An important aspect of a Tax system is the audit and verification of a Taxpayer's affairs. Accordingly, while maintaining the fundamental premise that a Taxpayer is honest and truthful, unless there is evidence of the contrary, it is still appropriate for the Tax Administration to carry out enquiries and audits as it may see fit to do. This is an important deterrent to Taxpayers who may not otherwise be honest and truthful in their Tax Filings. Important checks and balances are required in this process, to ensure that the objectives of the State are met, but that a Taxpayer's rights are protected.
- Where a Taxpayer is requested to provide information in the course of an enquiry or audit, the Taxpayer shall cooperate in providing the information on a timely basis and shall provide complete information and answer questions of fact truthfully and fully.
A Taxpayer shall cooperate in providing information on a timely basis in the course of an enquiry or audit by the Tax Administration. The information provided shall be complete and accurate, and questions of fact shall be answered fully and truthfully. A Taxpayer must cooperate in this process, and not obstruct the process by delay, providing incomplete or misleading information, or through any other means. Accordingly, the Tax Administration must act fairly by ensuring that the scope of the requested information is appropriate to the scope of the audit or enquiry in question.
- A Taxpayer shall be required to provide only factual information and not interpretations of Tax law.
In the course of an audit or enquiry, the Taxpayer shall be required to answer only factual information. Thus the Taxpayer shall not be required in the course of an audit examination to answer questions of law which may be beyond the Taxpayer's capacity.
- Before commencing an audit or enquiry, a Tax Officer shall notify the Taxpayer of the scope of the audit or enquiry, the issues which are being considered and the implications of the issues, and advise the Taxpayer of the rights which the Taxpayer has under legislation and under this Charter.
Before commencing an audit or enquiry, a Tax Officer shall provide reasonable notice to the Taxpayer. This notice shall outline the scope of the audit or enquiry, the issues which are being considered, and the implications of the issues. For example, if the audit is directed at particular issues, the Taxpayer should be advised of these issues and their implications. This creates an efficient and effective audit process. The Taxpayer should also be advised of their rights under legislation and under this Charter including the right to be represented by a Tax Advisor.
- A Tax Officer in the course of an audit or enquiry shall request from a Taxpayer only information which is reasonably necessary and applicable to the matters under review.
A Tax Officer should request only the information which is reasonably applicable to the matters under review, and only to the extent that it is reasonably necessary in the circumstances. This limits the scope of the audit or enquiry, within what has been outlined to the Taxpayer, thereby creating a more efficient process and respecting a Taxpayer's privacy. This does not prevent the Tax Officer from considering other matters, but these matters should be outlined in a supplementary communication to the Taxpayer where the scope of the audit or enquiry is broadened.
A Taxpayer shall not be required to disclose information which is not reasonably necessary to the resolution of matters at issue. This is to be understood in the context of an audit or enquiry outlining the issues which are to be reviewed. Accordingly, a Tax Officer cannot request the disclosure of information which is not relevant, but of general interest. However, this provision does not limit a Tax Officer where there is reason to believe that a Taxpayer has not been honest in Tax Filings. Information obtained by a Tax Officer in the course of an audit or enquiry shall be treated with the same level of confidentiality as is afforded Tax Filings. The Tax Officer should consider the reasonableness of requests for information in light of the compliance burden to the Taxpayer.
- Punitive provisions including penalty provisions should not be used as a negotiating tactic by a Tax Officer.
A Tax Officer shall apply the law, without bias or preference, and for this reason shall not use negotiating tactics, such as the prospect of levying of a penalty, as a basis for obtaining a Taxpayer's concurrence to adjustments being proposed. In keeping with the principle that the law should be applied with integrity and as is written, a Tax Officer shall not attempt to use an alternate and more onerous basis of assessment to incentivize the Taxpayer to resolve the matters in dispute.
- Where questions are asked by a Tax Officer, the purpose of the questions should be clearly disclosed so that a Taxpayer is not asked questions which are misleading, intended to be deceptive or whose answers may be self-incriminating without the Taxpayer being aware. The Taxpayer may refuse to answer such questions, and shall not be required to disclose confidential communications between the Taxpayer and his or her Tax Advisors.
In the course of an audit or enquiry, frequently questions are posed to a Taxpayer, and such questions should relate only to issues of fact. Specifically, questions to the Taxpayer should not be misleading or intended to be deceptive or be self-incriminating. In such cases, a Taxpayer is entitled to refuse to answer such questions. Also a Taxpayer is not required to disclose confidential communications between the Taxpayer and his or her Tax Advisor. Furthermore, the basis and purpose of the questions should be disclosed to the Taxpayer. The Taxpayer, though, should cooperate with the course of the audit and answer all questions honestly.
- In the course of an audit or enquiry, a Taxpayer may request that all communication be in writing and that a Tax Advisor be present at meetings and other proceedings.
A Taxpayer may request that communication with a Tax Officer in the course of an audit or enquiry be in writing and that a Tax Advisor be present at meetings and other proceedings. Having communications in writing ensures that a Tax Officer is bound by the correspondence and thus provides greater certainty to the Taxpayer. A Taxpayer may consult with a Tax Advisor before answering such questions, and sufficient time should be given to enable a Taxpayer or a Tax Advisor to answer such enquiries. This right to representation is, however, not to be used as a means of delaying or obstructing the orderly conduct of the audit or enquiry and as such, the Taxpayer should be cooperative within the course of the audit or enquiry. Despite having representation, the Taxpayer shall remain responsible for the information presented by the Tax Advisor.
- A Tax Officer shall summarize the results of the audit or enquiry and provide a reasonable length of time for the Taxpayer or a Tax Advisor to respond.
A Tax Officer shall summarize the results of an audit or enquiry and provide an opportunity for the Taxpayer or a Tax Advisor if so engaged to respond to such matters within a reasonable length of time. This provides clarity to the Taxpayer regarding the course of the audit or enquiry and promotes fairness by allowing the Taxpayer to respond to such matters. In general, a 30-day period will be considered appropriate for such a response, unless the matters are sufficiently complex or the information requested is not readily available, in which case a longer time may be appropriate.
- A Tax assessment must be justified by the facts and circumstances, and have a basis in law.
A Tax assessment must have a basis in law, which should be adequately explained. It is not appropriate for the State to make general statements as a basis for an assessment or reassessment, without sufficient particulars. For example, it is not permissible for the State to disallow a deduction on the basis that an amount was not reasonable in the circumstances, without stating why, in its view, such amount was not reasonable and why that conclusion justifies disallowance of the deduction. As another example, it is not permissible for the State to use as a basis for reassessment an internal policy or interpretation without clearly identifying the basis for same. It is also not permissible for the State to adopt alternate interpretations which are inconsistent with one another and generate multiple assessments of the same income among related Taxpayers. Failure to provide reasonable justification for conclusions drawn renders the Tax system to be perceived as unfair and unjust. However, these requirements are waived if a Taxpayer has failed to provide information which is reasonably required, whereupon the State may make assessments provided they are reasonable in the circumstance. The State should clearly indicate the information which was required and not provided.
- Where in the course of an audit or enquiry a Tax Officer considers the application of a penalty, this shall be disclosed when such person becomes aware of the circumstances which might justify the penalty.
If in the course of an audit or enquiry, a Tax Officer becomes aware that a penalty might be applied, this should be disclosed by the Tax Officer at the time of becoming so aware. The Taxpayer must be informed of the possibility of a penalty, as this is fundamental to the integrity of the system and the transparency of the process, and allows the Taxpayer to take appropriate steps to consider the matter and to retain the professional assistance of a Tax Advisor if the Taxpayer chooses to do so.
- A Taxpayer shall treat Tax Officers with respect and courtesy and shall cooperate with them in pursuance of their duties.
A Taxpayer shall treat Tax Officers with respect and courtesy and shall cooperate with them in pursuance of their duties, and shall not be uncooperative or obstructive. This is of fundamental importance to the relationship between a Taxpayer and the Tax Administration. Courtesy and cooperation are important Taxpayer Responsibilities. Other provisions of the Charter deal with the manner with which Tax Officers are to treat a Taxpayer, and contain more specific matters.