Office of the Chief Tax Counsel Jean Cordue Acting Director Adjudication Contents 1. Legislative Provisions 2. The Disputes Resolution Process 3. Office of the Chief Tax Counsel 4. Adjudication Legislative Provisions The main taxation legislation is the Income Tax Act 2007, the Goods and Services Tax Act 1985, and the Tax Administration Act 1994 (TAA). The disputes resolution provisions are found in Part IVA of the TAA & the challenge provisions are in Part VIIIA. The TAA can be found at: http://www.legislation.govt.nz/act/public /1994/0166/latest/DLM348343.html First Steps in the Dispute Resolution Process In an IR initiated dispute, the IR starts the process by issuing a Notice of Proposed Adjustment (NOPA) proposing an adjustment to a taxpayer’s assessment. The taxpayer may respond with a Notice of Response if they do not agree with the NOPA. It is possible for a taxpayer to initiate a dispute and this does happen. They may change their mind or have filed conservatively to avoid penalties. Conference Phase Following the issue of a Notice of Response to the NOPA, there will usually be a conference. This may be facilitated by a senior IR officer who has not previously been involved. The role of the facilitator is to get all the information on the table, help both parties understand the issues, and achieve resolution if possible. A number of disputes are resolved and settlements made during this process. Further Steps in the Disputes Resolution Process If the matter is not resolved, the CIR will issue a disclosure notice and a Statement of Position (SOP). This will discuss the facts, evidence, issues and propositions of law. The Taxpayer has two months to provide a SOP. IR has a right of reply in respect of any new issues raised. If the dispute is not resolved it is referred to Adjudication. Opting out of the Process Section 89N provides the taxpayer and the CIR can agree in writing not to complete the disputes process and to proceed to a hearing. This is called “opting out”. A taxpayer may make a request to opt out and a senior IR officer will consider the request. There are a number of situations where IR will automatically agree. In every case, the taxpayer must also have participated meaningfully in the conference. IR Guidelines for Opting Out IR will automatically agree to Opting Out if: The core tax is $75,000 or less; Turns on questions of fact only; Dispute concerns facts and issues that are waiting to be resolved by a court; or The dispute concerns facts and issues that are similar to those previously considered by the Adjudication Unit. 4 Occurence 4 Conference Adjudication Disclosure Notice Finalisation 1 Commissioner issues NOPA 2 Taxpayer issues Notice of Response rejecting NOPA? NO 1 Assessment issued YES 2 Commissioner accepts taxpayer's contentions? YES 1 End of process 1 NO In taxpayer's favour Conference takes place 1 End of process 2 1 Disputed issues resolved? YES In Commissioner's favour Assessment issued; end of process 1 NO Commissioner issues disclosure notice and statement of position 2 Taxpayer issues statement of position? NO 1 Assessment issued YES 1 Commissioner amends his statement of position to address any new matters in taxpayer's statement of position 2 Is issue resolved at this stage? NO YES In TP's favour In CIR's favour 1 End of process 1 Assessment issued 1 Assessment referred to Adjudication In TP's favour 1 Adjudicator determines issues 1 End of process In CIR's favour 1 Assessment issued; taxpayer may challenge in court Standard Practice Statements SPS 11/06 Disputes resolution process commenced by a taxpayer Link http://www.ird.govt.nz/technicaltax/standard-practice/disputes/sps-11-06disputes-commen-taxpayer.html SPS 11/05 Disputes resolution process commenced by the CIR Link http://www.ird.govt.nz/technicaltax/standard-practice/disputes/sps-11-05disputes-commen-cir.html Office of the Chief Tax Counsel The Office of the Chief Tax Counsel (OCTC) provides a wide range of advice and services to and on behalf of the Commissioner and to internal and external customers. OCTC is responsible for providing technical advice, specifically about the interpretation and application of taxation law. The Adjudication Unit is part of OCTC. Adjudication Adjudication is part of the disputes resolution process. This process was designed so that tax disputes could be resolved at an early stage. Adjudication is to take a fresh look at a dispute, providing an independent and impartial decision on the issues in the dispute before any adjustment to an assessment is made. Adjudication Outcomes Adjudication carries out comprehensive research and analysis of the law. It considers the correctness of legal and factual arguments raised by the taxpayer and by IR in deciding whether an adjustment should be made. A report on the reasons for a decision is issued to both the taxpayer and the Inland Revenue investigator. Facts and Figures for disputes Adjudication deals with between 65-88 cases per year. Adjudication finds fully or partially in the CIR’s favour in 75-80% of cases. The Taxpayer wins around 20-25% of cases. A very small number of cases have to be returned to the parties because of missing evidence or authorities or arguments overlooked. What Adjudication is and is not Adjudication is not mediation, nor is an adjudicator required to investigate. Consequently, an adjudicator very rarely meets with either the taxpayer or the Inland Revenue investigator involved in a dispute. Adjudication is independent of the Commissioner's investigative or audit function, and adjudicators are either qualified accountants or solicitors. What happens at and after Adjudication? A team of 3 work on the disputed matter. There will be an adjudicator, a manager and a sign off. A report on the reasons for a decision is issued to both the taxpayer and the investigator. If a decision finds in favour of the taxpayer, the CIR has no right of appeal. However, if the adjudicator finds in favour of the CIR, the taxpayer may appeal to the TRA or the HC.