Tax Treaty Dispute Resolution Procedures

Polenchuk Mariya Dmitrievna PhD Student, Department of Financial and Tax Law, St. Petersburg State University 199106, Russia, g. Saint Petersburg, ul. 22-Ya liniya vasil'evskogo ostrova, 7 maria.polenchuk@mail.ru

1.      IntroductionHistorically, since the first tax treaty between Prussia and Austria-Hungary dated June 21, 1899, the mutual agreement procedure has been the main mechanism for resolving international tax disputes.

Over time, it was supplemented by arbitration. Since most of the existing tax treaties are based on the OECD Model Tax Convention, this article provides an overview of the OECD approach to resolving tax disputes. The mechanism within the OECD includes a mutual agreement procedure and its component part - arbitration. Currently, the doctrine is debating the effectiveness of the OECD approach and offers various options for developing the existing or creating a new mechanism. Section 2 of the article summarizes the main advantages and disadvantages of the OECD approach.

In parallel, the European Union has developed its own mechanism for resolving tax disputes, largely based on the OECD approach. Initially, such a mechanism was enshrined in the EU Convention of July 23, 1990 on the Elimination of Double Taxation in connection with the Adjustment of Profits of Associated Enterprises (hereinafter referred to as the "EU Arbitration Convention"), but the convention had a limited scope. In this regard, Directive 2017/1852 of October 10, 2017 on mechanisms for resolving tax disputes in the European Union (hereinafter referred to as the "EU Directive") was developed. It is worth noting that along with the traditional mutual agreement procedure and the advisory commission (analogous to compulsory arbitration), the EU Directive provides for a qualitatively new mechanism – the commission for alternative dispute resolution. According to the author, comparing the approach of the European Union and the OECD approach can be useful for finding a universal mechanism that can provide taxpayers with effective protection of their rights. Section 3 of the article is devoted to the study of this issue.

As a rule, at the level of the OECD and the European Union, as well as in the doctrine, active work is being carried out to strengthen the role of arbitration in resolving tax disputes. At the same time, the mutually agreed procedure remains out of sight. The author believes that the analysis of optional dispute resolution mechanisms, including mediation, can improve the effectiveness of the mutual agreement procedure. This is especially true for those states that are currently not ready to use arbitration to resolve tax disputes. Section 4 of the article presents arguments that allow a new look at mediation in international tax disputes.

The conclusion reflects the main conclusions of the study and the author's proposal for the modernization of the mutual agreement procedure.

2.      The OECD approachArticle 25 of the OECD Model Tax Convention provides the competent authorities of the Contracting States with the opportunity to discuss cross-border taxation issues in order to develop a unified approach within the framework of a mutually agreed procedure.

At the first stage, the taxpayer submits an application to the competent authority of any of the contracting States. If, in the opinion of the competent authority, the application is justified, he first tries to solve the case on his own. If the dispute is resolved unilaterally, the case is not transferred to the international level. Otherwise, the dispute is subject to consideration by both competent authorities within the framework of a mutually agreed procedure. Formally, paragraph 2 of Article 25 of the OECD Model Tax Convention does not impose on the competent authorities the obligation to reach an agreement based on the results of a mutually agreed procedure, they should only strive to achieve it. In this regard, the mutual agreement procedure is a purely interstate procedure. The passive role of the taxpayer is limited to initiating a mutually agreeable procedure by submitting an application and providing information and documents at the request of the competent authority.

Finally, if the competent authorities are unable to come to an agreement within two years based on the results of the mutual agreement procedure, the taxpayer has the right to refer unresolved issues to arbitration. According to the OECD approach, arbitration is an integral part of the mutual agreement procedure (only one of the stages), but is not an alternative dispute resolution procedure. This means that the taxpayer cannot apply to arbitration in case of disagreement with the decision of the competent authorities reached within the framework of the mutual agreement procedure. The execution of the decision is entrusted to the competent authorities and is not ensured by international control. In arbitration, the taxpayer also does not receive the status of a party to the dispute.

The mutual agreement procedure was developed to ensure a balance between the interests of the Contracting States and the affected taxpayer. Professor Zvi Daniel Altman notes that the state seeks to maintain three balances in the dispute: (1) the balance between full control over taxation and ensuring that another state complies with the tax treaty; (2) the balance between maintaining income and maintaining relations with another state in relation to the distribution of the tax base; (3) the balance between the desire to avoid conflict and the taxpayer's protection from double taxation ^{[5, pp. 243-286]}. Accordingly, the state is interested in a flexible dispute resolution mechanism based on tax treaties.

At the same time, the taxpayer is primarily interested in an objective and impartial resolution of the dispute, regardless of the tax policy of a particular state. Therefore, it is important for the taxpayer to have a mechanism that ensures compliance with the provisions of the tax treaty by both contracting States, stability and certainty of taxation, as well as mitigation of risks and reduction of costs for dispute resolution.

From this point of view, a mutually agreed procedure is a good solution. On the one hand, the mutually agreed procedure leaves the State with sufficient freedom of action in resolving the dispute. On the other hand, the taxpayer has access to domestic remedies. However, in practice, the mutually agreed procedure has not only advantages, but also disadvantages. The main ones discussed in the literature are summarized in Tables 1 and 2 below ^{[35, p. 11]}; ^{[4, p. 252-286]}; ^{[20, p. 15-70]}; ^{[6, p. 210]}.

Table 1. Advantages of the mutual agreement procedureContracting State

Table 2. Advantages of the mutual agreement procedureContracting State

The advantages and disadvantages of arbitration expressed in the literature are summarized in Tables 3 and 4 below ^{[20, pp. 15-70]}; ^{[27, pp. 163-164]}.

Table 3. Advantages of arbitrationContracting State

Table 4. Disadvantages of arbitrationContracting State

As can be seen from tables 1-4, the mutual agreement procedure and arbitration are much more focused on protecting state interests, completely excluding the taxpayer from participating in the dispute resolution procedure and leaving considerable freedom of action to the contracting States. As a result, the question arises about the effectiveness of the protection of taxpayers' rights in the dispute resolution procedure based on tax treaties.

If a taxpayer does not receive an effective remedy at the international level, he can only apply to domestic remedies. However, this approach does not guarantee the elimination of double taxation. It is possible that the interpretation of the provisions of the tax contract by the national court will not correspond to the true meaning of the contract, since the court resolves the case from the point of view of national legislation. In addition, the courts are not obliged to be guided by the comments to the OECD Model Tax Convention, the legal force of which is a controversial issue in the doctrine ^{[21, pp. 95-108]}; ^{[23, pp. 34-59]}. Also in many states there is a problem of recognition and enforcement of a court decision of one state on the territory of another state ^[1]; ^{[3, pp. 132-157]}; ^{[1, p. 207]}. To overcome this problem, it is necessary to initiate parallel judicial proceedings in another State. In this case, the courts of the contracting States may take different positions on the same case, and double taxation will not be eliminated.

In this regard, only the dispute resolution mechanisms provided for in the tax treaty can be effective for the taxpayer. However, a mutually agreed procedure does not guarantee the resolution of the dispute. As for arbitration, currently only 31 out of 96 States that have signed the Multilateral Convention on the Implementation of Measures Related to Tax Agreements in order to counteract the Erosion of the Tax base and the withdrawal of profits from taxation in 2016 (hereinafter referred to as the "OECD Multilateral Tax Convention") have agreed to use mandatory arbitration. Developing States indicated the following reasons preventing the use of arbitration: (1) protection of fiscal sovereignty, (2) uncertainty of this mechanism, (3) high costs ^{[10, pp. 105-109]}; ^[9].

3.      The European Union approachAt the level of the European Union, the EU Arbitration Convention and the EU Directive are used to resolve international tax disputes.

The EU Arbitration Convention was developed in 1990 and provides for a mechanism similar to the OECD approach, consisting of two stages: a classical mutual agreement procedure and an advisory commission (analogous to compulsory arbitration). In practice, the mechanism provided for by the EU Arbitration Convention has a number of obstacles to the effective resolution of tax disputes, including ^{[30, pp. 353-354]}; ^{[21, pp. 169-172]}:

· uncertainty of the legal status of the convention: a subsidiary instrument supplementing bilateral tax treaties, or an instrument completely replacing them;

· limited subject of regulation: the convention applies only to disputes on transfer pricing and disputes on the distribution of profits of a permanent establishment;

· a limited number of taxpayers who have the right to initiate a mutual agreement procedure: business entities, individuals are excluded from the list of applicants;

· the taxpayer's participation is limited to the provision of information and documents;

· insufficient regulation of the timing and procedure of the procedure, leaving many issues at the discretion of the competent authorities.

In order to eliminate the above shortcomings of the EU Arbitration Convention, as well as largely due to the influence of the BEPS Plan, an EU Directive was adopted in 2017. Unlike the EU Arbitration Convention, the scope of the EU Directive covers any issues arising in connection with the interpretation and application of tax treaties. In this regard, there is an assumption in the literature that the EU Directive provides a priority mechanism for resolving tax disputes ^{[30, p. 350]}.

The EU Directive fully complies with the latest amendments made in 2017 to Article 25 of the OECD Model Tax Convention and Article 16 of the OECD Multilateral Tax Convention. Moreover, the EU Directive is in many ways ahead of the OECD approach, providing taxpayers with more guarantees of protection of rights and eliminating many shortcomings of the OECD approach.

In particular, the EU Directive does not use the abstract concept of "validity" of the application when evaluating an application for a mutually agreed procedure by the competent authorities. According to Article 5 of the EU Directive, the competent authority may decide to reject an application if (a) the necessary information is missing; (b) there are no disputable issues; or (c) the deadline has been missed. This approach seems to be more objective and, as the researchers note, does not leave the competent authorities free to act when deciding on admission to a mutually agreeable procedure ^{[30, p. 377]}. In addition, the EU Directive provides additional means of protection to the taxpayer if the competent authority refuses to conduct a mutually agreed procedure ^{[14, p. 313]}. Thus, the EU Directive excludes a formal approach when evaluating an application.

For example, Articles 5 and 6 of the EU Directive provide that if one competent authority accepted the application and the other refused, the taxpayer can challenge the refusal in the national court or in the advisory commission (at the EU level). If no competent authority has accepted the application, the taxpayer may challenge the refusal in the national court of each of the contracting States, and if the court of at least one State cancels the decision of the competent authority, an advisory commission is held. In the doctrine, such an approach is considered as confirmation that the protection of the sovereignty of the taxpayer's state of residence is no longer a priority ^{[29, pp. 355-356]}.

The EU Directive pays attention to the relationship between international mechanisms for resolving tax disputes and domestic remedies. On the one hand, the adoption of a final decision at the domestic level does not prevent access to a mutually agreeable procedure. On the other hand, the transfer of the case to a mutually agreed procedure does not suspend the judicial proceedings on the taxpayer's dispute. According to paragraph 2 of Article 4 of the EU Directive, a decision taken as a result of a mutually agreed procedure is binding on the competent authorities and the taxpayer if the taxpayer has made such a decision and refused domestic remedies. If judicial proceedings on the same dispute have already been initiated at the domestic level, the decision on the mutual agreement procedure becomes binding only if the taxpayer submits evidence of the termination of the proceedings in the national court. The refusal of the competent authority to execute the decision on the mutual agreement procedure is qualified as a violation ^{[29, p. 361]}; ^{[14, p. 314]}. In this regard, the purpose of the EU Directive is to create a mechanism that is completely autonomous from domestic remedies.

In general, the developers of the EU Directive paid much more attention to arbitration than to the mutual agreement procedure. Arbitration is represented in the form of an advisory commission with broad powers: (a) an appellate body if the competent authorities have refused to conduct a mutually agreeable procedure; (b) competent authorities, if they do not decide on the validity of the application; (c) arbitration (quasi-jurisdictional body), if the competent authorities could not reach an agreement within the framework of a mutually agreed procedure.

In addition, the EU Directive provides for another mechanism for resolving tax disputes. According to article 10 of the EU Directive, the competent authorities can agree on the establishment of an alternative dispute resolution commission and determine the rules of its functioning, including the form (special or institutional body) and the model ("independent opinion" or "baseball") of arbitration. Theoretically, the competent authorities can even agree on delegating the powers of an alternative dispute resolution commission to the EU Court, as stipulated by the tax treaty between Austria and Germany in 2000.

Arbitration under the EU Directive is not a classic jurisdictional body, it is not obliged to consider all the issues raised by the taxpayer in the application and comment on them, request evidence and require the taxpayer's presence in arbitration ^[18]. However, the EU Directive provides for the first time that the mechanisms for resolving tax disputes are based on the guarantee of the right to a fair trial provided for in Article 47 of the Charter of Fundamental Rights of the EU. For example, (a) arbitrators are appointed based on the principles of independence and impartiality, (b) there are clear deadlines for each stage of arbitration, (c) the taxpayer has a number of rights in the procedure, including attendance at arbitration and providing evidence with the consent of the competent authorities or the advisory commission, as well as the right to be informed of the decision.

The EU Directive, unlike the OECD approach, includes provisions concerning transparency of the final decision taken by the advisory commission. According to article 18 of the EU Directive, the competent authorities are obliged to publish an excerpt from the final decision and may agree to publish the decision in full. Despite the fact that the decision is not a precedent, taxpayers faced with a similar situation can rely on the positions developed by the advisory commission in already resolved cases.

Thus, the EU Directive has taken positive and significant steps towards protecting the rights of taxpayers. However, the main drawback of arbitration remains unresolved - it is still part of the mutual agreement procedure. But the EU Directive leaves it possible to eliminate this shortcoming with the help of an alternative dispute resolution commission, which can be established by agreement of the competent authorities. The fact that arbitration is not explicitly envisaged as an independent dispute resolution mechanism, an alternative to the mutual agreement procedure, shows that at present States are not ready to consider such a possibility as a working tool. In this regard, arbitration under the EU Directive, similar to the OECD approach, is subject to the disadvantages of a mutually agreeable procedure.

At the same time, the EU Directive pays less attention to the mutual agreement procedure. In particular, the EU Directive does not provide for conditions under which a dispute can be considered successfully resolved within the framework of a mutually agreed procedure. This means that, theoretically, the competent authorities can declare that an agreement has been reached and the case is not subject to arbitration, despite the fact that the dispute has not been resolved on its merits and double taxation has not been eliminated. In studies, the absence of a minimum standard for evaluating a decision on a mutually agreeable procedure is due to the interstate nature of the procedure, which gives the competent authorities freedom of action to resolve the dispute regardless of the legal and factual circumstances that are usually taken into account by national courts ^{[7, pp. 335-345]}; ^{[29, p. 361]}. It is assumed that the mutual agreement procedure corresponds to the objectives of the EU Directive, since the competent authorities act in the interests of the affected taxpayer, and only if the mutual agreement procedure is ineffective, additional regulation of further actions is required.

The EU Directive has retained the essence of the mutual agreement procedure, following the OECD approach. In fact, the mutual agreement procedure is still a bidding process, as Kees Van Raad once described it ^{[32, p. 218]}. The taxpayer does not have the opportunity to analyze the arguments used by the competent authorities in the procedure and assess whether such arguments correspond to the purpose of eliminating double taxation. In this regard, it is time to review the mutual agreement procedure.

4.      Proposal to modernize the mechanism for resolving international tax disputesThe doctrine expresses various options for the development of mechanisms for resolving international tax disputes in order to protect the rights of taxpayers ^{[32, pp. 281-285]}; ^{[35, pp. 184-188]}; ^{[4, pp. 393-420]}; ^{[32, pp. 217]}; ^{[25, pp. 205-234]}; ^{[8, pp. 467-476]}.

However, such initiatives are mainly aimed at strengthening the role of arbitration with the prospect of creating an international tax court. The development of the BEPS Plan and the OECD Multilateral Tax Convention has intensified the discussion on mandatory arbitration. At the same time, this initiative is an ideal, but not a universal tool. Researchers have repeatedly noted factors that hinder the use of arbitration, including the cost and duration of the mechanism, lack of experience, lack of clear and transparent rules for the functioning of arbitration, as well as the inability to appeal the final decision at the international level. As for developing countries, the most acute problem is the transfer of taxation powers to a third party, which leads not only to a limitation of sovereignty, but also to a limitation of the possibility of applying national legislation to non-residents, as well as to fears of being in a weaker position in a dispute with a developed state ^{[22, p. 6-8]}; ^{[26, c. 163-165]}; ^[3].

Considering this, the author believes that it is advisable to develop a mutually agreeable procedure, in particular, through mediation. This proposal is supported by the Comments to Article 25 of the OECD Model Tax Convention, which indicate that the mediator listens to the positions of each party and outlines their strengths and weaknesses. The Comments say that some states have already successfully used mediation to resolve tax disputes at the domestic level, and the use of this tool in a mutually agreeable procedure may also be useful. This procedure, unlike arbitration, is not mandatory, but it can help the parties reach a common decision before the case is referred to arbitration.

In addition, according to paragraph 2 of Article 25 of the OECD Model Tax Convention, the competent authorities should seek to resolve the dispute. This aspiration should be reflected in the methods used by the competent authorities to achieve this goal, one of which may be mediation.

The comments to Article 25 of the UN Model Tax Convention also recommend the use of additional non-binding dispute resolution mechanisms, such as expert assessment and mediation, in the mutual agreement procedure. Moreover, the development of mediation for the resolution of other (non-tax) disputes is one of the main goals of the UN.

In October 2021, the UN Committee of Experts on International Cooperation on Tax Issues issued a Handbook on the Avoidance and Resolution of Tax Disputes (Handbook on the Avoidance and Resolution of Tax Disputes). In particular, the Guide suggests using mediation to improve the effectiveness of the mutual agreement procedure. Despite the fact that there are currently no publicly available examples of using mediation to resolve disputes over tax contracts, the Guide recommends relying on the experience of using mediation to resolve tax disputes between taxpayers and tax authorities at the national level.

Following the comments of the OECD and the UN, the preamble of the EU Directive recommends that EU member States use non-binding dispute resolution mechanisms, such as mediation and conciliation, in a mutually agreeable procedure for resolving disputes over tax contracts.

Thus, at the international level and at the EU level, there is already a basis for mediation. This means that mediation can be easily integrated into a mutually agreeable procedure, since it does not require amendments to tax contracts. Competent authorities can simply try to apply mediation in practice. In addition, States can agree on the use of mediation on a one-time basis.

Since mediation follows from national legislation, let us turn to the main features of mediation on the example of the practice of Australia, Belgium, Mexico, the Netherlands, New Zealand, the USA and the UK.

The following definition of mediation is usually given in the literature: "A facilitating (facilitative) process in which the disputing parties attract the help of an impartial mediator (mediator) who does not have the authority to make any decisions on the dispute, but who uses certain procedures, methods and skills to help the parties resolve the dispute through negotiations through negotiations without judicial proceedings" ^{[11, p. 1270]}. This definition also applies to the resolution of tax disputes ^{[19, pp. 100-101]}; ^{[16, pp. 84-85]}.

Researchers refer to the general features of mediation in tax law at the national level ^{[17, p. 442]}:

· the mediator does not make a decision on the dispute: the parties retain full control over the outcome of the dispute and do not transfer it to a third party, as, for example, it happens when a dispute is considered in court or arbitration;

· the mediator helps to identify the main problems and constructive dialogue, develops possible options and alternatives;

· the mediator contributes to achieving a mutually beneficial solution for both sides of the dispute;

· As a general rule, mediation is a voluntary and informal procedure (Mexico is an exception);

· mediator – an independent, impartial and neutral mediator.

As the researchers note, mediation allows you to expand the view of the problem, not limited to the traditional legal approach ^{[24, p. 41]}. Mediation makes it possible to take into account such external factors as religious and cultural characteristics, business reputation, etc., which contributes to the search for previously not considered solutions to the problem. If in court or arbitration it is important to find out "what happened" in order to come to a solution (retrospective approach), then mediation focuses on what needs to be done to solve the problem (perspective approach) ^{[17, p. 444]}.

Thus, mediation, unlike arbitration, leaves control over the dispute to its parties, so mediation can become an alternative procedure for resolving international tax disputes in those states that still consider arbitration as a threat to sovereignty.

The advantages ^{[30, p. 498]}; ^{[15, p. 172]}; ^{[12, p. 213]} and disadvantages ^{[33, p. 314-315]}; 12, p. 186] of using mediation in a mutually agreeable procedure, expressed in the literature, are summarized in Table 5 below.

Table 5. Advantages and disadvantages of mediationDisadvantages

If the last two shortcomings can be overcome, then the lack of a guarantee of reaching an agreement on the dispute is a significant disadvantage. However, it is important to take into account that such a disadvantage is inherent in all non-binding dispute resolution mechanisms. Thus, mediation will not be able to solve all the problems that arise in connection with the application of the mutual agreement procedure, but, of course, mediation has the potential to improve the functioning of the mutual agreement procedure.

The opinion is expressed in the literature that the development of a multi-level procedure for resolving international tax disputes will help to neutralize the identified shortcomings of mediation ^{[30, p. 483]}. According to this approach, the final stage of dispute resolution should be arbitration ^{[15, pp. 174-177]}. In this case, mediation and arbitration are complementary, but not contradictory mechanisms ^{[25, pp. 254-255]}. This approach implies that mediation can facilitate the task of arbitrators, since it will reduce the number of unresolved issues within the dispute, as well as sort out the actual circumstances of the case, which will significantly reduce the amount of work of the arbitrator. It is assumed that with the introduction of mediation, the role of arbitration will also change - it will perform the function of the last instance to consider the case (like a judicial body) ^{[30, p. 521]}.

In general, supporting this approach, we note that, according to the author, it can be considered for the future as an ideal option. However, those States that are not ready to implement arbitration in the near future can compensate for the above-mentioned lack of a mutually agreeable procedure by granting the taxpayer the right to directly participate in the mediation procedure.

As a general rule, the taxpayer's participation in the procedure for resolving international tax disputes is assessed by foreign researchers as desirable, but unattainable in current realities due to the following reasons: less openness of the competent authorities; delays in the mutual agreement procedure, since in practice the competent authorities discuss not one specific case, but a category of cases on a similar problem affecting several taxpayers; weaker arguments of the competent authorities, since they will not be able to refer to previously reached agreements on similar cases ^[13].

According to the author, the taxpayer's participation in mediation is necessary because he is interested in the results of dispute resolution, but his interests (elimination of double taxation) do not always coincide with the interests of the competent authorities (preservation of the tax base on the territory of his state). The involvement of the taxpayer in the mediation procedure corresponds to the global trend of transparency in the field of international tax law ^{[30, p. 486]}; ^{[7, p. 335-345]}, as well as the trend set by the EU Directive on expanding the rights of taxpayers in the procedure for resolving international tax disputes.

Such an approach will also ensure that the guarantees of the right to a fair trial in international tax disputes are respected . In the absence of an international tax court, the injured taxpayer does not have a judicial remedy at the international level, within which his rights would be ensured.

The following advantages and disadvantages of taxpayer participation in mediation are expressed in the literature ^{[30, pp. 502-503]}; ^{[15, pp. 179-180]}; ^{[28, pp. 207]}; ^{[33, pp. 314-314]}.

Table 6. Pros and cons of taxpayer participation in mediationDisadvantages

According to the author, the first two arguments are regulated by the mediator, whose key role is to find a solution that is mutually beneficial for all parties to the dispute. At the same time, the third argument can be compensated by paragraph 3 of Article 25 of the OECD Model Tax Convention, which provides the competent authority with the opportunity to conduct a mutually agreeable procedure for disputes on the interpretation of the convention.

5. ConclusionSummarizing the advantages and disadvantages of the OECD approach to tax dispute resolution has shown that the mutual agreement procedure is a compromise solution that formally ensures a balance of public and private interests.

However, in practice, public interests are protected to a greater extent in the framework of a mutually agreed procedure compared to private ones. The main disadvantage of the mutual agreement procedure is the lack of a guarantee of dispute resolution. Mandatory arbitration was created to eliminate this shortcoming. However, many States do not support arbitration, so the practice of its application is currently not widespread. At the same time, it should be borne in mind that arbitration is only a part of the mutual agreement procedure, and not an alternative dispute resolution mechanism. In this regard, the shortcomings of the mutual agreement procedure have an impact on arbitration.

The European Union follows an approach similar to that of the OECD. The developers of the EU Directive sought to strengthen the role of compulsory arbitration. But the EU Directive is ahead of the OECD approach and leaves the possibility of creating an alternative dispute resolution commission at the discretion of the competent authorities. Theoretically, they may even decide to create an institutional arbitration. Thus, arbitration becomes an effective mechanism for resolving tax disputes, autonomous from the mutual agreement procedure. However, given the active discussions and contradictory positions of States regarding the application of mandatory arbitration, the development of an initiative to create an institutional jurisdictional body is unlikely to meet less resistance.

In this regard, the author suggests that it is now time to reconsider the mutual agreement procedure. The author's proposal is to use mediation in a mutually agreeable procedure. Of course, mediation is an optional mechanism for resolving tax disputes (unlike arbitration), so mediation cannot guarantee the resolution of the dispute in full. At the same time, the direct participation of the affected taxpayer in mediation can ensure effective protection of the taxpayer's rights, as well as reduce the risk of non-resolution of the dispute.