Mediating Tax Disputes: Global Developments


Over the last number of years, mediation has increasingly become recognised as an efficient and effective process for resolving tax disputes. In this article, CEDR Ireland’s Practice Manager Nicola White explores recent developments in this field.

Historically, tax disputes are settled either by litigation or, in the majority of cases, outside of court by agreement between the taxpayer and tax authority after on-going negotiations. However, there are many disputes that can remain unresolved for long periods between these two extremes and without any clear roadmap to resolution.[1] 

So, what is the difference between negotiating directly with the tax authority and using mediation to resolve the dispute? According to Giles Salmond of Deloitte ‘mediation has a structure, timetable and dynamic that ordinary negotiations lack. The presence of a mediator is the key distinguishing feature of the process, as compared to a normal party to party negotiation.’[2]  Unsurprisingly, countries are now exploring ADR processes such as mediation as an alternative route in the road map to resolving tax disputes. As noted by Jone and Maples ‘A successful tax mediation regime can not only help parties to move away from adopting entrenched litigious positions and towards focusing on early resolution outside of the Courts; but it may also help to improve taxpayers’ views of the tax dispute resolution system, thereby increasing voluntary compliance. If appropriately used, mediation should result in significant time and cost efficiencies for both taxpayers and the tax authority.’[3]

According to PwC ‘ADR may be suitable for a wide range of disputes across different taxes, particularly those which relate to transfer pricing, capital vs revenue or valuation issues. It may be particularly useful for use in long-running disputes where positions on both sides have become entrenched, with litigation or one party conceding appearing to be the only options.’[4] Furthermore, it was noted by the World Bank Group that ‘As tax laws are complex, tax disputes are often fact-intensive. A combination of these factors can contribute to uncertainty regarding the correct interpretation of the issues in the dispute, and thereby warrant mediation or negotiation that allow parties to search for creative solu­tions that fulfill the needs of both disputants.’[5]

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