Interest upon Pre-paid Tax Liabilities
22.43. A number of submissions have been made to the Committee to the effect that in certain circumstances payments made on account of taxation liabilities should bear a rate of interest for the benefit of the taxpayer. Some of these relate to a payment of tax in accordance with a notice of assessment notwithstanding that the assessment is objected to, or notwithstanding that, where the objection has been disallowed by the Commissioner, his decision has been referred to a Board of Review or is the subject of an appeal to the Court. By virtue of section 201, the fact that the assessment is objected to and that the Commissioner's decision disallowing the objection has been referred to a Board of Review or is the subject of an appeal to the Court does not relieve the taxpayer from his liability to pay the tax, which may be recovered from him by Court process unless the Court in which such action is taken grants a stay of proceedings, a course which would rarely be taken by the Court. It is not unusual in practice for the Commissioner not to take any recovery action in these circumstances where the taxpayer pays to the Commissioner a proportion of the tax levied, usually 50 per cent. If the taxpayer is ultimately successful in having the assessment set aside in whole or in part, it is this sum, or so much thereof as is refundable to the taxpayer, that is claimed should be repaid with interest.
22.44. Where a taxpayer has paid to the Revenue an amount in full or partial discharge of his purported taxation liability and his objection is upheld by the Commissioner, a Board of Review or a Court, there is justice in the claim that interest should be paid on the amount refundable to the taxpayer. In this case the Crown has enforced from him payment of a sum which has been shown to be taken from him without any justification under the Act which was relied upon for the exaction. Where the Crown rightfully resumes property and delays payments therefor, interest is generally payable upon the debt and, where property is taken from the citizen without sanction, the case for the payment of interest appears to the Committee to be unanswerable. The rate of interest should be specified as a realistic one in keeping with current economic conditions.