Isabel Espejo and Victor Thuronyi have published an inspiring work on How Can an Excessive Volume of Tax Disputes Be Dealt With? (download full text) in the Tax Law Note Series of the International Monetary Fund.
I strongly recommend to read the full paper. For those of you who are in a hurry let’s quote the “checklist” of measures recommended by the paper to cope with an excess of tax litigation (p. 47).
“1. Ensure that the tax laws are well drafted. (para. 10).
2. Minimize the frequency of amendment of tax laws. (para. 10)
3. Publish guidance for taxpayers. (para. 11)
4. Adopt a flexible approach in agreeing payment arrangements. (para. 43)
5. Provide for adequate but reasonable penalties and interest (at a floating rate). (para. 49-57 )
6. Ensure that the tax administration takes a generally cooperative approach to taxpayers (para. 12)
7. Explore whether there are rules leading to a substantial volume of disputes that can be replaced by bright-line rules that would be easier to apply (para. 10 )
8. Make sure that auditors are trained and encouraged to resolve disputes during the audit process. (para. 15)
9. Eliminate incentives for overly aggressive assessments. (para. 3)
10. Incorporate a mediation/conciliation procedure before an assessment is formally made. (para. 21) 48
11. If there is no formal mediation/conciliation procedure, make sure that the taxpayer has an informal opportunity to discuss the case within the unit making the decision before a final decision is taken (para. 98)
12. Take administrative actions that lead to a greater culture of taxpayer compliance (para. 9).
13. Examine whether the frequency of protests suggests unreasonable behavior on the part of the tax administration (para. 27)
14. Specify in the law and limit the administrative decisions that may be protested (para. 37).
15. Ensure that all decisions arising from the same audit (including imposition of penalties) are considered in the same protest/appeal case (para. 38-41)
16. Require tax to be paid pending appeal (para. 42-48)
17. Make sure that the burden of proving that an assessment is incorrect is on the taxpayer (para. 58-62)
18. Make sure that the scope of judicial review is appropriately narrow, consistently with the legal system (para. 63-71)
19. Provide that administrative silence constitutes a deemed rejection of a protest (para. 72-77)
20. Ensure skilled representation of the government in tax cases (para. 82-83)
21. Eliminate the rule of reformatio in peius if it exists, consistent with the legal system (para. 84-86)
22. Provide for imposition of penalties for frivolous appeals (para. 87)
23. Provide for taxpayers to be able to recover the costs of a successful appeal (para 89).
24. Require exhaustion of administrative remedies before an appeal can be filed in court (para. 95)
25. Train and encourage appeals officers to decide each case without a bias in favor of the tax administration (para. 103)
26. Provide for specialized tax courts or, where this is not possible, specialized chambers that approximate specialized tax courts as far as possible. (para. 133)
27. Institute ADR mechanisms at the administrative level (para. 161-209)
28. Ensure that the government’s litigation strategy includes a concession of weak cases (para. 194)
29. Institute a tax ombudsman. (para. 210-213)
30. Ensure there is a good system for monitoring cases at the protest and appeals stages. (para. 214-233)
31. Consolidate cases with common issues for joint resolution (para. 237)
32. Provide for reduction of penalties for taxpayers who refrain from protesting an assessment (para. 24, 237)
33. Provide that a taxpayer is required to pay the cost of an appeal that the taxpayer loses (para. 87, 237)
34. Provide streamlined procedures for small tax cases (para. 145)”.
Congratulations, dear Isabel and Victor for this amazing paper which will be really useful for the upcoming Spanish Tax Reform.