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Inland Revenue

Tax Policy

Chapter 2 - Administering the disputes process

2.1 The current disputes process involves the following sequence of events:

  • A notice of proposed adjustment (NOPA) is issued by either the Commissioner or taxpayer to the other advising that an adjustment is sought to the taxpayer's assessment, the Commissioner's assessment or a disputable decision.
  • A notice of response (NOR) is issued by the recipient of a NOPA if they disagree with it.
  • A disclosure notice is issued by the Commissioner.
  • A statement of position (SOP) is issued by both parties, providing an outline of the issues, facts, evidence and propositions of law with sufficient details to support the position taken.

2.2 There are also two administrative phases in the process – the conference and adjudication phases. If the dispute has not been resolved after the NOR phase, a conference will generally be held to clarify and, if possible, resolve the issues. If the dispute remains unresolved after the SOP phase, the Commissioner will usually refer the dispute to the Adjudication Unit, which is the final process before any amendment to the taxpayer's assessment.

2.3 The full disputes process is set out in the Annex to this paper.

2.4 The efficient resolution of disputes is dependent on how Inland Revenue administers the dispute. Legislation should therefore be sufficiently flexible to allow for a best-practice approach for dealing with this. It is for this reason that the very important steps of the conference phase and the adjudication process are not legislated for.

2.5 Administrative guidelines are a way of effecting good practice; they have the advantage of flexibility, in that they can be relatively easily amended as necessary, while giving taxpayers a degree of certainty about how their dispute will be handled.

2.6 The Commissioner’s current SPSs in relation to the disputes process are SPS 08/01: Disputes Resolution Process Commenced by the Commissioner of Inland Revenue and SPS 08/02: Disputes Resolution Process Commenced by a Taxpayer [3]. The Commissioner has now released the revised SPSs for consultation. This paper is drafted on the assumption that the key changes contained in the revised SPSs will be adopted into practice once the current consultation process is completed. If any of the changes discussed below undergo material change during this consultation process, some of the conclusions in this paper may need to be revised accordingly.

2.7 The motivation for changes contained in the revised SPSs is to specifically address some of the key concerns raised in the NZICA-NZ Law Society submission outlined in Chapter 1. For the purposes of this paper, the most important changes contemplated by the revised SPSs are in the following areas:

  • preparation of the Commissioner’s NOPA;
  • facilitation of a conference;
  • conduct of a conference; and
  • providing guidelines on when the Commissioner would be prepared to opt out of the disputes process under section 89N(1)(c)(viii) (the opt-out guidelines).

2.8 The full text of the revised SPSs can be found at the Policy Advice Division website ( This chapter outlines the content and objectives of the major changes proposed by the revised SPSs.

Preparation of the Commissioner’s NOPA

2.9 A common complaint is that Inland Revenue can “burn off” taxpayers (that is, discourage them from proceeding with the dispute) by issuing a long and complicated NOPA for relatively small disputes. Such NOPAs may increase compliance costs because taxpayers feel forced to issue a lengthy NOR in response.

2.10 The revised SPS (for Commissioner-initiated disputes) is intended to improve the process for NOPAs prepared by the Commissioner in the following ways:

  • by issuing a NOPA only after a completed investigation;
  • by taking a coordinated approach within Inland Revenue to NOPA drafting, to enhance the quality of the NOPA and to ensure that all aspects of it are fully considered before it is issued;
  • by the prompt issue of a NOPA when a taxpayer and Inland Revenue reach the stage where they “agree to disagree”;
  • by ensuring the size of the NOPA is proportionate to the dispute, including guidelines on the maximum NOPA length; and
  • by ensuring the NOPA concentrates on the main legal arguments that support the Commissioner’s position, with alternative grounds and arguments kept to a minimum.

2.11 It is anticipated that these proposed changes will reduce any “burn-off”. The revised SPSs should provide greater certainty and consistency in Inland Revenue’s approach to taxpayers and to better ensure that only arguments with a good prospect of success are pursued.

Facilitation and conduct at a conference

2.12 A conference between the taxpayer and Inland Revenue following the issue of a NOR is seen as a vital part of the disputes process. It is a chance for the parties to the dispute to exchange any information that should have been disclosed and resolves differences in their understanding of facts, laws and legal arguments.

2.13 In their joint submission, NZICA and the NZ Law Society considered that the conference should be an independent forum that benefits both parties. The revised SPSs propose that conferences should, at the option of the taxpayer, be attended by a “facilitator”. The facilitator will be a senior Inland Revenue officer who has not been involved in the dispute.

2.14 The facilitator would not be authorised to settle a dispute. Instead, they would assist in focussing the parties on the relevant facts and technical issues, explore options and ensure that all information that should have been disclosed is exchanged at the earliest possible opportunity. The facilitator will have the ability to determine that the conference phase is at an end.

2.15 The revised SPSs also set out a basic set of ground rules for the meeting. This includes agreeing to and adhering to, wherever possible, an agenda and timeframe. It also outlines how the facilitator (or, if there is no facilitator, the parties) would manage any meetings and how the conference phase is concluded.

2.16 These proposed operational changes should make the conference more meaningful for the taxpayer. If final resolution is not possible, the approach should better enable the parties to focus on agreed points of difference.

Opt-out guidelines

2.17 The opt-out guidelines apply for disputes initiated by the Commissioner and set out the circumstances in which the Commissioner will agree to a taxpayer’s request to opt out of the disputes process. So as not to undermine the “all cards on the table” objective, one prerequisite to the Commissioner agreeing to opt-out is that the taxpayer has participated meaningfully in the conference phase and signed a declaration that all material information has been provided to the Inland Revenue officers directly involved in the dispute. Provided this has taken place, the Commissioner will agree to opt-out when any one of the following features is present:

  • the “core tax” in dispute is $75,000 or less (except when it is part of a larger dispute);
  • the dispute turns on the facts;
  • the dispute concerns issues that are about to be considered by the courts; or
  • the dispute has facts and issues that are materially similar to a previous dispute between the Commissioner and another taxpayer and that dispute has been decided in favour of the Commissioner by the Adjudication Unit, so that the Commissioner is unlikely to change his view on the relevant matters.

2.18 The Commissioner retains the discretion to agree to opt out in circumstances outside of those described above.


3 Both SPS are contained in TIB Volume 20, No. 6, July 2008.