Taxpayer Rights Around the World (Part 1)
On March 13 and 14, the 2nd International Conference on Taxpayer Rights was held in Vienna, Austria. More than 150 individuals from more than 40 countries attended the conference, which connects government official, scholars and practitioners from around the world to explore how taxpayer rights globally serve as the foundation for effective tax administration. This is the first of two posts recapping the issues discussed at the conference.
Four panels were held on March 13: (1) The Framework and Justification for Taxpayer Rights; (2) Privacy and Transparency; (3) Protection of Taxpayer Rights in Multi-Jurisdictional Disputes; and (4) Access to Rights: the Right to Quality Service in an Era of Reduced Agency Budgets.
The Framework and Justification for Taxpayer Rights
This panel reviewed the sources of taxpayer rights, the impact of “exceptionalism” on taxpayers’ rights, and the legal implications of the status as a taxpayer in international taxation. The panelists included individuals from The Netherlands, the United States, the United Kingdom, and Australia. It explored different ways that taxpayer rights are announced by countries, including constitutional, statutory and administrative authorities. With respect to the US, panelists discussed the recent codification of the Taxpayer Bill of Rights (TBOR), which is found in Internal Revenue Code Section 7803(a). That provision provides:
Execution of Duties in Accord with Taxpayer Rights. In discharging his duties, the Commissioner shall ensure that employees of the Internal Revenue Service are familiar with and act in accord with taxpayer rights as afforded by other provisions of this title, including –
(A) the right to be informed,
(B) the right to quality services,
(C) the right to pay no more than the correct amount of tax,
(D) the right to challenge the position of the Internal Revenue Service and be heard,
(E) the right to appeal a decision of the Internal Revenue Service in an independent forum,
(F) the right to finality,
(G) the right to privacy,
(H) the right to confidentiality,
(I) the right to retain representation, and
(J) the right to a fair and just tax system.
The codification of the TBOR is a significant step in the protection of taxpayer rights and represents several years of efforts by the National Taxpayer Advocate on this issue. But the real question here is whether these are enforceable rights or merely “window dressing” (as one panelist noted). The next step will be to see whether taxpayers whose rights have potentially been violated by the Internal Revenue Service (IRS) can obtain any remedies from the courts. This may be difficult given that the statute does not provide for any remedies, but courts have sometimes fashioned remedies to implement the intent of Congress. The panelists opined that, whether dealing with the TBOR or similar pronouncements in other countries, taxpayer rights are not limited to individuals and should encompass corporations and other legal entities.
Privacy and Transparency
This panel discussed tax and financial reporting transparency frameworks in connection with the exchange of information between countries. The tension between privacy and transparency was discussed, including the varying approaches used by different jurisdictions. For example, one panelist noted that most jurisdiction do not provide notice of sharing of information with other countries. It was suggested that the best approach may be to notify taxpayers and give them the opportunity to share information with a country first instead of going to a third party in the first instance. It was also noted that financial institutions tend to over-report because there is no clear way for them to determine if a tax crime has been committed.
A panelist from Tax Analysts stated that “there must be no secret law.” He indicated that more than 90 countries have the equivalent of the United States’ Freedom of Information Act. He also discussed country-by-country (CbC) reporting and the looming question of whether CbC reports should be made public and whether taxpayer names should be redacted.
Protection of Taxpayer Rights in Multi-Jurisdictional Disputes
This panel discussed the expanded exchange of information between taxing jurisdictions, including what an effective multi-jurisdictional dispute resolution framework should look like and what fundamental rights it should incorporate. A panelist from Ireland noted that an Organisation for Economic Co-operation and Development review reflected that more than 90 percent of companies expect more double taxation based on Base Erosion and Profit Shifting and Mutual Agreement Procedures (MAP). He noted that the automatic exchange of rulings by countries could lead to more questions in other jurisdictions and that chilling effect this can have on obtaining ruling.
There was an extensive discussion of MAP and the problems taxpayers faced with this procedure, including: (1) barriers to access to MAP; (2) timeliness; (3) transparency; and (4) a guarantee of outcome. Another problem one panelist noted was that the taxing authorities tend to displace the taxpayer in MAP and the negotiations become solely between the two countries without adequate taxpayer involvement. It was suggested that this may violate the right to “access” to an effective remedy and involvement in tribunal proceedings. A panelist indicated that access should include the following rights: (1) nominate arbitrators; (2) be present at meetings/hearings; (3) ability to file reports and present documentation; (4) ability to examine witnesses and experts; (5) access to all records; and (6) bearing own costs and sharing arbitrator costs. Concerns were expressed about countries engaging in “horse trading” and advocating inconsistent positions that are not based on principled decisions.
Access to Rights: the Right to Quality Service in an Era of Reduced Agency Budgets
This panel explored developments in response to reduced taxing authority budgets, including an emphasis in some jurisdictions on electronic communications. Studies on taxpayer behavior were discussed and conclusions were presented that the tax laws are too complex, which leads to overcompliance by some taxpayers and more aggressive positions by others. It was suggested that taxing authorities should strive for simplification and tax education for taxpayers.
The first day concluded with a “fireside chat” with various inspector generals, ombuds and advocates from various countries. The panelists discussed the different budgets and roles each faced in his or her country. For example, some panelists indicated they have full access to tax authorities’ records while others must go through a request process to obtain information. The budgets in each country and the staff available to assist taxpayers varied widely. It was a very informative discussion, with a takeaway being that taxpayers in most countries do have someone similar to the National Taxpayer Advocate in the US and that they should utilize those services as necessary to ensure that their rights are being protected.