Fast-tracking small simple disputes (Dec 98) (WITHDRAWN)

Fast tracking small simple disputes

This standard practice statement outlines the Commissioner's criteria for settling small simple disputes and the procedures within Inland Revenue to fast-track them to resolution.

Background

On 1 October 1996 legislation introduced the disputes resolution process.  Inland Revenue established a project team to document procedures and policies for resolving disputes in a ‘typical' scenario.  We deferred developing the fast-track procedures for small simple disputes until the impacts of the new regime could be considered.

This statement outlines options for fast tracking small disputes against a background principle of cost effective timely resolution.  It covers:

• the criteria for small or simple disputes;
• the fast track process for small simple disputes; and
• the ‘review' process for small simple disputes.

Small simple disputes

If a case meets the following criteria Inland Revenue will treat it as a small simple dispute:

• the facts are clear and not in dispute
• the total tax in dispute is less than $15,000
• there are no significant legal issues of precedent involved
• the issue is non-recurrent for the particular taxpayer.

A case will not be fast tracked if the Commissioner considers these criteria are not met.  If the criteria are met but the taxpayer does not want the case to be fast tracked, the standard disputes process will be used.

Fast tracking procedures

The following fast track procedures will be used for small simple disputes:

Significant legal issues of precedent

A case will be considered to involve significant legal issues of precedent if it affects two or more taxpayers - e.g., a number of partners in a partnership or a number of employees of an employer.

In some circumstances there may be no connection between taxpayers but there is a common issue.  For example, CIR v Coveney and Anor (1995) 17 NZTC 12,193; Wattie and Anor v CIR (1997) 18 NZTC 13,297.  The outcomes of these two cases are likely to be persuasive or determinative of other cases where different taxpayers entered similar arrangements.

The decision as to whether a case involves significant legal issues of precedent will remain with Inland Revenue.

Disclosure Phase – agreed statement of facts

The fast track procedures dispense with the formal disclosure phase.  The purpose of the disclosure phase is to ensure that all parties have fully disclosed all the material they intend to rely on to support their position.

If the facts are clear and the issues non-precedential there should be no evidence or issues outstanding and little need for the protection of the evidence exclusion rule.  Formal disclosure is therefore generally not warranted for small simple disputes.  To ensure that all the facts have been disclosed and that they are clear and undisputed, an agreed statement of facts should be reached.

If the facts do not differ from those set out in the Notice of Proposed Adjustment or Notice of Response the agreed statement of facts may simply be a signed statement referring to those facts.  If the facts have been updated since the issue of the Notice of Proposed Adjustment or the Notice of Response a separate document outlining the facts and evidence should be agreed.

At the end of this statement is a recommended statement for use where facts are agreed.

The Agreed Statement of Facts will precede the review, so Inland Revenue's reviewer can be satisfied that there are no further material facts that either party seeks to rely on.

Review

All fast tracked disputes will be subject to a final review before the Notice of Assessment or Notice of Disputable Decision is issued.  The person reviewing the file will be a member of Inland Revenue's Technical Legal Support Group in the local Service Centre who has not previously had any involvement in the dispute.

The purpose of the review is to ensure that:

• the facts are clear and not in dispute
• the tax in dispute is less than $15,000
• there are no significant legal issues of precedent involved
• the issue is non-recurrent for the particular taxpayer
• the parties have agreed there are no outstanding facts
• the evidence disclosed and the law support the proposed adjustment.

Taxation Review Authority claims jurisdiction

Only a taxpayer can elect to use the Taxation Review Authority (TRA) small claims jurisdiction.  If an issue is fast tracked within Inland Revenue there is no obligation on the taxpayer to use the small claims jurisdiction of the TRA.  However, if the taxpayer elects the TRA small claims jurisdiction in their NOPA or Notice of Response that election is irrevocable and binding on the taxpayer.  If a taxpayer indicates that they do not want to use the small claims jurisdiction the Commissioner will take this into account in deciding whether to agree to use a fast track option.

If the case is fast tracked within Inland Revenue and taxpayer does file their case in the TRA's small claims jurisdiction the Commissioner retains the right to apply to the TRA to move the case to a different hearing authority - section 138O of the Tax Administration Act 1994.  This is likely to occur only if the taxpayer introduces new facts, evidence or legal argument that was not disclosed during the fast track process.

Shortfall penalties

It is probable that shortfall penalty adjustments will not meet the small simple dispute criteria in the short term.  Except for evasion cases shortfall penalties are new and there is no case law on where the boundaries fall.  Using the standard process when shortfall penalties are at issue will ensure consistency in applying the penalties, and if agreement cannot be reached Inland Revenue's Adjudication Unit will provide the independent review.

An example of a case involving shortfall penalties that could be fast tracked is failure to account for PAYE.

Recommended statement for use when facts are agreed

The following statements should be used when facts have been agreed.

"I, [taxpayer] agree that the facts outlined in [the NOPA, NOR, or other document*] are complete and form the basis of my position taken in this dispute.

"I, [team leader/senior investigator], on behalf of the Commissioner of Inland Revenue, agree that the facts outlined in [the NOPA, NOR or other document*] are complete and form the basis of Inland Revenue's position taken in this dispute."

* The document referred to in both statements must be the same.