TTax Disputes

The Administrative Review
Process for Tax Disputes:

Tax Objections and Appeals in
Latin America and the Caribbean
A Toolkit
Abstract
A well-designed internal administrative process for reviewing tax decisions can contribute to
economic efficiency, competitiveness, and growth by accurately identifying errors in tax admin-
istration, lowering compliance costs for taxpayers, and enhancing the credibility and popular
legitimacy of the tax regime. This toolkit describes the administrative processes that various juris-
dictions in Latin America and the Caribbean (LAC) use to review tax decisions and analyzes their
relative efficiency and effectiveness. The toolkit is designed to provide policymakers, tax
officials, donor agencies, and development partners with a framework for improving the business
climate by enhancing the quality of the administrative tax-review process, and it offers practical
advice for designing and implementing tax-review procedures based on good-practice principles
derived from the international experience. While the toolkit focuses on the LAC region, its
conclusions and guidelines are directly applicable to countries around the world.
After providing an overview of the key concepts of administrative tax review, the toolkit
describes the most salient lessons learned from the international experience, examines recent
global trends and innovations, and explores the tax-review mechanisms used by 23 countries in
the LAC region. This approach reveals how various concepts apply in practice while highlighting
priority areas for reform. The toolkit’s detailed account of the most common tax-review issues
facing LAC countries is designed to inform national strategies for improving tax administration.
The toolkit also offers an analysis of cutting-edge developments in information and
communications technology and their potential to strengthen various aspects of administrative tax
review. It concludes by underscoring the key role that an effective communications strategy plays
in the successful implementation of tax-administration reforms.
The toolkit draws on three main sources of information: (i) the experience gained by the World
Bank Group through more than 20 years of engagement in tax policy, (ii) the international litera-
ture on tax policies and systems, and (iii) a survey examining tax administration and related issues
in 23 LAC countries. The analysis is based primarily on data collected in 2016, and thus it may
not fully reflect the latest round of reforms in all countries.
CHAPTER 3 : INTERNATIONAL GOOD PRACTICES
AND GLOBAL TRENDS IN ADMINISTRATIVE TAX REVIEW...............................................28
Ten International Good-Practice Principles for Internal Tax Review................................................29
Principle 1: Legally Define the Rules of the Process.........................................................................29
Principle 2: Harmonize Internal Review Procedures..........................................................................30
Principle 3: Ensure the Independence of the Review Institution........................................................32
Principle 4: Communicate Effectively with the Public
and with Taxpayers Involved in the Review Process.........................................................................34
Principle 5: Resolve Disputes as Early in the Process as Possible.....................................................36
Principle 6: Collect, Publish, and Report Performance Data..............................................................37
Principle 7: Embrace ICT Solutions...................................................................................................38
Principle 8: Train Officials Continually.............................................................................................39
Principle 9: Improve the Quality of Tax Documents..........................................................................39
Principle 10: Establish and Use Performance Indicators....................................................................40
International Trends in Internal Tax Review......................................................................................40
Cooperative Approaches to Tax Administration................................................................................40
Leveraging ICT Solutions...................................................................................................................42
Utilizing Creative Communication Strategies....................................................................................43
CHAPTER 4 : ADMINISTRATIVE TAX REVIEW IN

LATIN AMERICA AND THE CARIBBEAN.................................................................................. 44
Elements of the Review System.........................................................................................................44
Country Characteristics......................................................................................................................44
Tax Systems........................................................................................................................................44
Institutional Capacity..........................................................................................................................44
Internal Tax-Review Processes in the LAC Region...........................................................................44
The Legal Framework.........................................................................................................................44
Institutional Arrangements.................................................................................................................47
Procedural Features............................................................................................................................48
The Use of ICT in the Internal Review Process.................................................................................52
Performance and Reform....................................................................................................................52
Conclusion..........................................................................................................................................53
CHAPTER 5 : SELECTED REFORM ISSUES

IN ADMINISTRATIVE TAX REVIEW........................................................................................... 55
Legislative Issues................................................................................................................................55
Optimizing the Use of Legislation......................................................................................................55
Determining the Appropriate Degree of Legislative Detail...............................................................55
Determining the Relationship Between
Administrative and Judicial Review...................................................................................................56
Establishing Formal Requirements for an Objection..........................................................................57
Defining Objection Exclusions...........................................................................................................57
Distinguishing Between Objections and Appeals...............................................................................58
Formulating Representation Rules for Individuals and Businesses...................................................58
Procedural Issues................................................................................................................................58
Suspending Payments During the Internal Review Process...............................................................58
Instituting Requirements for the Notice of Objection or Appeal.......................................................60
Ensuring Document Delivery and Proof of Receipt...........................................................................60
Establishing Taxpayer Deadlines.......................................................................................................60
Extending Deadlines for the Taxpayer...............................................................................................61
Avoiding Frivolous or Unreasonable Objections and Appeals..........................................................61
Establishing the Scope of the Review................................................................................................63
Allowing for an Increase in Taxes......................................................................................................63
The Burden of Proof and Disclosure Requirements...........................................................................63
Instituting Voluntary or Mandatory Formal Hearings........................................................................64
Considering Matters of Fact and Matters of Law...............................................................................64
Defining Rules for New Evidence......................................................................................................65
Establishing Deadlines for Review Decisions....................................................................................65
Using Case Profiling...........................................................................................................................66
Allowing for Settlements....................................................................................................................66
Determining the Content of the Objection Decision..........................................................................67
Institutional Issues..............................................................................................................................68
Determining the Appropriate Review Authority................................................................................68
CHAPTER 6 : THE ROLE OF INFORMATION

TECHNOLOGY IN ADMINISTRATIVE TAX REVIEW..............................................................69
Information Management in Internal Tax Reviews............................................................................69
E-Government Systems for Document Filing,
Payments, and Recordkeeping............................................................................................................70
Physical and Network Security...........................................................................................................71
Interagency Agreements.....................................................................................................................71
Developing an Interactive Website.....................................................................................................72
Workflow Management and Communication Processes....................................................................72
Data Management...............................................................................................................................73
ICT Development and Management...................................................................................................74
Long-Term Planning and Sustainability.............................................................................................74
Capacity-Building...............................................................................................................................74
Monitoring and Evaluation.................................................................................................................75
Risks...................................................................................................................................................75
CHAPTER 7 : THE ROLE OF PUBLIC COMMUNICATIONS
IN REFORMING THE ADMINISTRATIVE TAX-REVIEW PROCESS....................................76
Fostering Stakeholder Trust and Acceptance.....................................................................................76
Communications Strategies and Plans................................................................................................77
Credible Representation......................................................................................................................78
Openness and Transparency...............................................................................................................80
Public Accessibility............................................................................................................................80
A Communications Action Plan.........................................................................................................80
ANNEXES.........................................................................................................................................85
Annex 1: Copy of Questionnaire........................................................................................................85
Annex 2: List of Tax Authorities Contacted.......................................................................................90
Annex 3: Tables for Chapter 3............................................................................................................91
Annex 4: Reforming the Tax Review Process..................................................................................113
Annex 5: Case Study - Reforming the Tax Appeals Process in Jamaica.........................................120
List of Tables, Figures, and Boxes
Tables
Table 2.1: Key Features of the Internal and External Review Processes...........................................21
Table 2.2: Typical Features of a Quasi-Judicial Tax-Review Authority............................................24
Table 2.3: Comparison of One-Tier and Two-Tier Internal Tax-Review Systems............................26
Table 3.1: Internal Review Legislation in Selected Countries...........................................................30
Table 3.2 : Online Services Provided by Selected Tax Authorities...................................................39
Table 4.1: Summary of the Legislation on Internal Tax Reviews
in Mexico and St. Kitts & Nevis.........................................................................................................46
Table 4.2: Standard Forms for Tax Objections..................................................................................51
Table 4.3: The Use of Web-Based Services in
Internal Review Processes by Region.................................................................................................53
Table 5.1: Criteria for Determining Whether an
Internal Review Should Be a Precondition for a Judicial Review......................................................57
Table 5.2: The Effect of a Request for an Administrative
Review on the Disputed Tax Payment................................................................................................59
Table 5.3: Incentives to Discourage Frivolous Objections.................................................................62
Table 5.4: Formal Hearings in Selected Countries.............................................................................64
Table 5.5: The Scope of the Review Process in Selected Countries..................................................65
Table 5.6: The Relative Strengths and Weaknesses
of Different Internal Tax Reviewers...................................................................................................68
Table A2.1: Legislation on Internal Tax Review by
the Tax Authority in Selected LAC countries....................................................................................90
Table A3.1: Legislation on Internal Tax Review by
the Tax Authority in Selected LAC countries....................................................................................91
Table A3.2: Issues Addressed in Tax Laws on Objections
(First Administrative Review) Against Income Tax
Assessments in the Caribbean............................................................................................................92
Table A3.3: One-Tier Internal Tax Review Systems in LAC............................................................93
Table A3.4: Two-Tier Administrative Tax Review Systems in LAC................................................93
Table A3.5: Mechanisms to Ensure the Independence of the
Second Administrative Review in Selected LAC Countries..............................................................94
Table A3.6: Scope of Objections by Tax Type
in Selected LAC Countries.................................................................................................................96
Table A3.7: Deadline to Object a Decision of the Tax Authority
(First Administrative Review) in Selected LAC Countries................................................................98
Table A3.8: Deadline to Request an Appeal and Objection Decision
(Second Administrative Review) in Selected LAC Countries...........................................................99
Table A3.9: Deadline to Deliver the Objection Decision
(First Review) in Selected LAC Countries.......................................................................................101
Table A3.10: Whether an Administrative Review Decision
is Required before Judicial Review, Selected LAC Countries.........................................................101
Table A3.11: Average Length of the First and
Second Administrative Review Process...........................................................................................102
Table A3.12: Tax Payment Suspension and Interest Rates
Applied if Objection or Appeal is Not Successful or Payment
is Delayed in Selected LAC Countries.............................................................................................104
Table A3.13: Mandate to Negotiate a Settlement
with the Taxpayer, Selected LAC Countries....................................................................................106
Table A3.14: The Use of Web-Based Services in
Internal Review Processes in Selected LAC Countries....................................................................107
Table A3.15: The Use of Case Management Filing
Systems in Selected LAC Countries.................................................................................................109
Table A3.16: Recent Reforms of the Administrative
Review Process in Selected LAC Countries.....................................................................................110
Table A3.17: Key Performance Indicators (KPI) for the
Administrative Review Process in Selected LAC Countries............................................................111
Figures
Figure 3.1: The Degrees of Independence of the
Tax-Review Review Institution in Ascending Order.........................................................................32
Figure 6.1: Information Management at Various
Stages of the Internal Tax-Review Process........................................................................................70
Figure 6.2: Key Elements of the
Generic Internal Tax-Review Workflow............................................................................................73
Figure 7.1: Sample Outline of a Communications Action Plan.........................................................84
Boxes
Box 2.1: The Organization of the Objection Process
among Tax Authorities in LAC..........................................................................................................22
Box 2.2: Examples of Review Boards
and Administrative Tax Tribunals......................................................................................................24
Box 3.1: The Independence of the Internal
Review Process in Australia...............................................................................................................33
Box 3.2: The Customer Service Charter of
the Irish Revenue Commissioners......................................................................................................34
Box 3.3: Objection Statistics Published in Germany..........................................................................38
Box 5.1: Sample of the Jamaica Revenue
Appeals Division’s Decision Structure...............................................................................................67
Box 7.1: Innovative Public Communication Methods and Media.....................................................78
Box 7.2: Communicating the Establishment
of a New Appeals Agency in Jamaica................................................................................................79
Box 7.3: Generic Training Agenda for Communications Specialists.................................................81
Acknowledgments
The publication of this toolkit was made possible by a generous contribution from the Swiss State
Secretariat for Economic Affairs and Global Affairs Canada as part of the Business Tax Simplifi-
cation in Latin America and the Caribbean (LACTAX) program implemented by the World Bank
Group.
The toolkit was prepared by the World Bank Group’s LACTAX team. Its primary authors are
Marc Reichel, Graeme Godfrey Hammond, and Isabel Espejo (Consultants) and Numa F. De
Magalhaes (Senior Private Sector Specialist). It was prepared under the general direction and
supervision of Ana Cebreiro (Senior Economist).
The authors would like to thank peer reviewers Rajul Awasthi (Senior Public Sector Specialist)
and Mariana Montiel (Senior Counsel) for their valuable comments and insights. The toolkit also
benefited from input provided by Claudia Vargas (Consultant) and Pedro Andrés Amo (Senior
Private Sector Specialist, International Finance Corporation). Sean Lothrop (Consultant) revised
and edited the text, and Deborah Delmar and Lucía Burneo (Consultants) managed the logistics
involved in the toolkit’s production.
Context
The LACTAX program includes a knowledge-management component designed to promote dialogue,
encourage peer-to-peer learning, and support the dissemination of knowledge and best practices among
public and private stakeholders involved in tax policy and administration. Its goal is to help
governments across the region develop suitable and balanced reform programs that successfully
improve the business climate, support competitive markets, facilitate the development of small and
medium enterprises, and help prevent harmful, zero-sum regional tax competition.
Many of the key challenges faced by tax authorities in Latin America and the Caribbean stem
from the excessive complexity of regional tax systems, which increases administrative costs for
the both the public and private sectors, generates uncertainty for investors, and creates opportuni-
ties for corruption. Reforms that simplify and streamline regional tax systems have the potential to
increase public revenue, improve governance, and encourage investment, employment, and long-
term growth.1 According to the World Bank’s Investment Climate Advisory Services, 2 a credible,
independent, and expeditious administrative tax-review process is vital to an efficient tax system.
A well-functioning tax-review process, including appropriate appeals mechanisms, improves
public perceptions of the legitimacy of the tax regime, promotes tax compliance, and increases
revenue collection.
Like other administrative processes, tax-review systems must be regularly observed, assessed, and
reformed to maintain their effectiveness and ensure that they achieve their intended objectives. In
this context, the following toolkit examines global best practices for administrative tax review and
applies them to the unique challenges facing Latin America and the Caribbean. The toolkit
presents a detailed analysis of regional tax-review systems and provides policymakers and tax
officials with a framework for evaluating their efficiency and identifying priority areas for reform.
1 World Bank Group, 2011. “Tax Perception and Compliance Cost Surveys: A Tool for Tax Reform.”
2 World Bank Group, 2009. “A Handbook for Tax Simplification.”
12
Chapter 1: Introduction
The Purpose of the Toolkit

The quality of each country’s tax administration is a major element of its business climate and a
key factor in determining investment decisions. Because investors value certainty and predict-
ability in tax administration, enhancing the tax-review process can encourage investment and
promote economic growth and diversification. A vast body of literature examines numerous
aspects of taxation, from ideal tax rates and tax types to good practices for tax legislation and tax
administration, yet relatively little attention has been devoted to the internal process for identi-
fying errors by the tax authorities and addressing objections by taxpayers. This process–known as
administrative tax review–is an integral part of tax administration, as a well-designed review
process can enable the authorities to accurately identify and swiftly address errors, lower compli-
ance costs for taxpayers, and enhance the credibility and popular legitimacy of the tax regime.
Conversely, a poorly designed or ineffectively implemented review process can compromise the
efficiency of tax administration and undermine public confidence in the tax system. In this
context, the following toolkit was created to facilitate the establishment of thorough and efficient
administrative processes for administrative tax review.
The toolkit addresses a wide range of legal, administrative, and institutional issues related to
administrative tax review. Its purpose is to assist national policymakers, private-sector tax
preparers, international development agencies, and other stakeholders in analyzing and strength-
ening tax-review processes. While it focuses on the Latin America and the Caribbean (LAC)
region, the toolkit’s research, analysis, and guidelines for establishing an effective and efficient
review process are directly applicable to countries around the world.
13
14 The Administrative Review Process for Tax Disputes: Tax Objections and Appeals in Latin America and the Caribbean
The Scope of the Toolkit

This toolkit describes and analyzes the various systems through which taxpayers in the LAC
region may formally request and receive an internal administrative review of a tax authority’s
decision. It examines the different objectives, legal frameworks, institutional arrangements,
proce-dures, and requirements of each system and considers their relative merits in the context of
the international experience. The toolkit focuses exclusively on the internal review processes
under-taken by the tax administration or other public agencies, and it does not cover external
review by the judiciary. The analysis also touches briefly on cooperative approaches for avoiding
or settling tax disputes, such as advance tax rulings, alternative dispute resolution (ADR),
arbitration, or negotiated settlements.
The toolkit begins by exploring the conceptual foundations, legal and institutional prerequisites,
and principal objectives of administrative tax review. It defines and compares the respective
institutional arrangements for reviews conducted by the tax authority itself, by a separate tax-re-
view authority, and by a tax board or tribunal. It also contrasts one-tier and two-tier administra-
tive tax-review systems and describes the key features of an effective administrative tax-review
process, which include a strong legal foundation, substantial institutional independence, robust
transparency requirements, and a high degree of procedural efficiency.
The toolkit goes on to examine international good practices and global trends in administrative
tax review. It presents ten good-practice principles based on the international experience that
address the legal basis for tax review, the structure of the review process, and the relevant insti-
tutional arrangements. Countries with high-performing tax authorities, including Canada, Hong
Kong, Singapore, and the United Kingdom are used to benchmark the quality and efficiency of
review processes in LAC. The analysis of global trends indicates a shift toward more cooperative
approaches for resolving tax disputes, underscores the importance of leveraging information and
communications technology (ICT) solutions, and highlights the expanding use of innovative
communications strategies.
In the context of the international experience, the toolkit details the governing legislation, admin-
istrative procedures, and institutional frameworks for administrative tax review in 23 LAC coun-
tries. The authorities in these countries completed a survey designed to collect information on
their different approaches to administrative tax review and gauge the quality and efficiency of
their review processes. An analysis of the survey data reveals several priority reform areas and
yields important lessons for countries in LAC and worldwide. The analysis finds that the key
determinants of an effective review process include the transparency of its governing legal and
regulatory framework, the strength of the relevant institutional arrangements, the efficiency with
which disputes are resolved, and the effectiveness with which ICT solutions are integrated into
the process. Particularly important legislative factors include the degree of regulation applied to
the review process and the formal requirements for objecting to a tax decision. Key procedural
features include the effect of an objection on the tax payment, the taxpayer and tax authority’s
respective deadlines for advancing the review process, the mechanisms used to discourage friv-
olous objections, and the scope of the administrative review. The most salient institutional issue is
the designation of the appropriate review authority.
Because all tax-review processes require a substantial degree of information management,
effective documentation and recordkeeping is vital to the quality of administrative tax review.
Replacing paper-based application forms, stamps, and physical signatures with online e-filing and
e-payment systems can greatly improve information management. The toolkit describes the key
technological and administrative issues associated with developing and implementing a comput-
erized information-management system to guide the tax-review process. These include integration
with other e-government systems, physical and network security, potential interagency agree-
ments, web development, workflow management, information exchange, data management, and
the associated capacity-building requirements.
Finally, the toolkit explores how a robust communications strategy can enhance the quality of the
tax-review process. It describes effective methods for publicizing tax reforms and outlines
appropriate training modules for tax officials. A sound communications strategy can build public
trust in the tax authority and reinforce the legitimacy of the tax system, but accomplishing these
objectives requires credible representation, openness and transparency, public accessibility, and a
well-trained staff. Examples of successful communications initiatives are drawn from the inter-
national experience, and the analysis concludes by presenting a comprehensive communications
action plan.
Goals and Target Users

The toolkit’s primary objective is to provide policymakers and agents of the tax administration
with a framework for evaluating and enhancing the quality of the tax-review process. It provides
practical advice on the design and implementation of review procedures based on good-practice
principles gleaned from the international experience. The toolkit aims to assist government offi-
cials, bilateral donor agencies, multilateral development partners, and both domestic and interna-
tional nongovernmental organizations in strengthening their capacity to productively engage with
issues around administrative tax review. While the toolkit reflects the institutional arrangements
and administrative procedures that are most common in the LAC region, its conclusions and
guidelines for establishing an effective review process are directly applicable to countries around
the world.
Regional Focus
The World Bank’s LAC region comprises 32 countries, including 12 in the Caribbean and 20 in
mainland North, Central, and South America. This toolkit uses examples from 10 island nations 3
and 13 mainland countries.4 While these countries were selected on basis of data quality and
administrative resources, they are sufficiently numerous and diverse to provide an overview of
regional tax policies and practices. The Caribbean countries include both former British and
former Spanish colonies, with political and legal systems rooted in both the common law and civil
law traditions. The continental Latin American countries include both large and small nations,
allowing for a well-balanced sample reflecting a wide range of political-economic circumstances
and administrative capacity constraints.
Methodology
Consistent with its goals and target users, the toolkit is designed to serve as a practical guide for
policymakers, private firms, development partners, and informed citizens. Certain concepts have
been simplified to keep the text as clear and accessible as possible.
The toolkit draws on three main sources of information:
• The experience gained by the World Bank Group through more than 20 years of engage-
ment in tax policy, legislation, and administration reform in LAC and around the world.
• The international literature on tax policies and systems, including academic analyses,
policy reports, and legislation from multiple countries; and
• A survey of tax-review procedures in LAC conducted expressly for the toolkit. This
survey took the form of a questionnaire sent via email to the management of the tax
authorities of 27 LAC countries, 23 of which responded. These 23 countries form the
toolkit’s sample group, and their responses are described in detail in Chapter 3. In
countries that conduct a second internal review, the same questionnaire was also sent to
the authorities in charge of the second review. The response rate was 85 percent for the
first questionnaire and 63 percent for the second. The survey team used letters and
telephone interviews to supple-ment incomplete responses. A copy of the questionnaire
and a list of the tax authorities contacted are included in Annexes 1 and 2.
3 Antigua & Barbuda, Barbados, Dominica, Grenada, Guyana, Jamaica, St. Kitts & Nevis, St. Lucia, St. Vin-
cent & the Grenadines, and Trinidad & Tobago.
4 Argentina, Bolivia, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Mexico, Nicaragua, Paraguay, Peru,
Uruguay, and Venezuela.
The Contents of the Toolkit

Chapter 2 outlines the scope of the toolkit and explains the key terms and concepts involved in
administrative tax review. It describes the key features of the review process, details its guiding
rationale, and situates it in the context of the larger tax regime.
Chapter 3 presents good-practice principles and explores international trends in administra-tive
tax review. It defines the prerequisites for a well-functioning tax-review process, including
accessibility, transparency, legislative grounding, independent oversight, efficiency, and flexible
decision-making.
Chapter 4 describes and compares tax-review processes in the selected LAC countries using data
derived from the above-mentioned survey. It identifies broad regional commonalities and
highlights idiosyncratic features of specific country systems.
Chapter 5 identifies typical tax-review reform challenges. It details the legislative, institutional,
and procedural issues most often encountered by reform advocates and describes how to address
them.
Chapter 6 describes the important role ICT solutions can play in improving the efficiency of
administrative tax review, including the potential of web-based services and platforms, comput-
erized data-management systems, and interinstitutional networks.
Chapter 7 discusses how public communications initiatives can support and complement the
reform program. It describes how tax-review reforms can be effectively publicized and identifies
appropriate training modules for tax officials.
Chapter 2: Key Concepts
in Administrative Tax Review
The Purpose of Administrative Tax Review

Most countries grant taxpayers the legal right to challenge alleged errors in tax administration or
improper decisions by the tax authority in a court of law. Indeed, judicial review of actions by the
executive agencies, including the tax authority, is generally regarded as fundamental to the rule of
law. While an administrative review of tax decisions is not a substitute for judicial review,
providing taxpayers with an opportunity to obtain an internal review within the executive branch
before appealing to the courts can strengthen the integrity of the tax administration, speed the
process of redressing taxpayer grievances, and ease the caseload faced by tax courts. An effective
administrative review process is not only less costly than an appeal to the courts, but is often a
taxpayer’s only realistic chance to be heard. In some countries, taxpayers frequently wait years to
obtain a final court decision and pay several times the average annual income level on lawyers
and court fees.
Beyond affording taxpayers the opportunity to have inaccurate tax assessments revised and errors
redressed without the burden of litigation, a well-organized internal review process also offers
important advantages for the government. An internal review can enable the tax authorities to
swiftly identify and correct mistakes at a minimal fiscal and administrative cost and without the
need to involve the judicial branch. The benefits of resolving tax disputes within the tax authority
are so substantial that many governments have made an internal review mandatory before a
taxpayer can seek legal recourse.5
Germany is one such country, and statistics collected by the Ministry of Finance underscore the
impact of mandatory internal reviews. A study in Germany found that in the year 2000 more
5 A survey of 52 advanced and emerging economies showed that three-quarters allowed legal recourse only
after an administrative review. Tax Administration 2013, OECD, p. 321.
18
than one in five tax assessments included errors, and the error rate in certain local tax centers was
as high as 50 percent.6 In 2014, 3.46 million objections were submitted to the tax authori-ties, and
4.23 million objection decisions were issued. 7 Only 61,958 of these decisions, just 1.5 percent,
were challenged before a court of law, while in all other cases the internal review process
adequately addressed the taxpayers’ concerns.8
Most countries grant taxpayers the legal right to challenge alleged errors in tax
administration or improper decisions by the tax authority in a court of law.
Indeed, judicial review of actions by the executive agencies, including the tax
authority, is generally regarded as fundamental to the rule of law. While an
administrative review of tax decisions is not a substitute for judicial review,
providing taxpayers with an opportunity to obtain an internal review within the
executive branch before appealing to the courts can strengthen the integrity of
the tax administration, speed the process of redressing taxpayer grievances, and
ease the caseload faced by tax courts. An effective administrative review
process is not only less costly than an appeal to the courts, but is often a
taxpayer’s only realistic chance to be heard. In some countries, taxpayers
frequently wait years to obtain a final court decision and pay several times the
average annual income level on lawyers and court fees.
The World Bank Handbook on Tax Simplification summarizes the general
objective of the internal tax-review process. Its goal is to provide a credible,
independent and timely resolution to taxpayer objections, thereby strengthening
public confidence in the tax system and reducing opportunities for corruption
and abuse. The OECD regards administrative reviews as one mechanism for
safe-guarding taxpayers’ rights and ensuring the integrity of the revenue
authority. According to the OECD guidelines for tax administration, the internal
review process has three main objectives, which each country may prioritize
differently:
 Efficiency. Internal tax-review procedures should resolve tax
disputes in a timely and less expensive manner than courts of law.
These objectives can be accomplished by minimizing procedural
rules, allowing informal communication within the tax authority and
with the taxpayer, and adopting a flexible approach to dispute
resolution that focuses on achieving mutually agreeable outcomes.
 Self-control. The review process should give the tax authority an
opportunity to evaluate its own systematic accuracy and
administrative capacity. The primary purpose of the tax authority is
not to maximize revenue collection, but to apply tax laws correctly.
The internal review process can help the authorities ensure equal
treatment of taxpayers, identify and correct recurring errors, reduce
corruption, and enhance the overall quality of tax administration.
• Justice. In jurisdictions where litigation is especially slow and
expensive, many citizens may be effectively unable to obtain legal
redress in tax cases. A swift and inexpensive review process by an
independent agency within the tax authority can greatly enhance the
perceived fairness and credibility of the dispute-resolution process.
A well-designed process for administrative tax review should reflect and
address the unique constraints of the national legal system. For example,
in cases where judicial procedures are particularly slow, the efficiency of
the internal review process should be emphasized. In cases where
litigation is especially expensive, the internal review process should focus
on serving lower-income taxpayers.
Types of Tax Review

The two most common systems for evaluating tax decisions and
redressing grievances are: (i) an internal administrative review process
conducted by an executive agency, and (ii) an external judicial review
process conducted by a court of law. This toolkit concentrates solely on
internal review, which includes reviews by tax authorities, independent
review boards, and executive-branch tax tribunals. It does not encompass
the operations of regular courts, specialized tax courts, or judicial tax
tribunals. Nevertheless, in order to fully contextualize the internal review
process, the key elements of both systems are briefly outlined below.
Internal Review
Taxpayers the opportunity to request an internal administrative review of
decisions made by the tax authorities, and most mandate at least two
stages of administrative review before a taxpayer can appeal to the
courts. The second internal review is typically conducted either by the
tax authority or by another executive-branch institution supervised by a
ministry. The review is carried out by public officials who are bound by
both the standard civil-service regulations and the specific procedural
rules of the agency charged with internal tax reviews. In all cases, the
outcome of the internal review process is not final and may be appealed
in a court of law. Most LAC countries guarantee the right to such an
appeal in their respective national constitutions.
External Review
The external judicial review process differs in several important ways from the
internal administrative review process. External review is conducted by either a
general court of law or a specific court, chamber, or tribunal empowered to
adjudicate tax disputes. In most cases, the external review process is conducted
entirely by the judiciary, and the verdict is rendered by a judge. In some
countries, however, special tax tribunals may include adjudicators that are not
judges. These tribunals and their tax experts are governed by unique procedural
legislation. The decisions rendered by both tribunals and other courts can
typically be appealed to a higher court per the structure of each country’s
judiciary, and the decision rendered by the highest court of appeal is final and
terminates the review process.
Whereas an internal administrative review provides opportunities to verify the
underlying facts of the initial decision, a judicial review often limits its scope to
matters of law, especially at higher levels of the judiciary. Rules designed to
protect judges from undue influence safeguard the independence of the
judiciary, and the integrity of each country’s judicial system hinges on the
extent to which these rules are respected and enforced. taxpayers to review
decisions made or actions taken by a public institution or its personnel. These
requests may or may not assert a legal right to such a review, and they may or
may not allege a specific legal or procedural violation.
Internal Review by the Tax Authority
The institutional arrangements for internal review, its regulatory framework, and
the appeals process are all specific to each country, and different tax authorities
have different levels of administrative capacity. Some countries allow the same
official or unit that issued the objected decision to conduct the review, while
others allocate this task to a separate official or specialized unit within the tax
authority.
The degree of separation between the person or unit in charge of the initial
decision and those tasked with reviewing it varies by country. Some countries,
such as Antigua & Barbuda, charge the deputy commissioner of the tax authority
with reviewing all objections. Others, like Jamaica, have an initial assessment
made by the respective local tax center of the tax authority, while objections.
Internal Review by a Separate Authority

Some countries have established special tax-review agencies with a high degree
of independence from the national tax authority. However, these agencies are still
part of the executive branch, their employees are civil servants, and they are often
overseen by the same ministry as the official or office that issued the original
contested decision. While these agencies do not have the same degree of
independence as a court of law, regulations barring both the official that issued
the decision and the commissioner of the tax authority from interfering in a
second internal review allow the appeals authority to effectively serve as a quasi-
supervisory body during the review process.
Singapore: The Board of Review is charged with addressing appeals to objections
lodged against the Comptroller of the Internal Revenue Authority. Its decisions are
made by a committee with at least three members. The Chairman or Deputy
Chairman of the Board must be a district judge or accountant. The other members
may be businesspeople or tax experts.
Denmark: The Danish National Tax Tribunal is the only tax tribunal in Denmark.
It rules on administrative decisions by the Tax Authority, either with or without an
oral hearing, and its decisions can be appealed in local courts of law
Hong Kong: The Internal Revenue Review Board is an independent tribunal
consisting of at least three members. It rules on objections to decisions by the
Commissioner of the Internal Revenue Department. The board’s rulings can be
appealed to Hong Kong’s High Court, but only on questions of law.
Prerequisites for an Efficient and Effective Tax-Review
System
A sound tax-review system delivers timely, credible decisions at a reasonable
cost. The effectiveness of a tax-review process hinges on four criteria: legality,
independence, transparency, and efficiency. While different countries may choose
to emphasize the dimensions that best reflect their unique objectives and
institutional contexts, all four are essential to the quality and integrity of the
review process.
Legality
Legality reflects the extent to which the tax-review process is governed by laws and
formal administrative rules. When assessing the legality of the review process,
policymakers should consider whether the legal and regulatory frameworks are
appropriate to the objectives of the review process, whether they adequately limit
arbitrary or capricious actions, and whether they provide both the substance and
appearance of justice.
The laws and regulations that govern the tax-review process should be clearly
distinguished from those that govern the assessment of tax liability. The legislation
should also clearly separate operational and administrative rules, and it should
avoid inconsistency and redundancy. Some tax administrations may be empowered
to establish internal review processes without the need for new legislation.
Independence
Independence refers to the administrative distance between the office that made the
original decision and the office charged with reviewing that decision.18 While the
complete separation of the two can enhance the independence of the review process,
this often entails a significant cost, whereas reviewing objections and appeals
within the existing tax administration typically requires fewer resources.
Policymakers in each country or jurisdiction must attempt to strike the balance
between independence and administrative efficiency that best reflects their unique
circumstances.
Finally, at the far end of the spectrum, a government could create a separate
institution outside the tax authority charged with managing the review process. This
institution would be fully independent, but it would entail the greatest cost in terms
of staff and resources.
Transparency
Transparency reflects whether a taxpayer can easily obtain key information on the
review process. Highly transparent tax-review systems provide clear, easily accessible
information on the steps involved in the review process. In addition to a user-friendly
description of their rules and procedures, tax authorities should provide regular
updates on the status of each taxpayer’s objection or appeal.
Efficiency
Efficiency reflects the ability of the review process to render decisions swiftly and at a
low cost to both the taxpayer and the state, especially relative to the time and cost
involved in pursuing a case through the court system. The less efficiently a review
process is organized, the fewer disputes will be settled at the objection stage.
Indicators of efficiency include the average time between when an objection or appeal
is submitted and when a decision is rendered, the number of officials involved in the
process, the internal costs to the tax administration, and the compliance costs borne by
the taxpayer.
International Good Practices and Global

Trends in Administrative Tax Review
international good-practice principles for administrative tax review and highlights the
implications of recent global trends. from OECD countries and other highly
developed economies such as Canada, the United Kingdom, and Germany (which use
one-tier systems), Australia (which uses a two-tier system with a tribunal), and
Singapore and Hong Kong (which use two-tier systems with a panel). These
economies were selected because they represent a wide range of internal review
processes and because their tax-appeals management systems are generally effective
and efficient. The diversity of these systems underscores the extent to which there is
no single “right way” to establish an internal tax-review process.
The quality of an internal tax-review process hinges on its efficiency, credibility,
transparency, and ability to reach determinations that are generally regarded as
satisfactory and fair. However, the best strategy for managing tax objections is to
prevent them before they arise.
The following measures can help reduce the number of objections that the internal
review process must resolve: (i) developing an effective communications system, (ii)
simplifying tax legislation and presenting it in an accessible format, (iii) ensuring
adequate administrative flexibility to correct mistakes; and (iv) introducing self-
assessments, advance tax rulings, and other tools designed to reduce the number of
objections that must be resolved through the review process. The more information
taxpayers have about tax laws and processes, as well as the basis for tax decisions and
the grounds for appealing them, the fewer objections will be lodged. Moreover, the
objections that are lodged will tend to reflect more serious substantive issues.
Some objections are unavoidable, however, and the following 10 international good-
practice principles for internal tax review can help the authorities establish a well-
functioning process that serves the interests of both taxpayers and the state. While
many of these principles are not limited to the internal review process and can be
applied to multiple aspects of the public administration, this toolkit will continue to
focus on internal tax review.
Ten International Good-Practice Principles for Internal Tax
Review
Principle 1: Legally Define the Rules of the Process
A credible internal tax-review process requires the degree of public transparency and
formal authority provided by legislation. The laws governing the tax-review process
should be clearly presented and easily understandable to non-specialists. To avoid
taxpayer confusion and ensure consistent application of the law, the tax administration
and legislature should clearly and consistently define key terms related to the internal
tax-review process.
Some countries have relatively simple laws governing objections and appeals, while
others provide a significant amount of procedural detail. The first stage of the review
process may require only limited legislation; for example, the United Kingdom does
not have any legislation on the first stage of the internal tax-review process.
However, countries that offer an internal appeals process typically devote specific laws
or chapters of the tax code to it. Usually, the higher the administrative level of the
reviewing institution, the more elaborate its legal framework. If the tax authority can
communicate effectively with taxpayers in a context of administrative transparency
and mutual trust, the government may need only a simple legal basis for the initial
objection process.
Principle 2: Harmonize Internal Review Procedures
Objections can be lodged against various types of tax assessment. Some
countries provide for objections in the laws governing each tax type. Others
include objection rules in an umbrella law on tax procedures, which typically
applies to all tax types. When objection processes are included in individual tax
laws, each process is often unique to its respective tax. However, adopting
multiple objection procedures for different tax types is generally unnecessary
and potentially wasteful, and thus harmonizing internal review procedures is
regarded as a good-practice principle.
Principle 3: Ensure the Independence of the Review
Institution
The independence of the internal review institution increases the credibility of
the entire tax system, encourages voluntary compliance with tax laws, and
results in more satisfactory decisions that reduce the need for litigation. The
independence of the tax-review institution also improves the attractiveness of a
country’s investment climate by strengthening investor confidence in the tax
system’s integrity. Moreover, an independent review institution cannot easily be
politicized and provides greater predictability to firms and individuals.
Various factors influence the independence of an internal review institution,
including: (i) its legal status; (ii) the rules for appointing its officials; (iii) its
integration into the institutional hierarchy;
its supervisory structure; and (v) the administrative status of its employees.
While highly independent internal review institutions tend to be the most
effective, they can also impose significant administrative costs, as they require
additional offices and staff that are exclusively dedicated to reviewing
objections and appeals. However, a well-designed institutional framework
supported by appropriate regulations and effective information-management
systems can mitigate these costs. Figure 3.1, below, illustrates the various
degrees of independence of internal review institutions.
Principle 4: Communicate Effectively with the Public and
with Taxpayers Involved in the Review Process
An effective communications strategy can greatly facilitate the review process, as
well-informed taxpayers are more likely to refrain from submitting cases that lack
merit, provide complete documents and other evidence, enter the process with
realistic expectations, and make use of ICT services where available.
Communication is also a key element of institutional transparency and credibility.
An effective communications strategy should address the specific information
needs of the general public, of the taxpayers involved in the administrative tax-
review process, and of relevant professionals such as accountants and tax lawyers.
Communications strategies often begin with institutional mission statements,
declarations of taxpayer rights, or other foundational definitions of the
responsibilities of the tax authority, its agents, and taxpayers.
Principle 5: Resolve Disputes as Early in the Process as
Possible
Putting systems in place to fast-track certain disputes or refer others to
mechanisms can greatly enhance the efficiency of the internal review process. For
example, the Australian Taxation Office offers in-house mediation, in which an
impartial facilitator from the Review and Dispute Resolution team meets with the
taxpayer and the agent who made the original assessment to hold a structured
discussion of the case. The mediation process is offered free of charge. The
Australian Taxation Office also offers large businesses an early independent
review option for audit statements. Upon request by the taxpayer, the U.S. Internal
Revenue Service provides an Appeals Fast-Track Settlement procedure designed
to expedite the internal review process.
To minimize the possibility of systemic inequalities in tax administration,
horizontal monitoring and other cooperative approaches should be made
available to all taxpayers, not just the largest taxpayers.
Principle 6: Collect, Publish, and Report Performance Data
Continually improving the internal review process requires detailed information
on the efficiency of tax institutions and the performance of their staff. Some
performance data should be regularly reported to a supervisory body to identify
emerging challenges and adjust resource allocations accordingly. Other data
should be made available to the public in the interest of transparency,
accountability, and establishing realistic expectations among taxpayers.
Taxpayers should be aware of the average length of the review process, the
percentage of disputes resolved in favor of the taxpayer, and other practical
information on objections and appeals. Key data that should be collected and
reported include: (i) the total number of objections and appeals made and the
monetary amounts involved; (ii) the total number of review decisions and the
amounts involved; (iii) the share of tax assessments that are objected to; (iv) the
share of objections and appeals rejected by the tax authority; (v) the current
backlog of cases; (vi the number of decisions issued per official.
Principle 7: Embrace ICT Solutions
ICT systems can greatly enhance data collection and analysis. uses the SIGTAS
program to produce regular data on various aspects of tax administration, which
provide the basis for performance assessments and budget planning. ICT systems
can also facilitate communication with taxpayers and help publicize important
information. Key online services include downloadable forms, calculators and
other tools, e-filing and e-payment platforms, and secure databases for storing
taxpayer information.
Principle 8: Train Officials Continually
An efficient internal review process requires well-trained staff. Due to the
complexity of most tax systems and the frequency of both legislative and
administrative changes, tax personnel require continual training. Key training
subjects include procedural rules, taxpayer communications, and the use of ICT
solutions. Training plans should be formulated for staff at each administrative
level, and the effectiveness of training sessions should be regularly assessed. A
well-regarded training program can also enhance the tax authority’s
attractiveness to potential recruits.
Principle 9: Improve the Quality of Tax Documents
Accessible tax forms are crucial to the efficiency of tax administration, and
simple, clear documents can help prevent disputes from arising. Tax forms
should focus on collecting essential information, and they should communicate
ideas and requests in a straightforward manner. Streamlined tax forms can reduce
the administrative burden on both the taxpayer and the tax authority. To the
extent possible, tax forms should be made available for download or online
submission via a secure government website. The most important forms in the
internal review process include the notice of objection or appeal and the
withdrawal of objection or appeal.
Supporting documents can improve the transparency and consistency of the
internal review process, which are vital to its credibility and efficiency. In
addition to high-quality tax forms, process maps, procedural manuals, and
internal circulars can enhance the flow of information within the tax authority
and improve the consistency of the review process.
As tax procedures may change frequently, the manual should be regularly
updated. Finally, internal circulars can allow agents of the tax authority to
document and disseminate information regarding actions taken and decisions
made. Circulars can be issued regularly or on an ad hoc basis. Circulars should be
sent to all agents, and the information they provide should be regularly
consolidated and incorporated into new editions of the procedural manual.
Principle 10: Establish and Use Performance Indicators
Policymakers can use performance indicators to assess the effectiveness and
efficiency of tax institutions and design appropriate reforms. Key performance
indicators include: (i) the number of objections filed and resolved; (ii) whether
the case was settled, fully or partially decided, or rejected; and (iii) the length of
the objection process. To collect these data, every objection should be assigned a
unique identification code and recorded in a casefile. Each casefile should
include the identity of the taxpayer, the office in charge of the original
assessment, the nature of the assessment and any penalty applied, the type of tax
and the tax period, the amount of the disputed payment, and the date when the
objection was lodged. In cases involving multiple points of law, the amount in
question should be broken down by legal issue whenever possible.
International Trends in Internal Tax Review
In recent years, three major trends have emerged around tax administration in
general and internal tax review in particular. These trends include: (i) the
increasingly widespread adoption of a cooperative approach to tax
administration the mechanisms, (ii) the rising use of ICT platforms and
services, and (iii) the application of enhanced communications practices.
Cooperative Approaches to Tax Administration
Tax authorities in advanced economies have increasingly adopted a
cooperative approach to tax administration designed to minimize the
frequency of objections, deliver swift and satisfactory resolutions, and
alleviate the administrative burden on the formal internal review process.
However, implementing cooperative approaches can pose a considerable
challenge for developing countries, as these approaches require specific skills
and experience, detailed rules, and effective supervisory systems, which
developing countries may lack. Inadequate staff training and experience and
weak institutional frameworks can increase the rate of errors and facilitate
corruption.
In the United States, the Compliance Assurance Process describes the
country’s cooperative approach to addressing cases that cannot be easily or
effectively resolved through the normal internal review system.
Several countries, including Mexico and Brazil, have recently established a
tax ombudsman’s office. By addressing complaints, an ombudsman can
facilitate interactions between tax officials and taxpayers, helping to resolve
or prevent disputes.
Leveraging ICT Solutions

Online taxpayer services can provide access to information, forms, calculators
and other tools, e-filing and e-payment platforms, and secure taxpayer-
information databases. However, because ICT systems entail high costs and
require continuous internet access, tax authorities in developing countries may
have difficulty establishing these systems and encouraging their use, especially
among lower-income households.
countries offer some of the online tax services listed above, e-filing and e-pay-
ment platforms are limited. Moreover, some countries that do provide these
services have not extended them to encompass objections and appeals. By
contrast, over 75 percent of OECD coun-tries now allow e-filing for all major
taxes, and both the availability and use of online services have expanded
dramatically over the past decade. Austria, for example, introduced e-filing for
personal income tax returns in 2003; it reported a usage rate of 10 percent in
2004, which shot to 80 percent in 2013. Germany introduced e-filing in 1999,
and between 2004 and 2013 its usage rate increased from 4 percent to 51
percent.43
Utilizing Creative Communication Strategies
Tax authorities are increasingly using creative communications strategies to better

inform taxpayers of internal review procedures and improve institutional
transparency and credibility. Other educational materials and outreach tools can be
used to encourage taxpayer compliance and enhance the efficiency of internal
review procedures. Leaflets can be used to explain the key stages of the objection
and appeals process to taxpayers in simple terms. Well-designed newsletters can
educate taxpayers and tax professionals on the internal review process, the
relevant public institutions, and recent decisions by the tax authority and/or the
When the taxpayer does not agree with the assessment, the protest
procedure ensues. Protests may arise in at least the following situations:
1. The taxpayer does not want to abide by the tax laws.
2. The taxpayer pursues an unreasonable position.
3. The tax authority has made a mistake.
4. The facts are in dispute.
5. There are doubts concerning the interpretation of the tax laws,

thus requiring a decision by the courts.
The first two cases are symptomatic of a taxpayer culture of challenging

tax assessments frequently, even where the assessment is justified. This
might have to do with any number of factors, including rules about
requirements to pay tax pending appeal and interest rates on tax debt (both
discussed below), corruption, or the corrosive effect of tax amnesties.
Germany
Tax Disputes Resolution in Germany: Protest/appeals procedure
The first step in the procedure is protest before the same office making the protested
decision (within one month from its notification). This office tries to solve the problem
in an informal manner by openly discussing the case with the taxpayer.
Most protests (60-90%, depending on the office) are disposed of as a result of this
discussion39: either the taxpayer is convinced of not being right, or the protest is
accepted (for example, because the taxpayer presents new evidence), or both parties
reach the conclusion that in uncertainty the appropriate result can fall within a range,
finding a solution which is acceptable for both. In the last two cases the section
makes a new assessment which is no longer contested by the taxpayer. When the case
is not solved by the decision making section, it sends the case directly to the appeals
section (die Rechtsbehelfstelle), at the same hierarchical level as other sections in the
tax office, independent from them, and whose only function is reviewing appeals.
This also works in a very informal and speedy manner, discussing with the taxpayer,
personally or by phone, partly recognizing the right of the taxpayer, partly convincing
the taxpayer of not being right, partly finding a solution in between.
Only when the taxpayer is not satisfied and willing to go to court, is there a formal
reasoned decision on the protest, notified to the taxpayer, who is allowed to go to
court within one month. An action before the court is only possible in principle if the
taxpayer has first exhausted the out-of-court appeal proceedings. However, the court
can be appealed to directly if the public authority agrees to this, or if the revenue
authority fails to respond with a decision on an objection within a reasonable period
and without giving an adequate reason for failing to do so.
South Africa
After objection to SARS, taxpayers may channel tax disputes with SARS through
one of the following56:
 Alternative Dispute Resolution (ADR).
 The Tax Board, with jurisdiction when the tax in dispute does not exceed
R 100,000.
 The Tax Court, with jurisdiction when the tax in dispute is in excess of
R100,000.
Regulations on alternative dispute resolution procedures and settlement as
a form of dispute resolution other than litigation were introduced under
sections 107A and B of the Income Tax Act, effective from 1 April 2003
in pursuance of enhancing SARS’ client services, and included two
different procedures:
In case of agreement on the procedure, SARS will appoint a facilitator
(normally a trained and experienced SARS officer) who will endeavor to
resolve the dispute between the parties. The facilitator is bound by a code
of conduct and must seek a fair, equitable, and legal resolution of the
matter, arranging an informal meeting where both parties will state their
case and provide evidence. The facilitator cannot make a ruling or decision
which binds the Commissioner or the taxpayer, nor may compel the parties
to settle the dispute.
United States
When the taxpayer does not agree with any or all of the IRS findings in an
examination/audit procedure, the taxpayer may request a meeting or a
telephone conference with the supervisor of the person who issued the
findings.
If the taxpayer still does not agree, the taxpayer may appeal to the Appeals Office of
IRS, which will take a fresh look at the case and can settle most differences in a fair and
impartial manner taking into account the hazards of litigation.
The protest must be sent within the time limit specified in the letter received by the
taxpayer. If the total amount for any tax period is not more than $25,000, (including
penalties), the taxpayer may make a small case request instead of filing a formal written
protest.
The Appeals Office is the only level of administrative appeal within the IRS,
separate from - and independent of – the rest of the IRS. Conferences with Appeals
Office personnel are held in an informal manner by correspondence, by telephone
or at a personal conference.
To ensure independent Appeals function, expert communications between Appeals
personnel and other Internal Revenue Service personnel are prohibited. If the
taxpayer does not appeal to the IRS Appeals Office the taxpayer will receive a
formal Notice of Deficiency which allows going to the Tax Court within 90 days
(as a general rule) from the date of the notice. If the taxpayer does not file a
petition with the Tax Court within this period the IRS will assess the proposed
liability sending the bill to the taxpayer, and this assessment can no longer be
appealed in the Tax Court
Reference: The Administrative Review Process for Tax Disputes: Tax Objections and Appeals in Latin America
and the Caribbean (World Bank Group)
CONTEXT
It is common practice to provide taxpayers with an opportunity to request an internal review of

disputed decisions by the revenue authorities. A credible, independent and fast appeal process
improves taxpayer confidence in the tax system, reduces opportunities for illegal tax collection
and curbs corruption and extortion by tax officials.70
There are two general types of review processes:
1. An internal or administrative review is typically conducted by officials of the tax authority; and
2. An external or judicial review is conducted an independent court of law.
Most countries, including Jamaica, offer taxpayers the possibility of both requesting an adminis-
trative review of an assessment and subsequently a judicial review by the courts.
Tax Appeal process in Jamaica
Tax Authority Decision
Object to Tax Authority

Review Administrative
Appeal to Revenue Appeals

Review Judicial Division (RAD)
Appeal to Revenue Court
In Jamaica, the courts accumulated a large backlog of cases, which significantly extended the time
period for judicial review decisions. To address this, an additional internal appeals process was
established to provide taxpayers with a cheaper and faster alternative to the courts. This resulted in a
three-tier system in which a taxpayer could object an assessment of the tax authority to the objec-
70 World Bank, Handbook on Tax Simplification, 2009, p. 131.

tions unit of the tax authority, then file an appeal against the objection decision to the Revenue
Appeals Division (RAD),71 and subsequently appeal against the RAD decision to the courts.
In 2010 the government decided to overhaul the institutional and procedural arrangements for appeals.
At the time, the Taxpayer Appeals Department (TAD) was not a separate, independent entity from the
Tax Administration Directorate, as the Commissioner of Taxpayer Appeals reported directly to the
Director General of Tax Administration. It was felt that based on international best practices, TAD
should be a distinct and independent agency in order to ensure the impartiality of its decisions. The
International Monetary Fund (IMF), in a report on its 2006 mission to review the proposed reform,
formally proposed the separation of TAD, and this suggestion was subsequently approved by the
Cabinet. The World Bank Group was asked to support the reform process in 2013, and it has, in
partnership with the governments of Canada 72 and Switzerland73, provided technical assistance to aid
various elements of the reform program since that time.
Despite implementation of some of the reform recommendations, RAD continued to face a

backlog of cases. In 2014 RAD had a backlog of 240 appeals cases and it took RAD an average of
more than 1.5 years from the date of acceptance, and 5 months from the conclusion of a hearing,
to deliver an appeals decision.74 Considering that an appeal suspends the taxpayer’s payment obli-
gations in Jamaica, the procedure had a significant effect on government revenue. Approximately
JMD 3 billion (US$25 million), or 0.5 percent of the public budget, was held up in the appeals
process in 2014.75
While Jamaica’s institutional arrangement to allow for two sequential administrative reviews is
unusual, the lessons learned from reforming the Jamaican appeals process can be useful for other
countries facing an inefficient and expensive administrative or judicial review process.
ISSUES
An analysis of Jamaica’s internal review process in 2013 showed that taxpayers, though generally
content with the quality of appeals decisions, were dissatisfied with the length of the process.
Moreover, the revenue authorities expressed concerns about taxpayers misusing the process to
delay their tax payments. Several factors contributed to the length of the review process: (i) a
formal hearing had to be convened for every appeal; (ii) the Commissioner of RAD had to chair
each hearing; (iii) both the taxpayer and the tax authority had to be present at the hearing; (iv)
every appeal had to be determined by issuing a formal decision; (v) case files from the tax author-
71 The former Tax Appeals Department (TAD) was renamed Revenue Appeals Division (RAD) in 2015.
72 Global Affairs Canada (GAC)
73 The State Secretariat for Economic Affairs (SECO)
74 Baseline data provided by RAD is pending validation from the WBG project team.
75 Ministry of Finance and Planning
ities were submitted late and in some instances not submitted; and (vi) there were no penalties in
place in the event that a party delayed or obstructed the appeals process.
Overall Reform Program
The objective of the reform was to create an appeals process that enabled an average appeal time
of six months from the time the case was accepted and 60 days from the date the hearing was
concluded, without compromising the quality of the appeals decision.
Components and Sequencing
The first step in initiating such a reform should be to formulate a policy that defines the overall
role of the appeals process, possible institutional options and the legal approach. Legislative
drafting should only begin after policy questions are resolved. The Government of Jamaica
considered several options, including to consolidate the administrative review process into only
one stage, establish a more formal tax appeal tribunal, or to maintain the three-tier review process,
but make it more efficient and autonomous. The decision was to adopt the third option, as it
would minimize disruptions to the system and could be achieved at less cost.
A team of international experts from the WBG provided support for each of the four main compo-
nents of the reform program:
1. Drafting a new revenue appeals law and implementing its rules. Many of the envisioned
institutional changes required legislative backing. The government opted for a new law
instead of amending the existing Revenue Administration (Appeals and Disputes Settle-
ment) Regulations of 2002. The key rationale behind preparing a new law was to consoli-
date the new appeal institution, which was to be separated from the tax authority;
2. Implementing institutional and procedural changes. In order to make the reform worth-
while, the additional flexibility afforded to the appeals body in the new legislation needed
to result in streamlined procedures. This component included an analysis of existing
processes and recommendations for improvements. Outputs included detailed process flow
charts, simplified forms and new templates, a Memorandum of Understanding between
RAD and the tax authorities, a detailed operations manual and staff training on the new
operating framework.
3. Automating the process. The goal of this component was to improve the review process’
efficiency by linking the appeals body to the tax authorities, using digitalized files,
assisting officers in processing an appeal, sharing file information within the organization
and producing status reports.
4. Communicating the reform and educating taxpayers on the new appeals framework. A
new communications strategy was adopted and elements of the associated action plan were
implemented to coincide with key milestones, materials were developed, and staff were
trained on communications and client relations.
Sequencing the Reform Process
The sequencing of the components was important. The entire process, from drafting instructions
to the adoption of the Revenue Appeals Division Act, took over four years and involved thirteen
drafts. During these four years, a marginal amount of work could be done on the other
components of the program76. Additional work on the other components could only commence
after the shape and content of the Act and its rules became apparent. For example, the process
flow charts and forms had to be designed before a first draft of the manual could be produced.
Develop
Make key Stakeholder Stakeholder ICT system,
policy consultations consultations train staff,
decisions on policy on legislation communicate the
changes
Design new Draft appeals Implement

process law and rules new process
Legislative Changes
A new law was necessary to establish the independent appeals institution within the Ministry of
Finance and Planning, now called RAD, mandated to decide on tax and customs appeals. The new
legislation consisted of two parts: a law dealing with the institutional set up and implementing
rules establishing the appeals procedure. The institutional provisions provide RAD with its own
independent legal framework and establish the principles for its operations.
The rules on the appeals procedure will:
• Eliminate the obligatory formal hearing in appeals cases and instead give the Commis-
sioner of Appeals three options: (i) to conduct a formal hearing; (ii) to facilitate a settle-
ment between the parties; or (iii) to issue a decision without a formal hearing based on the
documentation available.
76 The WBG team started contributing to the process when the reform was already 2 years underway. This
particular process took an extended period of time to implement since it included the creation of a new law,
an independent appeals institution as well as an automatization.
• Enhance the right of officers to collect information in informal meetings. This will
give the taxpayer the right to be heard, yet without the time-consuming formalities of a
formal hearing.
• Allow the Commissioner to delegate powers. The old system resulted in a bottleneck, as
formal hearings had to be conducted and every step in the process had be confirmed by the
Commissioner.
• Allow RAD to decide an appeal when one of the parties willfully tries to delay or
obstruct the appeals process.
• Though not obligatory, allow the taxpayer to request a formal hearing.
• Allow the taxpayer to go directly to the Revenue Court, waiving the right to an
appeal.
Details of the appeals process were only formulated during the legal drafting phase, which
may have extended the drafting process.
Institutional and Procedural Changes
Detailed flow charts were used to redesign the review process. The development of case
criteria was particularly important in determining whether an appeals case could be
decided based on the available documentation, needed a formal hearing or might be
suitable for a settlement. A range of supporting documents were enhanced to streamline
the process and make the reforms sustainable, including:
—— Mandatory Appeal Forms. Prior to the reforms appeals could be submitted by letter
and in any format. The advantage of the mandatory form is that the appellant is
encouraged to submit only relevant facts and the reviewing officer knows where to
find relevant information. The appeal form is available in all tax offices and can be
downloaded from the tax authority’s website.
—— Withdrawal Forms. Under the old system appellants usually submitted a letter
indicating their intent to withdraw an appeal. Nothing in the law explicitly facilitated
the withdrawal of an appeal. The law now gives appellants the option to withdraw
an appeal using a prescribed form.
—— Operating Manuals. A more-detailed operations manual provides practical guidance to

appeals officers and helps ensure the consistent application of appeals legislation.
—— Settlement Templates. The previous law did not allow for settlements. The new settlement
template clarifies the rules surrounding settlements and ensures that essen-tial
information is included. It also contains the legal provisions of a settlement.
—— Decision Templates. A decision template ensures that all relevant facts are included in
the decision and that information is presented in a standard format. The decision
template was revised in line with other procedural reforms.
A Memorandum of Understanding was signed between RAD, the tax administration and
the Jamaica Customs Agency under the supervision of the Financial Secretary within the
Ministry of Finance. It stipulates the rights and obligations of each party with regards to
facilitating and expediting the review process, assigns liaison officers to each of the
parties, and includes guidance on resolving disputes.
The Role of ICT
The reform program attempted to move the country from paper-based management of the
appeals process to a digital file management system. This was particularly important as
previous review delays were often caused by a failure of the tax authority to send rele-vant
tax files to the appeal division on time. In addition to its time savings, an electronic system
can increase internal transparency by allowing for greater sharing of case data and
performance reports.
This coincided with larger efforts to computerize the tax administration’s operations. A
new ICT operational system was implemented, which will include a module that will be
adopted to RAD. As a result, both agencies will be able to use certain digitalized files, yet
at the same time secure sensitive data from being accessed. This is important as it ensures
RAD’s status as an independent review authority.
Training
The training of RAD staff was an important component to ensure proper implementation
of the reforms. Trainings included a course on legislative changes and their applications,
ICT use and the new case management system, public speaking, interacting with taxpayers
and media management. The courses were provided over 12 months.
Communication Strategy
A communications strategy was developed and endorsed by the head of RAD to establish
the guiding principles and policies of the organization’s outreach activities. A detailed
work plan was also developed to ensure that the public was well informed on the reform
program and the new review framework once the legislation was drafted.
RAD prepared materials such as frequently asked questions, brochures, videos and other
documents. Trainings were conducted for RAD staff to strengthen their communications
with the media and stakeholders and improve client relations. Meetings and sensitization
sessions were also held with various stakeholder groups, informing them of the contents of
the RAD bill.
PERFORMANCE INDICATORS
RAD refined the performance indicators that were in use under the previous system. Setup of the
RAiS software included the production of real-time performance data, as well as monthly,
quarterly and annual reports. RAD plans on releasing some of the data to the public to make the
process more transparent; for example, the average duration of the appeals process and the
success rate for appeals. This information will also be presented in an annual report to Parliament.
Performance indicators include (i) the total number of appealable decisions; (ii) the number of
new appeals broken down by appealed tax and region; (iii) the stock of appeals broken down by
appealed tax and region; (iv) the average amount appealed; (v) the number of appeal decisions
broken down by type (confirmed, discharged, altered, settled), tax and region; and (vi) the average
duration of the appeal process.
LESSONS
Appropriately sequencing reform components and effectively communicating reforms to both

staff and the public are key components of a successful administrative reform program. Key
lessons learned from Jamaica’s reforms to the tax appeals process include:
• Establish and update performance indicators at an early stage in order to document the
impact of reforms and ensure that improvements are sustainable.
• Answer key policy questions and formulate them within a policy document to guide
the entire reform process. Key questions include, what is the problem to be solved?
What will the internal review achieve and how will achievements be measured? What is
the most effective and efficient institutional set up to achieve the objective? How
independent from the assessment will the review process be and how will the degree of
independence be measured? Will the request for an internal review suspend the taxpayer’s
payment obli-gation? Will all or certain groups of taxpayers be able to waive the right for
an internal review and go directly to the courts?
• Consult with stakeholders at an early stage, once the basic policy parameters have been
formulated, to garner support, avoid misunderstandings and address concerns;
• Address the review process from the start in a comprehensive way. In Jamaica, gains
from reforming appeals procedures were partly offset by the lengthy objections process at
TAJ prior to the appeals process. It became apparent that reforms needed to be extended to
the objections stage;
• Incorporating an ICT component to the reforms can contribute to the more efficient
processing of information, but cannot replace the need for reforming the appeals
process;
• There is a tradeoff between simplifying rules to enhance public understanding,

particularly in rural areas, and ensuring a detailed and efficient review system.
Finding the right balance can be challenging and highlights the importance of developing
an effective communications strategy.
• The WBG’s support helped create momentum for the reform program. By following
up and meeting several times with stakeholders, particularly the drafters in charge of final-
izing the new law and regulations, the WBG helped facilitate a successful reform outcome.
CONCLUSION
Reforming an inefficient administrative tax review process can entail considerable advantages for
the taxpayer and the state. An internal review is often the only realistic option for a taxpayer
looking to obtain a second opinion on a tax assessment. A credible, transparent and fast review
process can promote tax compliance. An internal review is often more credible and acceptable to a
taxpayer if the reviewing body is independent from the assessment agency. Reforming the review
process can generate additional revenue for the government, particularly when an appeal suspends
the taxpayer’s payment.

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The Administrative Review

Process for Tax Disputes:

CHAPTER 4 : ADMINISTRATIVE TAX REVIEW IN

CHAPTER 5 : SELECTED REFORM ISSUES

CHAPTER 6 : THE ROLE OF INFORMATION

The Purpose of the Toolkit

The Scope of the Toolkit

Goals and Target Users

The Contents of the Toolkit

The Purpose of Administrative Tax Review

Types of Tax Review

Internal Review by a Separate Authority

International Good Practices and Global

International Trends in Internal Tax Review

Leveraging ICT Solutions

Tax authorities are increasingly using creative communications strategies to better

1. The taxpayer does not want to abide by the tax laws.

2. The taxpayer pursues an unreasonable position.

3. The tax authority has made a mistake.

4. The facts are in dispute.

5. There are doubts concerning the interpretation of the tax laws,

The first two cases are symptomatic of a taxpayer culture of challenging

It is common practice to provide taxpayers with an opportunity to request an internal review of

2. An external or judicial review is conducted an independent court of law.

Tax Appeal process in Jamaica

Tax Authority Decision

Object to Tax Authority

Appeal to Revenue Appeals

Appeal to Revenue Court

70 World Bank, Handbook on Tax Simplification, 2009, p. 131.

Despite implementation of some of the reform recommendations, RAD continued to face a

Design new Draft appeals Implement

—— Operating Manuals. A more-detailed operations manual provides practical guidance to

Appropriately sequencing reform components and effectively communicating reforms to both

• There is a tradeoff between simplifying rules to enhance public understanding,

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