EXPLORING THE POTENTIALS OF ALTERNATIVE DISPUTE RESOLUTION MECHANISMS IN TAX DISPUTE RESOLUTION

Abstract

Alternative Dispute Resolution (ADR) is a nascent adjudicative mechanism. Its preference to litigation is premised on lots of advantages which includes saving time, cost effectiveness and mutual relationship of the disputants. Notwithstanding the seeming advantages of ADR as projected by the protagonists, ADR has not been fully explored in the resolution of tax dispute. The challenge lies in the legal framework regulating the practice of ADR and the dynamic nature of tax dispute being a matter of public concern. Tax dispute is not always a controversial dispute where facts are so much in issue. The Tax authority knows its right to collect tax while tax payers know their obligation to pay tax. What is usually in issue is assessment which does not necessary require full blown litigation; what is usually required is mutual understanding of tax parties positions and differences; and the genuiness of parties to shift ground. This can be achieved through ADR process. It is on this ground that this paper evaluated the legal and theoretical potentials of the ADR process in the resolution of tax disputes other than the conventional litigation. The paper adopted a doctrinal approach. Accordingly, text books, journal articles, statutes, case laws were reviewed to propagate a profound and persuasive social-legal theory that justifies the potentials of ADR applicability to tax disputes. However, the paper does not apply to the resolution of every type of tax dispute. Jurisdictional tax disputes are beyond the scope of ADR while administrative tax disputes are suitable for the ADR process. ADR in tax is most suitable as an in-house administrative mechanism. The paper found that the applicability of ADR to tax dispute will reduce the cost and delay associated with litigation. The ADR process would require the involvement of tax experts as mediators, negotiators or conciliators who would look into the matter and advice the parties accordingly.