A Strong Foundation: Discussion Paper: Establishing Objectives, Principles and Processes (AGPS, 1999) p 122.

32 Ibid, p 148.

33 IGT, Tax Forum – next steps for Australia, A submission to the Tax Forum (September 2011).

34 Australian Government, Australia's future tax system, Report to the Treasurer (December 2009) recommendation 115.

35 Taxation Administration Act 1953 s 4. Section 4 limits the current number of Second Commissioners to three.

36 Above n 33, p 17.

37 IGT, Report into the Australian Taxation Office's large business risk review and audit policies, procedures and practices (2011).

38 IGT, Review into the ATO's compliance approaches to small and medium enterprises with annual turnovers between $100 million and $250 million and high wealth individuals (2012).

39 IGT, Review into the Underlying Causes and the Management of Objections to Tax Office Decisions (2009).

40 IGT, Review into Aspects of the Tax Office's Settlement of Active Compliance Activities (2009).

41 Above n 30.

42 IGT, Review into the Australian Taxation Office's use of early and Alternative Dispute Resolution (2012).

43 Above n 37, p vii.

44 Ibid, p 45.

45 Above n 38, p 1.

46 Above n 42, pp v-vi.

47 Australian Public Service Commission (APSC), Capability Review Australian Taxation Office (2013).

48 Ibid, p 7.

49 Joe Hockey MP, 'Address to the National Press Club' (Speech delivered to the National Press Club, Sydney 22 May 2013).

50 Ibid.

51 Australian National Audit Office, Managing Compliance of High Wealth Individuals (2014) p 16.

52 Ibid, p 17.

53 Ibid, p 18.

54 Ibid.

55 Ibid, pp 18-19.

56 ATO, 'ATO organisational and senior executive structure' (1 December 2014) .

57 Above n 25, p 5.

58 Chris Jordan, 'The ATO and large business' (speech delivered to the Corporate Tax Association annual convention, 3 June 2014) .

59 ATO, 'PG&I Disputes Prevention and Resolution Plan' (Internal ATO document, 1 July 2014) p 2.

60 Ibid.

61 Above n 37, recommendation 9.3.

62 Chris Jordan, 'Tax, the way ahead' (Speech delivered at Tax Institute 28th Annual Convention, Perth, 14 March 2013).

63 ATO, 'Large Business Liaison Group minutes' (12 August 2013) .

64 ATO, 'Large Business Amendments and Objections – Early Engagement' (5 February 2014) <www.ato.gov.au&gt;.

65 ATO, 'Large Business Amendments and Objections' (4 July 2014) .

66 ATO, 'Independent Review of Large Business and International Statement of Audit Position'

(3 December 2014) .

67 Ibid.

68 This would include small businesses and high wealth individuals.

69 Taxation Administration Act 1953 ss 14ZY and 14ZYA.

70 Taxation Administration Act 1953 sub-s 14ZYA(3).

71 ATO, 'Working Together and Sharing Knowledge' (Internal ATO document, 29 October 2014).

72 ATO, 'Independence' (Internal ATO document, 30 October 2014).

73 Above n 71.

74 Above n 72.

75 Commonwealth, Parliamentary Debates, House of Representatives Standing Committee on Tax and Revenue (26 November 2014) p 12.

76 ATO, Conduct of ATO litigation and engagement of ATO Dispute Resolution, PS LA 2009/9, 20 November 2009, para [29].

77 ATO, Precedential ATO view, PS LA 2003/3, 23 April 2014.

78 Taxation Administration Act 1953 ss 14ZZK and 14ZZO.

79 ATO, Settlements (PS LA 2007/5) (Withdrawn 15 October 2014) para [5].

80 Ibid, para [18].

81 ATO, 'Code of Settlement' (15 October 2014) ; ATO, 'A Practical Guide to the ATO Code of Settlement' (15 October 2014) .

82 ATO, Code of Settlement, PS LA 2015/1, 15 January 2015.

83 All Senior Executive Service (SES) officers have the delegation to settle tax and superannuation disputes. See ATO, 'A Practical Guide to the ATO Code of Settlement' (15 October 2014) .

84 ATO, 'Tier 3 project closure report L&P 09-01 Settlements Improvement' (Internal ATO Document, July 2009) p 12.

85 Above n 38, p 67; See also: IGT, Review into the ATO's administration of penalties (2014) p 58.

86 ATO, Annual Plan 2013–14 Program Structure and Activity Definitions Appendix (2014) pp 9, 10-12.

87 Includes client risk reviews, pre-lodgment compliance reviews, specific reviews, transfer pricing record reviews and research & development reviews.

88 Includes large business audits, specific issue audits, transfer pricing audits and research & development audits.

89 Above n 4, p 73.

90 Internal Revenue Service (IRS), Publication 556: Examination of Returns, Appeal Rights, and Claims for Refund (September 2013) p 5.

91 Above n 90.

92 The petition filing fee for the United States Tax Court is USD $60 .

93 United States Internal Revenue Code 26 U.S.C. § 6213(c).

94 IRS, Office of Appeals, 'About the Appeals Office' (6 November 2014) .

95 Internal Revenue Service Restructuring and Reform Act of 1998 s 1001 (a) (4).

96 Originating functions are those that make determinations that are subject to Appeals process, such as the Examination function.

97 IRS, 'Internal Revenue Manual' IRM

98 Ibid, IRM

99 Ibid, IRM

100 Above n 97, IRM

101 Ibid, IRM

102 Ibid, IRM

103 Ibid, IRM

104 Gerald A. Kafka, Rita A. Cavanagh, and Sean M. Akins, 'Do IRS Appeals' Office Ex Parte Prohibitions Need Strengthening?' (30 March 2009) Tax Notes 1591, p 1598.

105 Above n 97, IRM

106 Above n 97, IRM

107 American Bar Association Section of Taxation, Survey Report on Independence of IRS Appeals (11 August 2007) p 33.

108 National Taxpayer Advocate (US) 2005 Annual Report to Congress (2005) p 150.

109 IRS, 'Appeals Independence Part 1: What Recent Policy Changes Mean for Examination-Sourced Cases' (Presentation to the 2014 IRS Nationwide Tax Forums, various locations, 1 July – 28 August 2014) p 5.

110 Above n 97, IRM

111 Ibid.

112 Ibid, IRM

113 Above n 97, IRM

114 Melinda Jone and Andrew Maples, 'Mediation as an Alternative Option in New Zealand's Tax Disputes Resolution Procedures: Refining a Proposed Regime' (2013) 19 NZJTLP 301, p 322.

115 Tax Administration Act 1994 (NZ) s 89M(8).

116 Tax Administration Act 1994 (NZ) s 89M(13).

117 The Taxation Review Authority or the High Court.

118 New Zealand Inland Revenue Department (IRD), 'About Us, Office of the Chief Tax Counsel' (7 December 2004) <www.ird.govt.nz>.

119 IRD, 'The Disputes Review Unit - its role in the dispute resolution process,' (12 August 2013) .

120 Taxation Review Authorities Act 1994 (NZ) s 25(2).

121 New Zealand Ministry of Justice, 'Taxation Review Authority - Hearing Process' (undated) .

122 Taxation Administration Act 1994 (NZ) sub-para 89N(1)(c)(viii).

123 IRD, SPS 11/06 Disputes resolution process commenced by a taxpayer (16 July 2013) paras [203]-[230]; IRD, SPS 11/05 Disputes resolution process commenced by the Commissioner of Inland Revenue (16 July 2013) paras [172]-[192].

124 Taxes Management Act 1970 (UK) s 49A; HM Revenue and Customs (HMRC), 'ARTG2160 - Reviews and appeals for direct taxes: Appealing against a decision: What decisions can be appealed against' (undated) .

125 HMRC, 'ARTG1010 - Introduction: Background' (undated) . Prior to 2009, taxpayers still had a right to appeal directly to an external review body, which were the General and Special Commissioners. These Commissioners were replaced by the tribunal system.

126 HM Courts and Tribunal Service, 'Appealing to the Upper Tribunal (Tax and Chancery Chamber)' (undated) pp 13-15.

127 HMRC, 'ARTG1030 - Introduction: Reviews of HMRC decisions' (undated) .

128 Ibid.

129 HMRC, 'Code of Governance for Resolving Tax Disputes', July 2014, p 4.

130 HMRC, How we resolve Tax Disputes: The Tax Assurance Commissioner's Annual Report 2013-14 (July 2014).

131 Office of the Auditor General of Canada, Report of the Auditor General of Canada to the House of Commons (November 2004) <http://www.oag-bvg.gc.ca/internet/docs/20041105ce.pdf >.

132 Canada Revenue Agency (CRA), Protocol Between the Compliance Programs Branch and the Appeals Branch of the Canada Revenue Agency (7 July 2005).

133 Ibid.

134 Ibid.

135 CRA, Resolving your dispute: Objection and appeal rights under the Income Tax Act (3 June 2014) <http://www.cra-arc.gc.ca>.

136 Canada Department of Justice, 'Tax Law Services Portfolio Office Audit' (July 2011) .

137 CRA, Annual Report to Parliament 2012-13 (2013) p 85.

138 Revenue Commissioners (RC), Revenue Complaint and Review Procedures (February 2013) p 3.

139 Ibid, p 5.

140 Ibid, p 3.

141 Above n 138, p 7.

142 Ibid, p 11.

143 Ibid.

144 Ibid, p 14.

145 Ibid, p 4.

146 Ibid, p 13.

147 Office of the Appeal Commissioners, 'Guide to the Functions and Records of the Office' (undated) .

148 Irish Tax Institute, 'The Irish Appeals System - The Rules and Procedures Governing Irish Tax Appeals' (March 2008) p 53.

149 Above n 147.

150 Ibid.

151 Taxes Consolidation Act 1997 (Ireland) s 942(3).

152 RC, Tax and Duty Appeals Manual (April 2014) p 54.

153 Ibid.

154 Michael Noonan, 'Reform of the Appeal System for Tax Matters' (Department of Finance, 16 October 2013).

155 RC, 'Submission to the Consultation on the Reform of the Appeal System for Tax Matters by the Office of the Revenue Commissioners' (undated) p 15.