4.2 Nature of Taxpayer Rights

A 21st Century copywriter would give his/her eye teeth to have coined the phrase "No taxation without representation", although it must be conceded that taxation levels and system complexity in the United States have proven much higher with representation. It was the 18th Century riposte to "render unto Caesar the things that are Caesar's and unto God the things that are God's". Both are representative of their time and both chime wholeheartedly with the political economies from whence they came.

It would be an entertaining diversion to discuss at length what the underlying sense of these two profound statements is, but in the context of this work we draw only two relevant conclusions:

  1. Taxation cannot be confused with confiscation. It requires the active participation of the taxpayer either by some form of ethical obedience or democratic participation; and
  2. Tax is inextricably bound with the political and economic system within which it is levied and collected.

When the subjects of Boston started emptying tea into the harbour in protest at British colonial administrative attempts to enforce the Tea Act of 1773 (an importation tax levied by their distant monarch and his government), their active protest, even if stirred by the self interests of smuggled profitability, grew like wildfire. It enabled the colonists to begin to express not just their opposition to the impost but their deep down desires for self rule and the realisation of their rights. The tax led to revolution, war and eventually citizenship of an independent republic. Today U.S. Citizen Rights stem directly from the U.S. Constitution and the Bill of Rights put in place by those rebellious colonists and their descendants.

By a strange quirk of history, by 1773 the United Kingdom had already undergone a similar process, if not root and branch, which resulted in the primacy of Parliament in matters fiscal.  Over a century had passed since Charles I fought a bloody civil war and lost his head.  It was, though, not until the full enfranchisement of the male population in the 19th Century to vote (women had to wait until the 20th Century) that any effective link could be seen between tax and democracy.

France, on the other hand, did a thorough job of clearing the decks if in a way both brutal and exceptionally bloody. Excessive demands for taxes with no consideration for the taxpayer fuelled the utter resentment of the ruling establishment. We should not be surprised therefore to note that the new French Republic issued, in 1793, a Declaration of the Rights of Man and of the Citizen which included, as Article 13, a specific provision for non discrimination in tax matters. Interestingly there have been two French Charters of Taxpayer Rights, in 1975 and 2005, neither of which are now part of French tax legislation, but both of which referred to the 1793 Declaration.

In putting together this proposal for a Model Taxpayer Charter which all can draw on, we are very conscious that there are several layers upon which Taxpayer Rights rest.  At the top are the inherent rights of the individual encapsulated in the Universal Declaration of Human Rights.  Many of the articles have direct relevance to the position of taxpayers but we select the following as being of special relevance:

Article 6 which gives everyone the right of recognition as a person before the law,

Article 7 which provides that all are equal before the law and are entitled without any discrimination to equal protection of the law,

Article 11 which provides a fundamental safeguard against retrospective penal action,

Article 12 which safeguards privacy, family and correspondence from "arbitrary interference"

Article 17 which provides for the right to own property without being arbitrarily deprived of it

Article 21 (3) which provides that "the will of the people shall be the basis of the authority of government" expressed through periodic elections and

Articles 22 – 27 which provide for the rights to education, work, culture and social security which are a nation's product funded by the tax system.

The direct ancestry of this declaration can be found in the French and U.S. Constitutional embodiment of rights in matters fiscal. Together they provide a powerful argument that a charter for taxpayers would be of little use unless it exists to identify with precision what the minimum rights are, to extend, limit or amend those rights and to indicate to taxpayers exactly how a fiscal measure fits within the tax landscape.  In particular, it emphasises that tax is a two sided operation.  More particularly, Taxpayer Rights with legal force may restrain a tax authority that acknowledges the general rights whilst believing there is a pragmatic right held by it alone to act inconsistently with those rights as and when it deems necessary.

Fiscal measures are very commonly accompanied by specific and enforceable compliance requirements which carry with them specific rights, for example a time limit for the submission of a return or a limitation of action by a tax authority. These directly related rights are to be found at a lower level than those emanating from constitutional or fundamental human rights but are nonetheless significant. Parallel with them are those statutory provisions that set down the basis on which tax authorities are required to operate. Whilst giving specific powers, they also provide operating restraints which, cast in another guise, can also be taken as Taxpayer Rights.

We pose the question, therefore, what is the nature of a Taxpayer's Rights? He/she can expect to be treated equitably, to be required to pay a reasonable amount of tax which is assessed and collected according to a system which is not oppressive, which does not deal differently with different taxpayers and which includes provision for correction of errors and legitimate legal redress if there is an infringement of those rights. In return he/she obtains benefits from the state to which the taxes are paid. This may be limited solely to the right to the receipt of the balance of the income or capital sum on which the tax is levied but which ideally should include the right to hold assets freely and to dispose of those assets as he/she thinks fit, with or without another levy being made.  Those very benefits are referred to in the later articles of the Universal Declaration of Human Rights.  It will become immediately apparent that a great deal of human rights can be readily and habitually violated by an ill conceived or poorly administered tax system.

In any modern state there is a strong correlation between the taxpayer's consent to pay his/her taxes (however grudgingly that may be) and the necessary constraints imposed on the taxpayer by the tax authority to ensure an even and necessary flow of tax revenue. This finely tuned balance between right and obligation and between exaction and enforcement lies at the heart of a successful modern nation state. We think it not just best practice but an essential objective of nation building that the rights of the person in a given state in respect of his/her fiscal environment be recorded in a Taxpayer Charter which has legal force. This Taxpayer Charter should also deal with the responsibilities of the taxpayer in equal measure and these we deal with next.

In 1990, following a survey of all its member states, the OECD published a briefing paper on taxpayers' rights and duties. Included in that briefing was the following note identifying what it considered to be the basic rights attributable to taxpayers. The survey found that, while most countries at that time did not have an explicit Taxpayer Charter, the following basic Taxpayer Rights were present in all systems:

  • The right to be informed, assisted and heard
  • The right of appeal
  • The right to pay no more than the correct amount of tax
  • The right to certainty
  • The right to privacy
  • The right to confidentiality and secrecy

Whilst we do not think this is a complete listing of the rights which should be recognised (or indeed an accurate one in respect of all existing tax systems either then or now), we do think they are core rights and have used them as a point of commencement for our Taxpayer Charter.