Conceptos básicos

4.26 Having regard to the matters previously discussed on the impact of assessments issuing, including for some large businesses who may need to publicly disclose such matters, it is important to have clear and independent processes to reconsider proposed ATO decisions prior to finalisation and assessments being issued. The key benefits of an effective pre-assessment review are:

• an independent and ‘fresh set of eyes’ over the initial decision as a form of quality assurance before the dispute escalates;

• a circuit breaker between auditors and taxpayers where the parties’ positions become intractable;

• engagement with taxpayers to achieve a common understanding of the issues in dispute and identify strategies to address those;262 and

• to improve fairness, access to justice and address any power imbalances.

4.27 As discussed earlier, the ATO has implemented some procedures to informally review ATO decisions and resolve disputes as early as possible without resort to the objections process or litigation. Some of these informal processes occur prior to the issue of an NOA, such as through direct early engagement between the taxpayer and the ATO audit officers or the IR process263 while others may be applied at any time during the audit and objection processes, such as in-house facilitation264 or the use of different types of ADR.265 Some of the ATO’s processes are only used after an NOA has issued but before the period to lodge an objection has expired, such as the administrative reversals process used in relation to data matching and income integrity cases.266

4.28 In addition to examining the purely technical aspects of a case, it has been suggested that considerations of appropriate procedure and conduct, issues of fairness

261 Above n 251, p 122. 262 Above n 218, p 3. 263 Above n 66.

264 ATO, ‘Facilitation Process’ (14 October 2014) <www.ato.gov.au>; Above n 42, p 44. 265 ATO, ‘Alternative dispute resolution – an overview’ (27 May 2014) <www.ato.gov.au>.

266 IGT, Review into the ATO’s compliance approach to individual taxpayers – income tax refund integrity program (2014) p 82; IGT, Review into the ATO’s compliance approach to individual taxpayers – use of data matching (2014) p 75.

and adherence to the Taxpayers’ Charter and other guiding material could also be addressed. The learnings and outcomes from the HMRC experience in recently adopting a statutory internal review function and piloting a facilitation service have indicated that review of cases need not be strictly confined to technical aspects.

4.29 The IGT notes that the availability of pre-assessment review processes accords with current practice adopted in the US where IRS appeals officers also act as mediators in disputes between IRS compliance officers and taxpayers in order to resolve matters before they become ‘appeals’.267 _{Similarly, in Canada, CRA compliance} officers and taxpayers are able to escalate matters to the CRA headquarters to assist in resolving any impasse. The New Zealand process moves one step further by legislating the requirements for the IRD and taxpayers to engage and resolve disputes before assessments are issued.268 _{The process also promotes full and frank disclosure by} excluding any evidence not previously raised in subsequent challenges.269

4.30 Stakeholders have expressed concern that, in Australia, the barriers to access certain pre-assessment reviews operate to prevent taxpayers resolving disputes in the most cost-effective and timely manner. Other stakeholders have indicated that dividing cases along monetary lines and applying treatments on purely that basis is unacceptable as cases with low disputed amounts may nonetheless yield significant and complex issues of law and vice versa.

4.31 In the IGT’s view, as a matter of fairness and equity,there should be sufficient access to justice for all taxpayers through robust pre-objection mechanisms. This is particularly important for taxpayers who are least able to progress disputes through more formal channels (such as individuals and small businesses). However, there are resource implications for the ATO in extending all available processes to all taxpayers. There is also a potential for taxpayers to use such processes to delay ultimate resolution and assessment of their liabilities.

4.32 The IGT, therefore, considers that the ATO’s intended dispute resolution culture should aim at ensuring that its officers are open and responsive to taxpayer requests for engagement. The ATO should work collaboratively with taxpayers to achieve a common understanding of the issues and identify the most appropriate resolution option. Thus, the full range of options should be available to all taxpayers (without arbitrary distinctions) while ensuring that discussions between ATO officers and taxpayers are directed towards selecting the best avenue for resolving a dispute. 4.33 By consolidating all dispute resolution functions within a single, dedicated group, i.e. the Appeals Group, officers would be able to apply the dispute resolution option which is most appropriate having regard to the needs of the case. For example, the IR process may be applied to complex technical legal issues while in-house facilitation may be best used in less complex matters where there may just be a misunderstanding of the positions of each party. By reducing financial barriers and focusing on the issues in dispute, the ATO would be better able to address perceptions of inequity and inconsistency in its dispute resolution approach.

267 IRS, ‘Appeals Mediation Programs’ (11 June 2014) <www.irs.gov>. 268 Above n 119.

4.34 In addition to the issues of access to these processes, stakeholders have also suggested that the utility of such early intervention and dispute resolution may be enhanced if decisions of the Appeals officers were binding on the compliance team.

Improving actual and perceived independence of the objection