The SPS clarifies existing policy statements that address where the Commissioner is considering prosecution; the validity of a taxpayer’s dispute documents; and situations where either the Commissioner or the taxpayer wish to propose another adjustment or, where the Commissioner wishes to propose a fresh or increased liability.
Where the Commissioner is considering prosecution
The disputes process contains provisions compelling a taxpayer to provide certain documents, for example, in respect of an alleged tax liability. Therefore, the Commissioner must use their information gathering and dispute process powers with care to ensure taxpayers’ fair trial rights, are upheld throughout the disputes process.
To ensure that taxpayers’ fair trial rights are upheld, the Commissioner will advise a taxpayer that the Commissioner is contemplating taking prosecution action against them, they can voluntarily choose to continue with the disputes process; and that exceptional circumstances can exist under s 89K of the Tax Administration Act 1994.
While a taxpayer may choose to continue with the disputes process when the Commissioner is contemplating prosecution, any information in a disputes document that the taxpayer provides (such as a NOPA, Notice of Response (NOR) or Statement of Position (SOP)) could be used against them in criminal proceedings. It is therefore crucial that taxpayer’s seek legal advice before deciding to continue with the disputes process (which a taxpayer can discontinue at any stage).
The validity of a taxpayer’s dispute documents
The SPS makes it clear that when the Commissioner receives a NOPA, NOR or SOP from a taxpayer, it is only the courts, and not the Commissioner, that can invalidate the document. In the case of a taxpayer’s NOPA or NOR, unless it is incomprehensible or provides no argument to which the Commissioner can respond, the document will be accepted as valid.
Where the Commissioner or the taxpayer wish to propose another adjustment or, the Commissioner wishes to propose a fresh or increased liability
Once the disputes process is started, if either party wishes to propose another adjustment, or if the Commissioner wishes to propose a fresh or increased liability after a NOPA has been issued, this must be done by issuing a further NOPA. Neither the taxpayer nor Commissioner can simply include the additional adjustment in a subsequent disputes document for an existing dispute.