Can a taxpayer submit an amended tax return to the Board of Inland Revenue in order to correct a previous filing? If so, what are the conditions to be met and the procedure that should be followed? If not, by what other means (if any) may a taxpayer correct a previous filing?
Issue
Can taxpayers submit an amended tax return to the Board of Inland Revenue (the “Revenue”)? If so, what are the conditions to be met and procedure to be followed? If not, by what other means (if any) may a taxpayer correct a previous filing?
Intro/Abstract
Although the Revenue has the right to re-assess a taxpayer if it considers, inter alia, that a taxpayer has been under-assessed or not assessed whether the taxpayer has filed a tax return or not, the Income Tax Act, Chap. 75:01 (ITA) does not expressly give a taxpayer the equivalent privilege to file an amended tax return in order to rectify an error in its previous filing which may have given rise to an over-assessment. Conversely, the ITA does not expressly state that a taxpayer cannot file an amended tax return either.
It is intuitive that a taxpayer ought to be able to file an amended return, given that the taxpayer is under a statutory obligation to file an accurate return in the first place. It is logical, therefore, that if a taxpayer subsequently discovers an inaccuracy in its initial tax return, that its implicit statutory duty ought to be to rectify it. For example, if the taxpayer incorrectly omitted to include a zero on its gross revenue line and thereby inadvertently filed a return with a $300,000 figure when it was meant to be $3,000,000 – is the taxpayer meant to remain silent and wait for the Revenue to notice the error? To extrapolate this example, suppose the taxpayer says nothing, the Revenue observes the mistake that resulted in a gross underpayment of taxes and decides to lead evidence in Court that the taxpayer was aware of this mistake and did nothing about it. Will the Court accept the taxpayer’s defence that there is nothing in the ITA that specifically says it must correct an error of this nature? Furthermore, given that the Revenue inherently has a right to re-assess a taxpayer three years after a tax return is filed, what prejudice is there to the Revenue if the taxpayer re-files its Return?
Let us now look at the statute. The ITA stipulates that the Revenue will serve upon each taxpayer a Notice of Assessment which states the amount of his chargeable income and the amount of tax payable by him (s.86(1) ITA). The ITA identifies two instances where a taxpayer’s quantified liability to tax, as expressed in its tax return, may be subsequently revised:
(i) via an assessment pursuant to s.83 and s.89 of the ITA; or
(ii) pursuant to a repayment of tax application under s.90 of the ITA.
Section 89(1) of the ITA contemplates the instance where a taxpayer has not been assessed or has been assessed at a lesser amount than he ought to have been charged. Section 90(1) anticipates the circumstance where a taxpayer has paid tax in excess of what he should have paid and seeks a repayment.
If a taxpayer disputes his tax assessment by the Revenue, s.86 of the ITA identifies the following procedure must be followed:
1. He may apply to the Revenue by Notice of Objection in writing for the Revenue to review and revise the assessment made. The application must state the grounds of his objection and must be made within 15 days of the service of the Notice of Assessment.
2. This application may be made outside of the 15 days if the Revenue is satisfied there was a reasonable excuse for not making the application within the time limit and if the application was therefore made without unreasonable delay.
3. If the Revenue disallows the objection to be made under this ground, the taxpayer may appeal to the Appeal Board.
Two recently decided Trinidadian cases treat with this issue of reassessment, specifically in the context of a corporation tax return. In giving its ruling in these cases: A Ltd. v. The Board of Inland Revenue, I 36 of 2014 and SG Inc. v. The Board of Inland Revenue, I 97 of 2013, the Tax Appeal Board had to determine the issue of whether a statutory right to file an amended return exists. In both cases, the Tax Appeal Board acknowledges that application of the procedure identified under s.86 is the source of great confusion for both the taxpayer and the Revenue and sought to clarify the statutory requirements in its rulings.
“… Given that the two cases have substantially similar facts, and were issued by the same Court no more than five days apart, on a superficial level one would expect a substantially similar result with substantially similar reasoning … [O]n the face of it, the cases have materially different results and apparently inconsistent reasoning … On a closer read of the decisions, however …”
What follows is an examination of both cases, with an analysis of the efficacy of the rulings in addressing this identified problem and clarifying the statutory procedure. In accordance with the Caribbean’s common law tradition, we look at these recent cases to determine what precedent the court may have established regarding this area of tax law by summarising the material facts of each case and analysing the decisions handed down.
The guidelines handed down by the court in these two rulings will no doubt prove useful in future. In fact, it is suggested that the attorney’s role in the development of tax law through the courts could only be aided by publication of the decisions of the court, as this facilitates the examination and discussion that leads to growth and advancement. We at caribbean-tax.com look forward to further elucidation regarding the re-assessment of a taxpayer and the procedures relevant in each circumstance.
CAVEAT
The views expressed in this article are the views of the authors only and shared for discussion and information purposes only; they are not intended to constitute legal advice. Readers are encouraged to consult with their professional advisors for advice concerning specific matters.
DISCUSSION FORUM
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