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Costs of Objections, Reviews and Appeals

22.40. Submissions have been received by the Committee in relation to the recovery of the costs incurred by taxpayers in formulating their objections to assessments and in appealing against the Commissioner's decisions which disallow the objections. Annually a great many objections to assessments are lodged with the Commissioner (see paragraph 22.16 above). Many of these are without substance and are withdrawn by the objecting taxpayer, some after reference to a Board of Review; some are wholly and some partly disallowed by the Board, and some are wholly allowed by the Board. In some cases either the taxpayer or the Commissioner appeals to a Court in respect of a Board's decision. Frequently, even in those cases in which the taxpayer is successful, the form of the objection goes far beyond the requirements of challenging the particular decision to which objection is taken. In many cases the objection takes what is a standard or substantially standard form. In short, to arrive at some reasonable basis for the taxpayer's costs in formulating his objection presents formidable difficulties and in practice the expense of doing so would more often than not exceed what would be a reasonable sum for the objection itself. The Committee does not recommend that the costs of an objection, even if successful, should be met by the Commissioner.

22.41. Bound up with the question of the costs of the objection is the other question whether the taxpayer who is successful before a Board of Review should be reimbursed for his costs and expenses of the hearing before the Board. In considering the answer to that question, these matters should be kept in mind. Firstly, the reference to the Board is one made at the taxpayer's option. Secondly, the reference to the Board puts him at no risk of costs being awarded against him if he is unsuccessful. Thirdly, the taxpayer, confident of success, can always take his case directly to a Court where the winning of his case will result in his costs being paid. The Board of Review is an administrative body and, having regard to the matters referred to, the Committee does not think that costs should be awarded either against the Commissioner or against the taxpayer in respect of its proceedings. The fees and travelling expenses of persons who are required to attend and give evidence pursuant to Regulation 39 (2) of the Income Tax Regulations are entitled to be reimbursed on a scale fixed by regulations—where requested to attend at the behest of the taxpayer, by the taxpayer, and in any other case by the Commonwealth.

22.42. It has been suggested that the Commissioner should abide by the decision of the Board of Review or that, if he wishes to appeal, he should pay the costs of the taxpayer whatever the result of the appeal in the Courts. This raises a somewhat different


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problem. The Commissioner may decide to appeal because he considers that a point of law of general importance is involved or that there is a substantial amount of tax at stake. Appeals to a Court—and the case may go further on appeal from the Supreme Court to the High Court—are usually expensive. In 1967 the Commonwealth Treasurer issued a statement in the following terms:

‘Although it will still be necessary to consider each case on its merits, it has been decided that, when the Commissioner appeals against a decision of the Board of Review, the Commonwealth will, as a general rule, be prepared to bear its own costs and the reasonable costs of the taxpayer in connection with the appeal, irrespective of the outcome. The Treasurer said he would not be prepared to enter into any arrangement regarding costs in cases where the taxpayer was seeking some benefit which the legislature clearly had not intended to grant. Apart from these exceptional cases, however, taxpayers who seek rulings from a Board of Review will have a reasonable assurance that they will not thereby become exposed, against their will, to the cost of litigation in the courts.’

In the Committee's view the Courts should have a wide discretion with regard to the costs on appeals to them from a Board of Review by the Commissioner; but, unless there is some feature of the case which in the opinion of the Court warrants a different order, the costs of such an appeal from a Board of Review should be borne by the Commissioner in any event.

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