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    Written Tax Advocacy: State Taxes

    1 Introduction

    1.1 Introduction

    My high school English teacher considered I was illiterate. Armed with a 1961 grammar book,1 he attempted to teach me spelling, punctuation, grammar, logic and style and drilled me in word confusion and misuse. When graduating, his sage advice was to write simply son lest people realise you cant write.

    In pursing simpler writing, I have adopted much of the approach to legal writing in S.D. Stark, Writing to Win: The Legal Writer.2 G.T. Pagones, Tax Effective Writing3

    discusses written advocacy theory in Federal tax matters from an Australian perspective. There is little published on written advocacy theory in State taxes matters.

    The preparation of technical information responses, objections and penalty and interest submissions can be deceptively complex, because of the different jurisdiction legislative framework, the different administrative practices of the different State and Territory revenue offices and limited administrative practice statements and technical publications and services.

    DCTR Richards4 will co-present a separate paper on non-technical considerations and informal approaches that practitioners might use to advance their clients interests when interacting with the revenue offices.

    This paper discusses my tips, traps and examples for preparing more effective State taxes written advocacy including:

    writing style lessons from S.D. Stark and G.T. Pagone and others;

    the importance of addressing:

    legislative authority, administrative practice and tax policy; and

    the differences between assessments, decisions, determinations and exercise of discretion;

    preparing objections;

    1 T.E. Berry, The Most Common Mistakes in English Usage, Pitman, 1961

    still my most prized reference book.

    2 S.D. Stark, Writing to Win: The Legal Writer, Main Street Books, 1999;

    (2nd ed), Three Rivers Press, 2012.

    3 G.T. Pagone, Tax Effective Writing, The Federation Press, 2013.

    4 J. Richards, Session 5: Dear Commissioner, The Tax Institute (National),

    14th Annual States Taxation Conference, 24 July 2014.

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    preparing penalty and interest submissions.

    The examples are based on my home jurisdiction, Victoria.

    This paper is based on a paper for Federal taxes written advocacy and has been adapted for State taxes matters.5

    1.2 Summary

    With all good written advocacy, the objective is to ensure the writing is expressed clearly, concisely and persuasively. My golden rules are:

    (a) Understand, address and managing the bureaucratic structures, systems and tendencies and administration practices of the revenue offices.

    (b) Applying a consistent methodology within the tax advocacy team will improve efficiencies and quality of written advocacy.

    (c) Write for the benefit of the client, the intended and successive reader and within legislative and procedural constraints.

    (d) Effective tax advocacy should address legislative power, judicial interpretation, the revenue office administrative practice and tax policy to resolve disputed and disputable issues.

    (e) Identify the relevant legislative power to ensure there is a disputable issue and the correct procedure is adopted and expressly engage that power.

    (f) Extra care is required in communicating with the revenue office, the courts and the tribunals, because penalties for material misstatements and omissions are visited upon the taxpayer and the adviser.

    (g) Select and include only the facts and documents that relate directly to the legal reasons (i.e. the taxable facts). Additional facts or documents are as likely to lose as win the case.

    (h) Use the CRAC method of technical drafting, because the method directs the reader by stating the conclusion first, avoids lengthy quotations and emphasises the taxpayer's position rather than the revenue office's position.

    (i) Use the method of drafting by formulating arguments by interweaving the statutory words with relevant facts in respect of each element of the claim and prepare specific rather than exhaustive and compendious claims.

    (j) An objection is the first step in the litigation process as it defines and, in some jurisdictions, potentially confines any legal proceedings. The quality and style of the objection should reflect that it is a fundamental part of legal proceedings.

    (k) The objective of a penalty submission is to establish the taxable facts, the appropriate base penalty amount, the entitlement to a reduction for voluntary

    5 R. Jorgensen, Tax Advocacy - Writing to Win, The Tax Institute (Vic), 29

    August 2013.

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    disclosure and to a discretionary remission by reference to the revenue offices administrative practice.

    (l) The objective of an interest remission request is to establish the taxable facts and the entitlement to a total or partial remission by reference to the revenue offices administrative practice.

    1.3 Approach to dealing with the revenue offices

    Understanding, addressing and managing the bureaucratic structures, systems and tendencies, the bureaucrat personality and the legacy and administration practices of the revenue offices will improve the engagement by the revenue officers and the effectiveness of written advocacy.

    Proactive engagement with the revenue offices is appropriate, unless there is an appreciable risk of criminal prosecution in which case a more circumspect approach may be best.6

    DCTR Richards7 summarises a number of suggestions provided by the revenue offices to improve the persuasiveness and effectiveness of written submissions including:

    (a) Technical content:

    (i) read and quote relevant legislation succinctly;

    (ii) recognise that each State and Territory has different legislation with real policy and legislative approaches;

    (iii) have a good understanding and evidence the satisfaction of the general law;

    (iv) address published rulings, practices and information requirements;

    (v) ensure the submissions are supported by evidence to discharge the taxpayers onus of proof;

    (vi) express the commercial motivation and objectives of the transaction to provide context;

    (vii) provide a copy of the instructions to a valuer to support the value provided;

    (b) Tone of communications:

    (i) avoid alleging bad faith or bias without grounds;

    (ii) show proper respect to the revenue officers;

    6 W. B. Zichy-Woinarski QC, Giving Criminal Law Advice to the Tax Client,

    (2001) 30 AT Rev 206; V. A. Morfuni, Criminal Law Risks for the Tax

    Adviser, (2002) 31 AT Rev 4.

    7 J. Richards, Session 5: Dear Commissioner, ibid.

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    (iii) objections should be simple and succinct and not drafted like court pleadings;

    (c) Processes:

    (i) engage the proper escalation and priority policies to ensure urgent matters are expedited;

    (ii) lodge through appropriate channels;

    (iii) satisfy the document and information lodgement requirements;

    (iv) observe time limits; and

    (v) ensure that documents lodged are accurately executed and dated.

    I endorse these suggestions, and present my views on how to achieve these objectives.

    Keating has critiqued the ATO bureaucracy and suggests practical approaches and methods to effectively interact with the ATO.8 Keatings suggestions can be implemented in dealing with the revenue offices.

    Keating advocates early and proactive engagement with case officers. Advisers should actively educate case officers and present correspondence and arguments consistently with revenue office procedures to effectively progress the taxpayers position.

    Keatings tips include escalating matters vertically and horizontally to the legal services, technical advice and review and policy and legislation divisions of the revenue office should the engagement with the case officer be stalled or be effectively exhausted. A new revenue officers perspective may alter the taxpayers prospects.

    DCTR Richards provides details of revenue office escalation processes.

    Keatings most practical tip is to provide a separate one page issue statement (The ABC P/L Issue) to assist the case officer and focus each other revenue officer that will deal with the matter on the central issue, lest they are lost in or overwhelmed by the complexity and volume of material collated by the revenue office and the taxpayer.

    2 Writing Style Lessons

    2.1 Introduction

    With all good written advocacy the objective is to ensure the writing is expressed clearly, concisely and persuasively. Ultimately, one is always drafting from the client perspective, because the client must understand and approve the statements being made to the revenue office.

    Choose a good drafting book and a good grammar book and apply the principles consistently to form your own style and ensure consistency.

    8 M. Keating, Facing the Dragon in His Lair, The Taxation Institute

    (National), 14 March 2013.

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    Applying a consistent methodology within the tax advocacy team will improve efficiencies and quality of written advocacy. A consistent style will assist in efficiently collating team members work without major rewriting, reproducing the argument through each successive stage of position paper response, objection, tribunal review, and court appeals and easily reusing arguments on other client engagements.

    2.2 General drafting

    Pagone advocates writing for the benefit of the intended and successive reader within legislative and procedural constraints.9

    An author sh