A comparison of New Zealand taxpayers' rights with selected civil law and common law countries - have New Zealand taxpayers been "short-changed"?

• Author: Sawyer, Adrian J.

ABSTRACT

This article seeks to ascertain the breadth of rights that taxpayers enjoy in New Zealand in comparison with their counterparts in a number of common law and civil law jurisdictions. Such a comparison enables the wealth of experience that codification of rights in civil law countries can provide in comparison to the traditionally lower reliance on statutory protection in common law jurisdictions. From this comparative analysis common themes are distilled, as well as differences between New Zealand and various civil law and common law nations with respect to the legal position and state of taxpayers' rights. The author mounts a strong argument that New Zealand taxpayers have been short-changed--in comparison with the selection of civil and common law nations--from a legal (formalistic) perspective, and more recently from an informal point of view. This assertion is evidenced by the absence of a constitution protecting fundamental human rights, minimalist legal protection of rights through statutory means, and the poor attempt at providing a charter of taxpayer rights. Consequently, there is the possibility that a future government may ignore and override not only fundamental taxpayers' rights, but also fundamental human rights. The author concludes by strongly suggesting that it is better to prevent the undesirable from happening rather than resting in what may be a false comfort that a satisfactory level of taxpayers' rights will remain through administrative convention and informality.

1. INTRODUCTION AND BACKGROUND

   Many countries are seeking to improve the service provided to the taxpayer, in part because modern tax systems require increased cooperation from the taxpayer if they are to operate efficiently and also as a result of changing attitudes towards the role of the tax administration vis-a-vis the taxpayer. This cooperation is more likely to be forthcoming if mutual trust exists between the taxpayer and the administration and if the taxpayer's rights are clearly enumerated and protected.(1)

   Taxpayers' rights, for individuals at least, should be seen in the broader context of human rights where there are established principles and an international collective understanding of fundamental human rights.(2) In particular, there are international and European covenants on human rights that have been adopted and widely ratified, including the International Covenant on Economic, Social and Cultural Rights,(3) the International Covenant on Civil and Political Rights,(4) the European Social Charter,(5) the European Convention on Human Rights and Fundamental Freedoms,(6) the European Community Treaty,(7) and various other U.N. agreements and treaties.(8) Organizations have been created to monitor and hear complaints concerning these covenants and conventions by citizens of member states. In sum, the process of stating and protecting human rights is largely internationalized to a commonly accepted standard in the developed world. Furthermore, almost all developed nations have legislated for basic fundamental rights through a constitution, which provides the highest level of protection that a legal system can offer.

   The same conclusion cannot be reached for taxpayers' rights--a subset of human rights dealing with the tax administration and government on tax-related matters.(9) As the Organization for Economic Cooperation and Development (OECD) observes,(10) a clear statement of taxpayers' rights and accompanying protection will be positive in terms of enhancing taxpayers' collective levels of compliance and providing a mechanism for taming ever more powerful tax administrations. To date, no international statement of taxpayers' collective rights exists, and the release of such a statement is not imminent. Indeed, the OECD's report illustrates that its member nations have differing views on the rights they are willing to offer to their taxpayers.(11)

   Many of the rights that taxpayers may enjoy arise in the context of basic human rights, a discussion of which is beyond the scope of this article. This article, however, will highlight the importance of providing rights for taxpayers both in dealing with revenue authorities and in relation to basic fundamental human rights. Consequently, it is opportune to ask the question, "Should there be a separate statement of taxpayers' rights in addition to statements of basic human rights?" The answer, submitted here, is in the affirmative and is twofold. First, many of the rights taxpayers should be able to enjoy are too specific to be set out in a higher level covenant or code of human rights or, for that matter, in a constitution, since they relate to dealing with the tax administration and associated issues.(12) Second, as will be demonstrated later in this article, not all nations in the OECD(13) provide for the same protection of their taxpayers. In short, in the absence of any international statement or covenant on taxpayers' rights, taxpayers cannot--and perhaps should not--expect consistent treatment in their affairs from nation to nation. While substantive tax legislation differs from country to country as a result of national sovereignty in determining tax policy and law, it is my contention that the basic taxpayer rights, as set out in Parts II and III of this article, should be substantially similar. For instance, while national human rights laws differ in legislative style, most developed countries and many developing nations have endorsed international covenants and conventions setting out basic human rights and freedoms, notwithstanding the underlying differences in substantive law between these nations.(14)

   Why, therefore, have a readily accessible statement, either in the form of a charter, declaration, or code, setting out taxpayers' rights? The simple answer, in my view, is that it enables taxpayers to be aware of their rights and the obligations and standards that can reasonably be expected of them, which arguably is a fundamental right in itself. Furthermore, such a statement will assist in enabling taxpayers to meet their tax obligations with more certainty(15) and to be more confident when dealing with the revenue authority, including handling disputes. In an environment of globalization of trade, finance, and business activities, taxpayers are increasingly involved in activities that come to the attention of revenue authorities outside of their own country of principal residence.(16) That is, taxpayers are coming to the attention of revenue authorities in the countries in which they have a presence.(17) Generally accepted standards of tax administration conduct and taxpayers' rights, in my view, would serve to facilitate the growing phenomenon of globalization.

   The intent behind this article is to ascertain the breadth of rights that taxpayers in one common law country, New Zealand, enjoy in comparison to their counterparts in a number of common law and civil law jurisdictions. The comparison of selected civil law and common law jurisdictions enables the wealth of experience that codification of rights (or offering fundamental legislative protection) in civil law countries can provide in comparison to the traditionally lower reliance on statutory protection in common law jurisdictions. Given my experience with New Zealand's position on taxpayers' rights, this article is able to offer not only a valuable comparison of taxpayers' rights in a number of OECD member nations, including those of both civil law and common law extraction, but also a perspective on a nation internationally represented as a leading promoter and protector of human rights.(18) However, as this article will argue, New Zealand provides noticeably less protection in statutory form for taxpayers than an observer would reasonably expect, given the (overstated) high regard for New Zealand as both a protector of, and advocate for, highly developed universal human rights.(19)

   An important limitation must be indicated at the outset. This article does not purport, and could not hope, to provide a comprehensive comparison and detailed statement of the current nature and state of taxpayers' rights in all developed civil law and common law nations, many of which are members of the OECD. Therefore, not only is this study limited to a subset of civil law and common law nations,(20) but it also does not consider taxpayers' rights in nations in which both human and taxpayers' rights are likely to be an issue of grave concern, such as a number of developing (or emerging) nations and some former socialist or communist nations (or transition nations). Rather, this article will focus on New Zealand taxpayers' rights in the context of international standards of taxpayers' rights. The comparison draws upon the experience of a number of well-developed industrial common law and civil law countries.(21)

   Part II of the article provides a brief summary of the status of taxpayers' rights in several civil law jurisdictions, namely Austria, Belgium, Denmark, France, Germany, Hungary, Japan, Luxembourg, the Netherlands, Spain, Sweden, and Switzerland. Part III considers the position in several common law nations, namely Australia, Canada, New Zealand, South Africa,(22) the United Kingdom, and the United States. The material in both Parts II and III will draw upon international comparative work prepared under the auspices of the International Bureau for Fiscal Documentation(23) and the OECD.(24) The discussion will focus on the main subject of this article--New Zealand--in Part IV, where a more in-depth analysis will be undertaken with respect to taxpayers' rights and obligations. Part V will distill from the preceding discussion common themes as well as differences between New Zealand and other OECD nations (comprising selected civil law and common law nations), with respect to the legal position and state of taxpayers' rights.

2. TAXPAYERS' RIGHTS IN CIVIL LAW COUNTRIES

   1. A Comparative...