8. Disputes

Taxpayer rights and obligations are frequently set out in law or taxpayer charters. Table 8.1. sets out some of the most commonly reported rights and obligations. Underpinning these rights and obligations is effective access to processes that allow taxpayers to challenge assessments and decisions. This safeguards taxpayer rights and ensures that appropriate checks and balances exist on the exercising of tax powers by administrations. At the same time, tax administrations and taxpayers should also strive to work together to prevent disputes from arising in the first place, thus reducing burdens and uncertainty for both parties.

This chapter examines the dispute resolution and review strategies in the jurisdictions covered by this report, as well as their performance in this area.

All 58 jurisdictions covered in this report provide taxpayers with the right to challenge assessments. Almost all administrations report having an internal review mechanism in place, and a large majority of administrations provide taxpayers with the option to seek an independent review by an external body, which can help improve legal certainty for taxpayers while avoiding potentially lengthy and costly legal proceedings. For those administrations that offer both review mechanisms, approximately 80% require taxpayers to seek an internal review before their case can be reviewed by an external body. (See Figure 8.1.)

While tax administrations cannot generally control the timing of judicial processes, many of them are working on improving dispute resolution processes to make them quicker. These might include mediation or other non-judicial routes. The examples included in Box 8.2. illustrate how technological advances offer new possibilities for tax administrations to improve the efficiency of dispute resolution.

Making effective adjustments to dispute resolution processes requires sound reporting and monitoring mechanisms, and many administrations are active in improving the level of management information available. As a result, this report contains performance information from approximately 90% of administrations.

Tables 8.2. and 8.3. compare the change between 2018 and 2021 in the number of review cases initiated and on hand at fiscal year-end, for both internal and external reviews. Between 2019 and 2020, the majority of administrations reported a reduction in the number of cases initiated and on hand at fiscal year-end. In relation to cases under external review, this result can also be observed for 2021. However, in relation to the number of cases under internal review, the majority of administrations reported increasing numbers in 2021.

Figures 8.2. and 8.3. take a more detailed look at the jurisdiction level data and show the change between 2020 and 2021 in the number of review cases on hand at fiscal year-end, for both internal and external reviews. What is interesting to note are the significant increases in the number of internal review cases reported by a few jurisdictions.

At the same time, it should be pointed out that the volume of cases per jurisdiction varies significantly and where the number of cases is very low there can be significant fluctuations between years. This becomes more evident when looking at Figure 8.4., which highlights the wide differences between jurisdictions in the use of internal review procedures. Looking at Table 8.4., which shows the evolution of the average number of internal review cases initiated, it can be observed that the average has been stable between 8 and 9 internal review cases initiated per 1 000 active PIT and CIT taxpayers between 2018 and 2021.

Different interpretations of tax law by taxpayers and the tax administration are a normal part of tax administration, and it is not uncommon for these differences to become subject to litigation, once the internal and external review procedures have been exhausted. Whilst tax administrations report that most disputes are resolved without the need for litigation, Figure 8.5. reports the performance of administrations for cases decided upon by the courts. It shows significant differences in the success rate of administrations, although for some jurisdictions the number of cases decided is very low, meaning results can fluctuate significantly between years.

As disputes can be resource intensive processes, preventing them is the most effective strategy, and a key element in the dispute prevention framework is the provision of guidance and advice to taxpayers. Tax administrations often do this as part of their wider service strategy. This can include putting information and interactive tools on their website, publishing guidelines and taxpayer information briefs, and carrying out educational and business support initiatives. In addition, many administrations offer specific dispute prevention mechanisms and some of those approaches are described in this section.

As shown in Table A.120 of the 2019 edition of this series (OECD, 2019[1]), as part of tax administrations’ commitment to give taxpayers certainty of treatment, it is now common practice for administrations to set out how they will interpret the laws they administer, and how it will interpret the tax law in particular situations, through rulings:

  • A public ruling is a published statement of how an administration will interpret provisions of the tax law in particular situations. They are generally published to clarify application of the law, especially where a large number of taxpayers may be impacted by particular provisions and/or where a provision has caused confusion or uncertainty. Typically, a public ruling is binding on the tax administration if the ruling applies to the taxpayer and the taxpayer relies upon it.

  • A private ruling relates to a specific request from a taxpayer (or their tax representative) seeking greater certainty as to how the law would be applied by the tax administration in relation to a proposed or completed transaction(s). The objective of private rulings is to provide additional support and certainty to taxpayers on the tax consequences of more complex transactions.

Over the last few years, there has been an increasing focus on the use of co-operative arrangements to manage compliance and enhance tax certainty. These programmes often involve a more transparent relationship between tax administrations and taxpayers, and can involve more proactive approaches to resolving material tax risks. The concept of co-operative compliance has been the subject of several OECD reports, most recently Co-operative Tax Compliance: Building Better Tax Control Frameworks (OECD, 2016[2]).

As the operation of a co-operative compliance programme is resource intensive due to the high level of engagement between tax administration officials and taxpayers, traditionally those programmes were reserved for large companies. However, technological advances in risk assessment processes have led to a number of administrations reporting the application of this concept to other taxpayer groups (see Figure 8.6.).

The International Compliance Assurance Programme (ICAP) is a voluntary programme for a multilateral co-operative risk assessment and assurance process. It is designed to provide multinational enterprise groups (MNE groups) with increased tax certainty with respect to certain of their activities and transactions as long as they are willing to engage actively, openly and in a fully transparent manner. ICAP does not provide an MNE group with the legal certainty that may be achieved, for example, through an advance pricing arrangement (APA). However, it does give assurance when tax administrations participating in an MNE group’s risk assessment consider covered risks to be low risk.1 (OECD, 2021[3])

Another tool that can assist in preventing disputes is a joint audit where officials from two or more administrations join to form a single audit team which will examine issues or transactions of taxpayer(s) with cross-border business activities and in which the jurisdictions have a common or complementary interest. By collaborating it may be possible for the participating tax administrations to detect and address differences or potential disputes at an early stage. (OECD, 2019[4])


[3] OECD (2021), International Compliance Assurance Programme – Handbook for tax administrations and MNE, OECD, Paris, https://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/international-compliance-assurance-programme-handbook-for-tax-administrations-and-mne-groups.htm (accessed on 22 May 2023).

[4] OECD (2019), Joint Audit 2019 – Enhancing Tax Co-operation and Improving Tax Certainty: Forum on Tax Administration, OECD Publishing, Paris, https://doi.org/10.1787/17bfa30d-en.

[1] OECD (2019), Tax Administration 2019: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/74d162b6-en.

[2] OECD (2016), Co-operative Tax Compliance: Building Better Tax Control Frameworks, OECD Publishing, Paris, https://doi.org/10.1787/9789264253384-en.

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