4.7 Legally Binding or Practice Statement

As noted in the discussion on the nature of Taxpayer Charters, the majority of jurisdictions which have adopted such charters have chosen to do so as a practice statement rather than a legally binding document. But to put the question in this way is to obscure rather than clarify the issue posed by the title above.

No jurisdiction which has been reviewed in this document provides that its taxpayers have no rights. Nor do jurisdictions which have such a charter, on a non-binding basis, assert that position. Rather, the question is what should be contained in such a charter and what should be the legal consequences if the charter is not complied with.

The jurisdictions which have non-binding charters simply do not categorize the rights which they confer upon taxpayers as falling within a charter. Concepts such as a right of objection against adverse assessment, or the right to appeal an adverse decision on an objection, are well known in jurisdictions which have non-binding charters. The non-binding charters emphasise entirely desirable objectives such as service standards, commitments to polite and efficient dealing, and the like. It makes little sense to argue that there should be a legal obligation on tax officers to be polite and in any event the question arises as to what should flow from circumstances in which they were rude.

Ultimately, taxpayers have an obligation to pay the tax which the law, properly interpreted and applied to their circumstances, requires them to pay. Failure on the part of the tax authority to deal with them efficiently or politely cannot discharge them from paying the tax due.

On the other hand, taxpayers do have a right to insist that their liability is determined and enforced according to law, and that tax officers respect those rights rather than seek to frustrate them. Provided that the law is balanced, the result should be a fair system which should command respect from the taxpaying public.

Best practice, therefore, requires a comprehensive set of Taxpayer Rights associated with the determination of liability, and enforcement of revenue laws. Whether those rights are described as being within a Taxpayer Charter, or provided generally as part of the legal system, might be argued to matter little.  But our survey perhaps provides the best answer as to why it does in fact matter. To the best of the knowledge of those involved in its production, this is the first attempt which has been made to assemble a comprehensive body of knowledge as to how the various jurisdictions throughout the world deal with these issues. The existence of that body of knowledge will inform considerations of best practice to the benefit of all. Comprehensive statements of the legal rights of taxpayers (and of course the existence of a substantial body of rights) make for transparency, and competitive advantage for those jurisdictions which align their systems with best practice.

And there is no reason why tax authorities, together with taxpayers and tax professionals, should not all seek to achieve performance standards which encourage mutual cooperation so as to ensure the law is properly enforced in a mutually respectful professional environment which goes beyond mere legal rights.

There are many Taxpayer Charters in place which are, for the most part, practice statements issued by the tax authority. Such Taxpayer Charters do not have the force of law. As pointed out earlier, Taxpayer Rights will be granted in legislation in certain areas, such as those concerning tax appeals. In addition, taxpayer obligations will always be enshrined in legislation.

The results of our survey, and the comments made, indicate that the Taxpayer Charter should have legal force to the extent possible, in order for it to be fully effective. Clearly not every provision in the model Taxpayer Charter is capable of being formulated in legally binding terms, but most of the provisions are.  This leads to the supplementary question of determining how Taxpayer Rights are to be enforced, if they are violated, because, as tax authorities well know, laws which are not capable of enforcement have no real effect. It is therefore clear that a taxpayer must have recourse of some nature where a Taxpayer's Rights under a Taxpayer Charter are not adhered to. The exact nature of how a taxpayer might proceed in a situation where a Taxpayer's Rights under a Taxpayer Charter are not upheld will depend on the legal traditions of the particular country. Since these legal traditions vary considerably across the world, it would be wrong to advocate a particular approach as being suitable in all circumstances.  We note, that the office of a Taxpayer Ombudsman (or Taxpayer Advocate) could be the appropriate forum for enforcement of Taxpayer Rights in the first instance (i.e. informed resolution rather than court action) if given the authority to do so.