There are no greater two surer guarantees in life than death and taxes. There is also absolutely no acceptable excuse for tax evasion. But what happens in cases where the tax authorities get it wrong? And what happens if their decisions are made based on misunderstanding?
The author of this article has been working with national and global taxation for nearly 40 years in his capacity as a chartered global tax advisor, tax inspector, adjunct tax professor, tax lawyer and head of global tax. In his opinion, we should not trust the tax authorities. As a result of what he has learned over the decades, he has become very sceptical about the tax authorities because:
Unfortunately some tax officials have prejudiced views and believe that every single taxpayer cheats, in order to avoid paying tax if given the opportunity. Consequently many taxpayers are taxed erroneously.
International taxation is highly complex and not all tax officers have the necessary knowledge, education, experience or even interest to make a correct, professional assessment.
It is hard to believe, but many tax authorities ignore the taxpayers’ rights – constantly.
Some tax authorities lack proper routines, procedures and even willingness to assess taxpayers in a lawful way.
In the author’s experience the tax authorities often prefer to impose as much tax as possible, rather than perform a correct tax assessment.
Tax officers suffer no consequences if they make wrong decisions - decisions that could be crucial for taxpayers.
Some tax authorities threaten taxpayers with statements like: “You have not done anything wrong, but we need the revenue and if you do not accept the tax adjustment, we will be on your back for the next 3-5 years”.
Tax evasion is unacceptable, but what about situations where the tax authorities make wrong or unlawful decisions, based on misunderstandings, a lack of knowledge and / or a prejudiced belief that every taxpayer is cheating, for instance? This author believes that the tax authorities sometimes cheat taxpayers for the reasons mentioned, something which is even worse than dishonest taxpayers.
The author asks: how many taxpayers suffer unacceptable and unlawful tax assessment? How much have these taxpayers erroneously paid in taxes and penalties? How many taxpayers have had their lives destroyed due to erroneous tax assessment? The author believes that we are talking about substantial numbers. We are probably talking about millions of taxpayers who have been incorrectly taxed worldwide. In addition, we are probably talking about billions of dollars which taxpayers around the world have overpaid in taxes and penalties. This is simply not acceptable!
Tax authorities around the world, including the OECD, the EU, the G20, the World Bank and the UN, are focusing on tax evasion committed by taxpayers, but why is there a lack of focus on what this author considers to be ‘opposite tax evasion’ – situations where taxpayers face unfair, unlawful and erroneous tax assessments issued by the tax authorities?
Based on experience the author believes that we should be very skeptical about the tax authorities and question and challenge all tax inspection reports, decisions and guidelines etc. Trusting the tax authorities can be a pretty costly business. EG