The Government recently released the report of the Inspector-General of Taxation (IGT) which examined the effectiveness of the ATO's dispute resolution practices including early dispute resolution and alternative dispute resolution (ADR). The IGT report although lengthy raised many concerns but a few of interest include;
1. Avoiding unnecessary costs of litigation.
Although in most cases 90% of resolutions are made prior to hearing it was suggested there was a significant opportunity for greater engagement to resolve disputes and reduce unnecessary costs for taxpayers and the ATO alike.
2. Information sharing with other bodies.
The ATO has extensive investigative powers enabling to compel disclosures by taxpayers and their associates, as well as third parties, of required information and documentation. Stakeholders expressed concern that this is sometimes done without the taxpayer being afforded an opportunity to inspect or comment on the additional information. The IGT said this may hinder taxpayers' ability to fully understand the putative case that may be in development against them or to address particular issues which may arise. Such an approach can seriously diminish the effectiveness of early engagement and increase the likelihood of protracted disputes, resulting in additional time and increased cost, the report said.
3. Understanding a taxpayer's business.
It was noted in the report that where tax officers have sought to appreciate the commercial and factual nature of a taxpayer's business, there has been a better working relationship, leading to a common understanding of issues and concerns which were able to be addressed more efficiently. Conversely, where this does not occur, there was a tendency for issues to escalate to disputes requiring formal intervention. In one case noted in the report, the effectiveness of early engagement avoided what may otherwise have been a dispute.
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