Tax disputes, litigation costs and access to tax justice

Tax dispute resolution is an integral part of the operation in any modern tax system. The availability of a fair, impartial and independent mechanism for resolving tax disputes between taxpayers and the central collection agency can be viewed as an indicator of how well-developed or advanced is the tax system under study. In Australia, in addition to the Australian Taxation Office (ATO)'s internal review, there exists a comprehensive system of external tax dispute resolution involving the Administrative Appeals Tribunal (AAT) and the courts, and, to a lesser extent, a variety of governmental bodies. At the same time, there is anecdotal evidence that the litigation costs of taxpayers engaging in tax disputes can be very high especially if professional (legal, tax or accounting) assistance is employed. The existence of such high costs can act as a barrier to the effective accessibility of the external tax dispute resolution system and to the neutrality of the outcomes of such disputes (in the sense that taxpayers with greater resources may be able to obtain more favourable outcomes than taxpayers with lesser resources). This paper provides a comprehensive review of the current state of play and sets out a future agenda for research on this topic.