EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
Tax controversy update vol. 4 - Recent trends in requests for administrative reviews
The EY Tax Controversy team provides a range of services beyond tax examination support, including requests for reviews, tax litigation and mutual agreement procedures. In this newsletter and the two to follow, we share our views on these taxpayer actions using the latest available data provided by the National Tax Agency (“NTA”). This newsletter will focus on requests for reviews that have been filed in recent years.
In June, the NTA released overviews of the number of requests for re-examination（再調査の請求）and requests for reconsideration（審査請求）processed and generated in fiscal year 2020.
As you may be aware, all requests for administrative reviews（不服審査）filed after 1 April 2016 in relation to assessment have been processed under the revised requests for reviews system for national tax matters. The greatest change brought about by the revised system is the ability for non-blue return taxpayers to forgo the filing of an objection (referred to as requests for re-examination in current parlance), which was originally a prerequisite for filing requests for reconsideration under the former system.
The following chart shows changes in the number of newly filed requests for re-examination and requests for reconsideration between 2014 and 2020. It indicates the number and percentage of requests for reconsideration made by foregoing the request for re-examination process (direct reconsiderations).
The chart shows that while the number of newly filed requests for administrative reviews had typically remained at approximately 5,000 cases, this number decreased significantly during the past two years. The above is a reflection of the impact of the COVID-19 pandemic, which restricted the ability of the authority to conduct tax examinations. Further, analysis of the increase in the total number of filings, 60-70% of which are filed as direct reconsiderations, enables the reader to infer that there is an established pattern wherein the majority of requesters are foregoing the requests for re-examination process. This conclusion is unlikely to be affected even after accounting for the impact of the COVID-19 pandemic.
|
Fiscal year |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|---|---|---|---|---|---|---|---|
|
Number of requests for re-examination |
2,755 |
3,191 |
1,674 |
1,814 |
2,043 |
1,359 |
1,000 |
|
Number of requests for review |
2,030 |
2,098 |
2,488 |
2,953 |
3,104 |
2,563 |
2,229 |
|
Total number of new cases |
4,785 |
5,289 |
4,162 |
4,767 |
5,147 |
3,922 |
3,229 |
|
Number of direct reconsiderations |
- |
368 |
1,473 |
2,020 |
1,958 |
1,603 |
1,593 |
|
Percentage processed via direct considerations |
- |
17.5% |
59.2% |
68.4% |
63.0% |
62.5% |
71.4% |
The data sourced from the National Tax Agency website are as follows (same for the chart below)
（https://www.nta.go.jp/information/release/kokuzeicho/2020/shinsa/index.htm
https://www.nta.go.jp/information/release/kokuzeicho/2020/saichosa/index.htm
https://www.nta.go.jp/information/release/kokuzeicho/2016/shinsa/index.htm
https://www.nta.go.jp/information/release/kokuzeicho/2018/shinsa/index.htm）
The number of requests for administrative reviews processed between 2014 and 2020 and the percentage of said requests which were approved are shown in the following chart.
|
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
|
|---|---|---|---|---|---|---|---|
|
Number of cases processed |
2,980 |
2,311 |
1,959 |
2,475 |
2,923 |
2,846 |
2,328 |
|
Percentage of said requests which were approved (%) |
8.0% |
8.0% |
12.3% |
8.2% |
7.4% |
13.2% |
10.0% |
Despite the COVID-19 pandemic, the decrease in the number of cases processed has been limited.
The percentage of cases approved has generally hovered at approximately 10%, and in 2020 the percentage approved was exactly 10.0%.
No simple comparison can be made between the ease of obtaining a favorable result through requests for re-examination and request for reconsiderations, although their success rates are approximately equivalent.
Decisions regarding whether to file via direct reconsideration must be made in full consideration of the point of contention (e.g., whether it is a formality like a simple mistake in calculation or an issue pertaining to a substantive matter, etc.), the fees for specialist support, the time it will take to resolve the issue.
Contact
EY Tax controversy team
Direct to your inbox
Stay up to date with our Editor's picks newsletter.
Tax
Our tax professionals offer services across all tax disciplines to help you thrive in this era of rapid change.