THE PROCESSES OF AUDIT , DISPUTE RESOLUTION AND ENFORCEMENT

Construction of Statutes

The general principles governing the construction of taxing statutes enunciated by the English Courts
the classic statement of Rowlatt J in Cape Brandy Syndicate v IRC that:
in a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment.
There is no equity about a tax. Nothing is to be read in, nothing is to be implied.

Classical Approach to Construction of Statutes

Wooding CJ in Reynolds v Income Tax Comr when he said in relation to the construction of the taxing
statue of Trinidad and Tobago:
it must be read as a whole so as to correlate its several parts. Its language, when plain, must be given
its full significance. The imposition of tax being the prerogative of the legislature, the courts must
enforce what the legislation decrees. Interpretation must be strict because it is a taxing statute

Modern Approach to Construction of Statutes

MODERN APPROACH: The trend in modern times is to move away from the literal or strict
interpretation of taxing statutes and to adopt a more purposive approach. This was the applied in the
Jamaican case of Commissioner of Taxpayer Audits and Assessments v CIBC Trust and Merchant Bank
Jamaica Ltd JM 2006 at page 61. There reference was made to the statement of Lord Steyn in the House
of Lords decision in Inland Revenue Comissioners v Mc Guckian (1997) 3 ALL ER 817. There he stated:
During the last 30 years there has been a shift away from the literalist to purposive methods of
construction. Where there is no obvious meaning of a statutory provision the modern emphasis is on a
contextual approach designed to identify the purpose of a statute and to give effect to it. But under the
influence of the narrow Duke of Westminister doctrine, tax law remained remarkably resistant to the non-
formalist methods of interpretation. It was said that the taxpayer was entitled to stand on a literal
construction of the words used regardless of the purpose of the statute.
NB: Duke of Westminster doctrine: Derived from the dictum of Lord Tomlin where he stated in that
case:
Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is
less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however
unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he
cannot be compelled to pay an increased tax.

ASSESSMENT, OBJECTION, APPEAL AND COLLECTIONS

Assessment:
Assessment
Notice of Assessment
Additional Assessment
Value Added Tax Assessment

Objection
Income Tax and PAYE
Corporation Tax
 Value Added Tax (VAT)

Appeal
Tax Appeal Board
Court of Appeal
Privy Council

Enforcement or Collection of Taxes

Collection by Distraint
Garnishment
Civil Proceedings

API PIPELINE CONSTRUCTION CO. LTD v. BIR H.C.A No. 93 of 1999 Justice Sebastien Ventour said:
On the evidence before this Court I have concluded that the Applicant has discharged the burden placed upon
it.

I have found as a fact that the circumstances are exceptional in that the Respondent, after carrying out its audit
of the Applicant and after making its assessment, it proceeded to enforce the liability against the Applicant by
serving a garnishee order on the third party without notifying the taxpayer of its right to challenge the
assessment.

It is trite law that the garnishee order takes effect immediately upon service on the garnishee. Such conduct
is unacceptable and this Court cannot close its eyes to such violation of the rights of the taxpayer; and it
matters not whether the taxpayer is guilty of any wrong doing under the provisions of the Act..
I have therefore found on a balance of probability that the Respondent treated the Applicant unfairly and
acted contrary to the principles of natural justice when it denied the taxpayer the right to challenge the
assessment prior to taking recovery action. In the view of this Court the Respondents conduct amounts to an
abuse of process.

Ramnarine Maharaj v AG & Comptroller of Customs and Excise CV.A 54 of 1997

Justice of Appeal Mr. Mustapha Ibrahim
Before parting with this appeal, I would like to say a word or two to the Customs Department and to other
Government departments that are similarly circumstanced, as for example,the Immigration Department.
Where the laws entrust them with powers, great care must be taken by them in the due exercise of these
powers to ensure that they properly understand the basis on which those powers are entrusted and are to
be exercised, for great hardship and embarrassment may be suffered by the citizenry if the powers are not
exercised in accordance with law as is the case here.

Income Tax Assessments

Section 83
(1) The Board shall proceed to assess every person chargeable with the tax as soon as may be after the day
prescribed for delivering the returns.

Viscount Simon, L.C. in the House of Lords stated:

The word assessment is used in our Income Tax code in more than one sense. Sometimes by assessment is
meant the fixing of the sum taken to represent the actual profit for the purpose of charging tax upon it. But in
another context the assessment may mean the actual sum in tax which the taxpayer is liable to pay on his
profits.
(Rex v General Commissioners of Income Tax for the City of London 9ex parte Gibbs and Others), (1940), 24 T.C.
221, 238).

S. 83(2) Where a person has delivered a return, the Board may:

(a) accept the return and make an assessment accordingly
OR
(b) refuse to accept the return and, to the best of its judgment, determine the amount of the
chargeable income of the person and assess him accordingly

Best of Judgement Tax Assessments

83(3) Where a person has not delivered a return and the Board is of the opinion that such person is
liable to pay tax, it may, according to the best of its judgment, determine the amount of the chargeable
income of such person and assess him accordingly, but such assessment shall not affect any liability
otherwise incurred by such person by reason of his refusal, failure or neglect to deliver a return.

Additional Assessment
Section 89.

(1) Subject to this section, where it appears to the Board that any person liable to tax has not been assessed or
has been assessed at a less amount than that which ought to have been charged, the Board may, within the year
of income or within six years after the expiration of the year of income or three years from the date the tax
return is filed whichever is later, assess such person at such amount or additional amount as according to its
judgment ought to have been charged, and the provisions of this Act as to notice of assessment, appeal and
other proceedings under this Act shall apply to such assessment or additional assessment and to the tax
charged thereunder. F.A. 35/98*

Best of Judgement Assessment

In the Privy Council case of Bi-Flex (Caribbean) Ltd v Inland Revenue Division:
Lord Lowry in delivering the judgment stated as follows:
The element of guesswork and the almost unavoidable inaccuracy in a properly made best of judgment
assessment as the cases have established, do not serve to displace the validity of the assessments..

Additional Assessments
In the case of Atkinson v Board of Inland Revenue where the Tax Appeal Board stated:
The Respondent may act under section 89 (1) where he has formed a different opinion (either as a
result of a later court decision or otherwise) as to the legal effect of the same facts on which the first
assessment was made. It may also invoke the section where it finds out or discovers new facts, from
whatever source, which makes it appear to it that the taxpayer has not been assessed or has been
under-assessed. Its assessment is to be at such amounts as according to its judgment ought to have
been charged.

Additional Tax or Penalty

Section 83 (4):
Subject to section 89 (2) and (3), if at any time within the year of Income or within six years after the
expiration thereof, the Board makes an assessment which results in a person being charged to tax for
the year of income in respect of a total chargeable income in excess of the chargeable income disclosed
 in the return of income rendered by such person, the Board may charge such person, in addition to the
total tax otherwise charged in the assessment, further tax not exceeding the amount of tax charged in
respect of the excess.

In the judgment of Persaud JA in the Trinidad and Tobago Court of Appeal in the case of Inland
Revenue Board v Procope when he said as follows:
I do not accept the proposition advanced by Counsel for the Board that once the reassessment has
disclosed an excess of chargeable income there is a presumption that the incorrectness of the return
returned by the taxpayer is due to one of the grounds mentioned in Section 83 (4).

Assessment Lists
Section 85.
(1) After completing its assessment, the Board shall prepare lists of persons liable to tax. Lists of
persons assessed and notices of assessment
(2) Such lists (herein called the assessment lists) shall
contain the names and addresses of the persons
assessed to tax, the amount of the chargeable
income of each person, the amount of the tax
payable by him and such other particulars as may
be necessary.

VAT ASSESSMENTS AND OBJECTIONS

Very Similar To Income Tax Assessments But There Are Differences In The Objections Process
Section 39.
(1) Where:
(a) a person fails to furnish a return in accordance with this Act;
(b) a person requests the Board, in writing, to amend a return that the person
has furnished under this Act;
or
(c) the Board is not satisfied with a return made by any person or as to any matter on the basis of which the
return is prepared, the Board may assess the amount of tax that should, in the opinion of the Board, be payable
by that person, or the refund that should, in the opinion of the Board, be due to that person, in respect of the tax
period concerned and the amount so assessed is payable in lieu of the tax that would otherwise be payable by
that person, or the refund that would otherwise be due to that person, in respect of that tax period.

39(2) Where a person makes any commercial supply contrary to section 20, the Board may assess the
amount of tax that would, in the opinion of the Board, have been payable by that person in respect of
any such commercial supply if he had been registered and his tax period had been such period as the
Board may determine, and the amount so assessed is payable by that person as tax.

39 (3)Where a person who makes a supply

(a) falsely represents that tax is charged on that supply;
(b) falsely represents the amount of tax charged on that supply
OR
( c) in contravention of section 23(2), recovers or seeks to recover an amount represented to be in respect of
tax,
the Board may assess that person as being liable to pay an amount of tax on the basis of so much of the amount
that it appears to the Board was represented to be charged as tax, or was recovered or sought to be recovered
in respect of tax, as exceeds the amount, if any, that he is authorized by section 23 to recover in respect of the
supply and, where the person is not registered, the assessment shall be made as if that person were registered
and his tax period had been such period as the Board may determine.

(4) Where an assessment of the tax payable by a person is made or amended under this section wholly
or in part as a result of any act or omission of that person that constitutes an offence against this Act,
the assessment may include such additional amount by way of penal tax as the Board sees fit, but so
that the additional amount does not exceed three times the amount of tax (other than penal tax) that is
included in the assessment or amendment as a result of the act or omission that constitutes the offence.
(5) An assessment under this section may be amended or vacated by the Board notwithstanding that
the tax or refund as assessed may already have been paid.
(6) The liability of a person to pay tax assessed under this section is not affected by the fact that the
person may not have been registered at the relevant time nor by the fact that the person may have been
convicted of, and punished for, the contravention concerned, and the liability of the person to be
proceeded against or punished for an offence is not affected by an assessment under this section or the
payment of an amount so assessed.
(7) The Board shall give to the person to whom the assessment relates notice in writing of an
assessment, or the amendment or vacation of an assessment, and any amount required by an
assessment or amended assessment to be paid by that person shall be paid within thirty days after the
notice is given.
(8) An assessment under subsection (1) shall not be made, amended, nor vacated at any time
after six years has elapsed since the end of the tax period to which the assessment relates or
three years from the date of filing of the return to which the assessment relates, whichever is
later.
(9) An assessment under subsection (2) shall not be made, amended, nor vacated at any time
after six years has elapsed since the end of the month in which the supply to which the
assessment relates was made.
(10) Subsections (8) and (9) do not apply where the Board is satisfied that there are reasonable
grounds for believing that tax has been or may have been lost through the fraud, willful default, or gross
neglect of any person.

Section 39A.

Where a person pays tax on supplies in excess of his liability to the Board, the Board shall refund the
amount by which the payment exceeds such liability. Refund of overpayments of tax on supplies. Finance
Act,1990.

NOTICE OF ASSESSMENT
The Board shall serve on each person liable to tax, a notice of assessment showing the chargeable
income and amount of tax payable, and rights of objection. i.e.
Section 86 (1).

A notice of assessment may be served personally or by post Section 114 (1)

The decision of the Guyana Court of Appeal in the case Ramlakhan v Inland Revenue Commissioner
(1974) 21 WIR 305, Persaud JA stated that the service of a notice of assessment is a separate and distinct act
from the actual assessment.
DISTINCTION BETWEEN ASSESSMENT AND THE NOTICE OF ASSESSMENT
On the question of the distinction between the assessment and the notice of assessment, the leading
case on this subject within the Commonwealth Caribbean is that of the Court of Appeal of Guyana in
Ramlakhan v Commissioner of Inland Revenue. In that case, Persaud J made the following much cited
dictum:
I am of the view that the service of the notice of assessment is a separate step apart from the assessment
itself which is complete as soon as the mathematical calculations are complete and the Commissioner has
fixed the quantum of the taxpayers liability. If perchance, the Commissioner decides for some reason not to
inform the taxpayer of such liability under s78 (1) of the statute, he may not take any further step to
collect the tax. For one thing, it is upon the notice of assessment that the taxpayers right of appeal to the
Board of Review depends, and the Board may or may not affirm the Commissioners assessment. So that
the service of the notice is an important step in the whole process of tax collection, and is no part of the
actual assessment, notwithstanding the expression duly assessed in the statement of claim. That
expression means assessed in a manner allowed by statute, that is, in due process of law, but does not
include any step after assessment(1974) 21 WIR 305 At page 309

WHEN WAS THE ASSESSMENT MADE?

The question of when was an assessment made has been the subject of certain English decisions.
In Honig v Sarsfield , the Court of Appeal held that an assessment had been made when the Inspector of
Taxes signed the certificate in the assessment book stating that he had made an assessment.
Similarly in Buford v Durkin, the Court of Appeal held that an assessment was made by an Inspector of
Taxes who took the decision to assess even though the assessment book was signed, at his direction, by
another.
In the most recent decision of Corbally-Stourton v Revenue and Customs Commissioners, the Special
Commissioner, Charles Hellier, noted that the practice of the taxation authorities in the United Kingdom
was no longer to maintain an assessment book but computerized records of the details of the
assessment. He further stated that once the information is entered into the computer system, a record
of the assessment may be generated from the system and concluded that the assessment was made
when having decided to make it; the taxation authorities authorized the entry of its amount into its
computer system.

OBJECTION - INCOME TAX

If any person disputes an assessment he may apply to the board in writing to have it reviewed and
revised (Sec.86(2)).

In this notice of objection the taxpayer must state precisely the grounds on which he is objecting to the
assessment.
An application to the Board to review and revise an assessment must be made within fifteen days from
the date of service of the notice of assessment (Sec.86(2)); but may be made out of time if the Board is
satisfy that there was reasonable excuse for not making it within the statutory period and that it was
made thereafter without unreasonable delay (Sec.86(3)).
On receipt of an objection the Board after reviewing the assessment, may vary, vacate, or
confirm it. (Sec.86(5))
Where the Board is reconsidering an assessment on objection by a person, requires that person to
submit documentary information to assist in the assessment and the person does not provide the
information on time the notice of objection filed by that person will cease to have effect and the
assessment will be final and conclusive, (Sec.86(5A) as introduced by Act 3 of 1994)
The Board must determine an objection within twenty-four (24) months after the date of
service of the notice
 Failure to do this will result in the objection being deemed to have been determined in the favour of the
taxpayer, Section 86(8) effective 1/1/86 (Act 1/86).
Further, Section 86(9), introduced by Act 1/86 provides that, where the Board has failed to settle an
objection within twelve (12) months from the date of service of the notice, the objector may present
an appeal to the Appeal Board, within the subsequent twelve (12) months.

A notice of the Boards decision on objection must be served upon the objector, Section 86(6) refers.

VAT OBJECTIONS
Section 40.
(1) A person disputing an assessment, or the amendment of an assessment, under section 39 may apply to
the Board by notice of objection in writing delivered to the Board to review and revise the assessment and -
Sections 86 and 97 of the Income Tax Act apply, with such modifications as are necessary and subject to
subsections (2) and (3), for the purpose of enabling the application to be dealt with and the objection to be
determined; andb) Section 87 of the Income Tax Act and the provisions of the Tax Appeal Board Act apply,
with such modifications as are necessary, for the purpose of enabling the making of, and the hearing and
determination of, appeals from decisions of the Board upon objections under this section. Chap. 4:50
(2) Except with the leave of the Board an application under subsection (1) to review and to revise an
assessment shall not be made unless any amount required by the assessment to be paid has been paid
to the Board or such security has been given for the payment of that amount as is acceptable to the
Board.
(3) Where, within six months after an application is made in accordance with subsection (2), the Board
fails to determine the objection, the objection shall be deemed to have been determined in favour of the
person disputing his assessment and the assessment shall be amended accordingly
(4) In the Court of Appeal Trinidad and Tobago, the Board of Inland Revenue v AZ Supplies Ltd,C.A No
126 of 2002, Rolston Nelson, Justice of Appeal stated:
(5) On the basis of the authorities cited above and on the wording of the legislation I would hold if it were
necessary to do so that:
(1) The determination of the objection is a separate and independent procedure
from the service of notice of the determination of the objection.
(2) The statutory six-month limit in respect of section 40 (3) of the Act applies only to the
determination of the objection.

TAX APPEAL
The right of Appeal is strictly a creature of statute and is of a procedural nature. Thus, if a statute lays
down conditions precedent which must be satisfied before the taxpayer can exercise his right of appeal,
those conditions must be complied with prior to the right of appeal being exercisable.
Thus, in the leading case of Bata Shoe Co Guyana Ltd v Inland Revenue Comr and A-G, the statue in
Guyana provided that no appeal shall lie.unless the person aggrieved by an assessment.has paid to
the Commissioner tax equal to two-thirds which is in dispute.

BURDEN OF PROOF
The Taxing statutes provide that, in a tax appeal, the burden of proof rests on the taxpayer to show that
the assessment in dispute is wrong and unfounded.
In the case of Inland Revenue Board v Boland Maraj, Kelsick CJ said:
On the Revenue rests only the evidential onus that it rightly appears to the Revenue to act; which it
discharges by adducing evidence of the information or material which caused it to appear to the
Revenue that the taxpayer was under-assessed. On the other hand, the statutory burden of the whole
case is on the taxpayer.
 In the local case of Napoleon Alleyne v Board of Inland Revenue, the taxpayer had lost all his receipts and
bills to support the expenses claimed by him as deductible expenditure and appealed against the
quantum of such expenses allowed by the Board of Inland Revenue who made an additional assessment
on him using its best judgement.
The Tax Appeal Board there held that the onus is on the taxpayer, by satisfactory evidence, to show that
the assessment ought to be reduced or set aside and that the taxpayer has to attain proof on a balance
of probabilities They further held that the assessment is prima facie right and remains right until the
taxpayer shows it is wrong and the taxpayer must show not only negatively that the assessment was
wrong, but also , positively, what correction should be made to make it right or more nearly right and
the taxpayer in this case had failed to discharge the burden of proof placed on him.(1967-77) 1 T.T.T.C
584
The Tax Appeal Board in its decision stated:
We have no doubt that some disbursements were wholly, exclusively and necessarily incurred in respect of the
other expenses claimed, but the quantum of them has not been established.
We consider that a better effort could have been made by oral or documentary evidence, adduced from the
respective payees, to quantify some of the other items, such as lights, telephone, advertisement and motor vehicle
maintenanceHaving seen the manner in which the Appellant testified and having evaluated the evidence
adduced on his behalf, we are not satisfied on a balance of probabilities that he had lost or misplaced all his
receipts and bills relating to his business for the year of income 1969. We would expect most if not all, of the
documents relevant to his business to have been kept at his place of business and not at his home, and we do not
accept his evidence to the contrary

APPEALS AGAINST ASSESSMENT

Any person who having served a notice of objection upon the Board of Inland Revenue and is
dissatisfied with its decision, may appeal to the Tax Appeal Board in accordance with the provisions of
the Tax Appeal Board Act (T.A.B.A.) Ch. 4:50. Section 87 refers.

The taxpayer must file the notice of appeal with the Registrar of the Tax Appeal Board within twenty
eight days of the date of service of the Boards decision on his objection. A copy must also be served on
the Board of Inland Revenue. Section 7(2) T.A.B.A. Ch.4:50 refers.
Any person who having served a notice of objection upon the Board of Inland Revenue and is
dissatisfied with its decision, may appeal to the Tax Appeal Board in accordance with the provisions of
the Tax Appeal Board Act (T.A.B.A.) Ch. 4:50. Section 87 refers.

The taxpayer must file the notice of appeal with the Registrar of the Tax Appeal Board within twenty
eight days of the date of service of the Boards decision on his objection. A copy must also be served on
the Board of Inland Revenue. Section 7(2) T.A.B.A. Ch.4:50 refers.
Notwithstanding subsection (2), an appeal may be instituted out of time if the Tax Appeal Board is
satisfied that there was a reasonable cause for not appealing within the time limited and that the appeal
was filed thereafter without unreasonable delay. Subsection 7 (3) T.A.B.A.
The notice of appeal shall specify the grounds of appeal, and subject thereto, the appeal shall be in such
form as may be prescribed by rules of the Tax Appeal Board. Section 7 (4) T.A.B.A.
The Tax Appeal Board may dispose of an appeal by:-
Dismissing it
Allowing it
Allowing it and:-
vacating the assessment
varying the assessment
 referring the assessment back to the Board of Inland Revenue for reconsideration and
reassessment (Sec 8(3) of T.A.B.A. Ch 4:50)

DECISIONS OF THE TAX APPEAL BOARD

On questions of fact, the decision of the Tax Appeal Board is final.
The Appellant or the BIR, if dissatisfied with the decision of the Tax Appeal Board on a point of law may, within
21 days of delivery of the decision, file a notice with the Registrar of the Tax Appeal Board requesting a
statement of case for the opinion of the Court of Appeal.
The Court of Appeal may reverse, affirm or amend this decision of the Tax Appeal Board. Sec.9 of the
Tax Appeal Board Act Ch 4:50 refers.

There is a final right of Appeal to the Privy Council.

ENFORCEMENT AND COLLECTION OF TAXES

After the Due Process Afforded to the Taxpayer
Three (3) methods used by the Board of Inland Revenue to enforce collection of unpaid taxes are:
1. COLLECTION BY DISTRAINT
2. GARNISHMENTS
3. CIVIL PROCEEDINGS
(a) Magistrates Court
(b) Supreme Court

COLLECTION BY DISTRAINT
If tax which is due remains unpaid, Section 104 empowers the Board to authorize any person to distrain on
the taxpayers goods.
The goods distrained on must be held for 7 days (during which period the taxpayer may pay the tax and
interest and get his goods back) after which the goods are to be sold by public auction, any surplus after
payment of the tax and deduction of costs, being payable to the taxpayer.

(Section 104(4) and Section 108).

Distraint can be a powerful weapon, since in the great majority of cases the taxpayer will pay up, if he can, as
soon as the goods are seized, rather than have them sold at knock-down prices.

GARNISHMENTS
Section 112 enables the Board to recover unpaid tax from any amount due by a third person to the defaulter
by serving of a Garnishee order.

This method is most useful in collecting unpaid balances of tax from employees, but there is no restriction on
who can be called upon to pay.

The only requirement being that he is or is about to become indebted to the taxpayer.

Where the agent is an employer, the requirement to recover will remain in force until successive payments of
remuneration equivalent to the debt have been made (Subsection (3)).

CIVIL PROCEEDINGS MAGISTRATES COURT

Sections 110 and 111 govern the procedure for Court action to recover unpaid tax.
Where the tax due, or any instalments of tax due do not exceed $3,000 and $1,200 respectively, the Board may
commence proceedings for recovery as a civil debt before a Magistrate's Court.

Such amounts may include tax on more than one assessment or due on more than one instalment, if it is desired
by the Board to pursue the matters collectively,
Section 110(2).

CIVIL PROCEEDINGS SUPREME COURT

For larger debts overdue for more than 30 days - including P.A.Y.E. deductions not paid over by an employer -
or indeed any debt which it is desired not to pursue through a Magistrate's Court, the Board may make out a
certificate on "prescribed form" stating:-
(a) the amount payable

(b) name of taxpayer

(c) nature of trade or profession

(d) usual address (Not a box number).

This information can be presented to the Registrar of the Supreme Court who will then register the
certificate which then becomes equivalent to a judgment of the Court in favour of the Board which can
be enforced through normal court procedures, Section 111.

REMEDIES
The Board has three (3) remedies against a defaulting taxpayer:-
1. distraint
2. garnishment, and
3. prosecution in the Courts
4. If all fail or are impossible for one reason or another the defaulter can be arrested and imprisoned.

QUESTIONS
Discuss the time frame in which the BIR may make a VAT Assessment and detail the objection
procedure including the prerequisites for making an objection, the time frame for its
determination and whether such time frame is inclusive of the service of the determination of
the objection on the VAT registrant.
As it relates to assessments to Income Tax, discuss the time frame in which an additional
assessment to Income Tax may be made by the Board of Inland Revenue on a taxpayer and
whether the time period for making such additional assessment is inclusive of the service of the
notice of assessment on the taxpayer.
What are the remedies a taxpayer may have to dispute an assessment to income tax raised by
the BIR, at what stage are the courts involved and may an appeal be made to the Privy Council?