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Questions we've been asked: General issues
Managing communications associated with a dispute referred to the Adjudication Unit
Issued December 2003
This item outlines how the Adjudication & Rulings group deals with communications it receives that are associated with a dispute that has been referred to the Adjudication Unit.
Under the disputes resolution process, a tax dispute between IRD and a taxpayer is generally referred to the Adjudication Unit to review. The Adjudication Unit is independent of IRD's audit function, so as to facilitate impartiality, and is intended to take a fresh look at the application of the law to the facts of the disputed case. As such, the actual and perceived independence of the Unit is a matter that is taken very seriously.
As noted in Tax Information Bulletin, Volume 8, Number 3, August 1996 ("TIB"), it is intended that communications to the Adjudication Unit about a dispute being considered by an Adjudication team would be very rare and, in most instances, would be initiated by the Unit itself. This would generally be in circumstances where the Adjudication team required clarification of some matter concerning the dispute. In all such cases, such contact will be in writing and a copy of the letter is also sent to the other party to the dispute. This is to ensure openness and transparency of the Adjudication process, and also to prevent compromising some aspects of the tax disputes process, including the role of the Statement of Position and the operation of the evidence exclusion rule.
The TIB implies that the disputants cannot initiate any communications with the Adjudication team. However, in practice, taxpayers/agents and IRD staff, from time to time, do attempt to contact the Adjudication Unit for various reasons. These communications are managed by Adjudication & Rulings' Field Liaison & Communication Unit ("FLAC") in a manner that endeavours to ensure that the impartiality and independence of the adjudication process is not compromised.
There are two principles that guide the Adjudication Unit and FLAC in managing inward communications that are associated with a dispute that has been referred to the Unit.
- The first principle is one of openness and transparency. This ensures that the adjudication process is consistent with the dispute resolution procedures and is based on an "all cards on the table" approach. This includes every communication subsequent to the dispute being referred to the Adjudication Unit which FLAC passes on to the Adjudication team working on the particular case being copied to all parties concerned. This principle is also reflected in the final Adjudication Report which is intended to be comprehensive and address all relevant arguments raised by either party to the dispute. As such, final decisions of the Commissioner are clearly explained in the report.
- The second principle is one of maintaining the independence of the Adjudication Unit so that the impartiality of the team considering a disputed matter is not compromised. This is to ensure that the Adjudication team cannot be inappropriately influenced by matters beyond the scope of the dispute as embodied in the documentation referred to the Adjudication Unit. As noted in the TIB, the role of the Adjudication Unit is not to carry out further investigations but to form a view based primarily on the information provided in the Statements of Position of the respective parties, including any additions to such statements under section 89 M(13) of the Tax Administration Act 1994.
These two principles generally overlap so as to effectively require that the parties are aware both of the reasons for the decision and what has influenced the Adjudication team in the course of their deliberations. An example of this can be seen in the final Adjudication Report issued by the Unit, which is comprehensive as to the reasons for the decision(s). If an aspect is not in the report, then it did not influence the Adjudication team and does not form part of the reasoning or decision of the Adjudication team in that matter.
Applying the principles in practice
There are two categories of communications:
- Those generated by the Adjudication Unit itself because they need to know something in order to progress their consideration of the case.
- Those that are generated by the disputants - generally enquiring as to the state of progress of their particular case, or wanting to contribute further by referring additional material or arguments, suggestions, etc.
The first category
The first category is straightforward and is of the type referred to in the TIB. FLAC signs such letters and ensures that copies are referred to both parties. The reason for FLAC signing these letters is to ensure that the Adjudication team does not become the contact point for matters arising from such communications, and so is not open to direct contact for debating matters that potentially impact on their impartiality and perceptions of such impartiality. FLAC also ensures that all correspondence received in response is copied to both parties.
The types of communications that fit into this category include letters enquiring whether a single report can be prepared in cases which concern more than one taxpayer, and (in rare situations) letters requesting clarification of something in a Statement of Position or requesting evidential material referred to in a Statement of Position but not included in the material provided.
The second category
As already noted, the second category involves communications received from a taxpayer or their agent, or from the Service Delivery area of IRD. The nature of these communications can range from enquiries about the state of progress of their particular case to wishing to refer additional material for consideration.
Any inward communications are received by FLAC in the first instance and would be answered by FLAC if the matter is of a general or procedural nature. Some entirely administrative or system-related communications which are dealt with solely by FLAC or the systems area in Adjudication & Rulings and are not seen by the Adjudication team working on the case would not generally be copied to both parties. All communications which are passed on to the Adjudication team working on the particular case will be copied to both parties to the dispute. If the sender of the communication claims that it is the subject of legal professional privilege, the applicability of the privilege will be considered and determined by the Adjudication team before any copy is sent to the other party.
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