Timeliness in resolving tax disputes (Feb 02) (WITHDRAWN)
Withdrawn INV-170-Timeliness in resolving tax disputes (Feb 02). Statement provided for historical purposes only.
This statement has been withdrawn and is provided for historical purposes only.
This Standard Practice Statement (SPS) establishes administrative practices and time lines that will assist in the timely progression of cases in dispute.
This SPS shall apply from 1 March 2002 to all cases in dispute.
The disputes resolution process aims to promote the prompt and efficient resolution of tax disputes. Taxpayers have a right to have their dispute go through the whole disputes resolution process. When it becomes evident that a case is likely to proceed to dispute a time line should be negotiated between the taxpayer and the Inland Revenue officer involved to ensure timely and efficient progression of the case.
While both Inland Revenue staff and taxpayers should endeavour to meet the agreed time lines, if it becomes apparent the negotiated time line cannot be achieved this will be discussed with the taxpayer with a view to agreeing a new time line.
Negotiating time lines for the timely resolution of disputes is an administrative practice encouraged by the Commissioner of Inland Revenue; failure to negotiate an agreed time line or adhere to the agreed time line will not prevent a case from progressing through the disputes resolution process.
In 1996, the disputes resolution process was introduced to ensure the effective and efficient resolution of tax disputes. The process requires the issues and evidence to be considered by the Commissioner and the disputant before proceedings commence in a court.
Fundamental to the effective progression of a case in dispute is a commitment by the parties involved to work through the process in a constructive manner and to a reasonable time line. This SPS sets out the steps the Commissioner will follow when a case enters the disputes resolution process. This includes both statutory requirements and administrative practices.
While the emphasis of the disputes resolution process is to obtain agreement, the SPS covers all the stages of the disputes resolution process which could be involved in any one dispute in order to establish the time lines and procedures that Inland Revenue staff will follow.
Time lines for completing the disputes resolution process
Each case in dispute will have a different set of circumstances and features, nevertheless there is practical value in establishing time lines for completing the steps in the disputes resolution process. The suggested time line outlined below should form the basis of discussing and agreeing time lines for a specific case in dispute.
As a yardstick a simple case in dispute can take up to 16 months from the time a Notice of Proposed Adjustment (NOPA) is issued until the assessment is issued. The following diagram is indicative of the time line for a simple dispute initiated by the Commissioner:
Click on the image below to get a full sized view
Factors that may influence the agreed time lines
While it is expected that the agreed time lines established between the taxpayer and the Inland Revenue officer will closely follow the time lines suggested above, there may be aspects of the particular disputed case which could have a bearing on the timely progression of that case. These aspects are commented on below:
- Information on which to form opinions and make fact based decisions
Critical to the timely and satisfactory progression of a case in dispute is the Commissioner's need to have all the information and facts necessary on which to form opinions and make fact based decisions. Any delay in providing information will inevitably impact on the timely progression of the case.
Where circumstances warrant, the Commissioner will take assertive action to seek information required. The actions will include use of the information requisition powers in the Tax Administration Act 1994 (TAA).
The prime objective remains to effectively resolve the dispute by way of agreement or move to formal proceedings in a timely manner.
- The conference phase
The conference phase is an administrative practice designed to identify and clarify facts or issues, and to attempt to resolve those facts or issues in dispute. The time suggested for the conference phase is an average of 3 months. The time will vary according to the facts of the specific case.
The conference is an important part of the overall disputes resolution process. The Commissioner's intention is to encourage open and full communication. Conferences provide Inland Revenue and taxpayers with an opportunity to precisely identify the facts and issues causing the dispute. Effective dialogue between Inland Revenue and the taxpayer increases the prospect of a productive outcome. For example, dialogue may identify common ground, inconsistencies, erroneous arguments, or alternative agreements.
The parties to the dispute should carefully assess the significance of conducting a conference. In brief, taxpayers and Inland Revenue staff should perceive the conference phase as an effective option to progressing or resolving the dispute.
The clarity of each party's position in respect to the matters in dispute, the level of cooperation and the nature of the communications to date, would be factors taken into account in determining whether or not to conduct a conference, or determining how long the conference phase should be.
The decision to either conduct or waive a conference should be by mutual agreement. The time lines involved in completing the next step in the agreed process would be expected to be an important outcome from the overall discussions.
- Time bar waivers
Time lines for investigations and resultant dispute proceedings will take account of the time bar reopening limitations set out in sections 107A, 108, and 108A of the TAA.
If the original time line established for progressing a dispute has not been met, it is still important to ensure, as far as practicable, that the case follows the full course of the disputes resolution process, and in particular to have the case adjudicated by the Adjudication Unit.
If a case is likely to be time barred, the taxpayer will be contacted and asked to waive the time bar under section 108B of the TAA. Exercise of the time bar waiver will allow further opportunities for the disputed case to be resolved before issue of the assessment notice, including by way of an independent review by the Adjudication Unit.
In the event that the request to waive the time bar is declined by the taxpayer, the Commissioner will consider the options available to progress the case towards finality.
Upon receipt or issue of a NOPA, unless already negotiated, the Inland Revenue officer involved will contact the taxpayer to negotiate a time line for progression and finalisation of the dispute.
Negotiation of the time line will take into account the following statutory and administrative timeframes.
Where a NOPA is issued by the Commissioner
Issue of a NOPA
When the Commissioner issues a NOPA, the taxpayer or agent will be contacted within 10 working days of the date of issue of the NOPA to ensure that the NOPA has been received.
Within 2 weeks of the expiry of the response period for the NOPA, the taxpayer or agent will be contacted with a view to ascertaining if the NOPA is to be responded to.
Consideration of taxpayer's Notice of Response (NOR)
Within 1 month of receipt of the taxpayer's NOR, the Inland Revenue officer involved will advise the taxpayer or agent whether the NOR is accepted, rejected in full or in part, or requires further work to be done before a decision can be made.
Where the NOR is accepted in full, all “closure” actions on the case (such as issuing the notice of assessment) should be completed within 1 month of the issue of advice of acceptance of the NOR.
If further work is required to be carried out before a decision to accept or reject a NOR can be made, the Inland Revenue officer will regularly update the taxpayer or taxpayer's agent on the progress of further analysis or enquiry work being undertaken.
The conference phase
The time suggested for the conference phase is an average of 3 months commencing 1 month after receipt of the NOR. This time is intended to cover any analysis required as well as organising and conducting a conference. The time may well vary according to the specific facts of the case. If by the end of this phase the dispute has not been resolved, or if by mutual agreement no conference is held, a Disclosure Notice will be issued, together with the Commissioner's Statement of Position (SOP).
The taxpayer must file their SOP within the statutory response period for the Disclosure Notice, that is 2 months. This time may be extended by application to the High Court.
Additional information by the Commissioner
Within 2 weeks of receipt of the taxpayer's SOP, the taxpayer will be advised whether or not the Commissioner proposes to provide additional information by way of Addendum to the SOP.
Additional information by taxpayer
Where the Commissioner has agreed to accept additional information from the taxpayer, the time line above suggests 1 month for agreement to be reached and information provided.
File preparation and adjudication
Where agreement cannot be reached the disputed case should proceed to adjudication. Before the case is forwarded to the Adjudication Unit the Inland Revenue officer involved will send to the taxpayer a copy of the Adjudication cover sheet. The cover sheet includes a list of the evidence being sent to Adjudication with the file. The taxpayer should respond within 10 working days advising whether they want any other material already disclosed and not listed on the cover sheet to be included in the file. The file will be sent to Adjudication within 12 working days of the taxpayer being sent the cover sheet.
Where the NOPA is issued by the taxpayer
The processes and steps involved in progressing the dispute towards settlement or formal proceedings when a taxpayer has issued a NOPA are generally the same as those outlined above. Establishing agreed time lines to assist in the timely progression of a case where the taxpayer has initiated the dispute proceedings is as important as where the Commissioner has initiated the disputes resolution process.
When discussing time lines for resolving taxpayer initiated disputes three key differences from a Commissioner initiated dispute will be taken into account:
- Within 2 weeks of the expiry of the response period for the NOPA, the taxpayer will be contacted and advised whether the Commissioner intends to respond to the NOPA by issuing a NOR. At this stage the Inland Revenue officer involved will initiate time line negotiations with the taxpayer.
- The Commissioner will initiate the conference stage within 1 month of receipt of the notice of rejection of the Commissioner's NOR.
- An additional 2 months must be added to the time line to recognise the fact that the Commissioner's SOP does not accompany the Disclosure Notice but is issued within 2 months of the date of issue of the taxpayer's SOP.
Inability to meet negotiated time lines
While both Inland Revenue staff and taxpayers should endeavour to meet the agreed time lines, if it becomes apparent the negotiated time line cannot be achieved this will be discussed with the taxpayer with a view to agreeing to a new time line.
Negotiating time lines for the timely resolution of disputes is an administrative practice encouraged by the Commissioner; failure to negotiate an agreed time line or adhere to the agreed time line will not prevent a case from progressing through the disputes resolution process.
National Manager, Technical Standards