1.18
The Tax Commissioner recalled that at the time of the last hearing the
Committee raised issues associated with increasing levels of complaints and
diminution of service standards, which were attributable mostly to the finalisation
of the change program. He was pleased to report that in the intervening six
months a ‘bounce back’ had been achieved. [8]
1.19
There have been changes to service standards over the past few years:
increases and decreases of benchmarks; redefinition of standards; and
collapsing of categories. For instance the ATO advised that they were no longer
reporting on clerical and administrative errors as a service standard.[9]
The Committee were informed that the ATO reviews service standards annually
both from the point of view of where gaps exist and from a pragmatic business
point of view. The Committee sought to understand the methodology used in
setting the service standards and how they were revised, including whether
anybody external to the ATO was involved.
1.20
The Committee therefore welcomes the announcement that the ATO has
commissioned a strategic review of service standards, involving external
consultants, to assess the effectiveness of the current measures against
community expectations. The Committee heard that any new standards would take
account of the needs of the taxpayer so that the response is measured in terms
of appropriateness, not just in terms of time taken to complete.
1.21
In the ATO’s submission to the next hearing, the Committee requests the
key results of the external review of the service standards be included.
1.22
The Tax Commissioner undertook to put focus and direction into trying to
improve and shorten any gap identified between international best practice
service standards and current ATO performance.
1.23
There was some concern about the view held by the ATO leadership team
that ‘it is no use promising something that we cannot deliver’ [10]
and ‘that we put on the table the things we can realistically promise and not
just possibilities.’[11] It is important, the
Committee considered, that the ATO set high standards even if it took some time
to reach them.
1.24
The Committee expects to see improvements in performance against
benchmarks for the two complaint handling service standards by the time the
submission to the next hearing is being prepared. It also expects to see
continuous improvement against the electronic tax returns service standard
benchmark given the amount of time the ATO will have had to iron out any
problems with the implementation of the ICT processing system.
1.25
The traffic light system for publicly reporting achievements against
service standard benchmarks, as recommended by the Committee, has been
instigated. It gives a clear indication of how the ATO is performing against
each benchmark. However, this information was hard to locate on the Website.
Recommendation 1 |
| |
The Committee recommends that the Australian Taxation Office
increase the visibility of the traffic light reporting system, on its
achievements against benchmarks, to a more prominent position on its website
with clear signposting for visitors to the website. |
Complaints handling
1.26
The ATO’s submission noted that complaints on hand had reduced
significantly, from 4501 at June 2010 to 962 at June 2011, following a
concerted effort to improve management of complaints. Also that the total
number of complaints received had ‘largely returned to traditional levels,’
giving the example of July 2009 a total of 2,167; July 2010 a total of 4,594;
and July 2011 a total of 1,785.[12]
1.27
The Committee appreciates that the ATO has an exceptionally large volume
of interactions with its clients both taxpayers and tax practitioners, however the
Committee thought the ATO should be wary that it does not become complacent
about the level of complaints and continues to strive to reduce the number of
them.
1.28
As with service standards, the ATO is conducting a review of its
complaints and compliments handling processes, including consideration of best
practice drawn from Australia and overseas.
1.29
Many of the complaints in the previous year were related to Tax Time
performance. The ATO reported that early indications were that Tax Time 2011
was going more smoothly than in 2010, with a significant increase in the number
of refunds processed in the same time period as last year. The Taxation Ombudsman’s
office advised the Committee that, with extra resources and revised processes,
service delivery at Tax Time had improved noticeably over the previous year,
resulting in their office receiving fewer complaints.[13]
1.30
The Taxation Ombudsman’s office reported that of all the in-jurisdiction
complaints and approaches they had received last year, 2,589 related to the
ATO, making it the third most frequent agency about which complaints were received.
1.31
However, the ATO were ‘pleased to advise the Committee that since the
March hearing of the JCPAA we have seen a significant improvement in the ATO’s
complaints handling,’ citing improvements in income tax returns processing area;
the level of senior officer involvement in complaint resolution; and the
responsiveness of the complaints area of the ATO, as improved aspects of
particular note.[14]
1.32
Complaint numbers were showing a slight trend upward, reported the
Ombudsman’s office, but overall on a better trajectory. The current issues of
most concern are the ATO’s communication with taxpayers, followed by the way
audits are conducted and then matters of inconsistency in decision making.
‘Over 30% of our complaints are resolved by us by providing a better
explanation for an ATO decision. This suggests to us that taxpayers are not
understanding their interactions with the ATO or do not understand what they
are being asked to do.’ [15]
1.33
The Committee considered that the ATO had made a significant effort in
the area of complaint handling since the last hearing, both in terms of
resource allocation to reduce the number of complaints on hand, and in tackling
the issues that led to complaints being lodged. The Taxation Ombudsman
confirmed that the new processes for complaint handling were working well. The
Committee was pleased that the process of review was ongoing and should result
in continuous improvement. They signalled their interest for the next hearing
in further discussing the nexus between clear communication and complaints.
Change program
1.34
At the March hearing the Committee was informed that the implementation
of the integrated core processing system, a major component of the change
program, was the cause of delays in the processing of refunds which resulted in
an increase in the number of complaints.
1.35
Tax Time 2011 had gone more smoothly, the ATO reported in their
submission - with 100,000 additional refunds processed by 21 August, compared
to the same time last year and 1,783 complaints received in July 2011 compared
to 4,594 in July 2010.[16]
1.36
The Tax Commissioner claimed the ATO as one of the leaders
internationally in electronic lodgement, with 95% of income tax returns lodged
electronically either through tax agents or e-tax.[17]
He announced that having finalised the change program, the ATO had commissioned
a new program to promote online dealings - ATO Online 2015.
1.37
The Committee signalled its intention to inquire further into this
program at its next hearing. As mentioned in its last report, the Committee
trusts the ATO has learned lessons from the implementation of the large scale
change program and that the implementation of ATO Online 2015 will be less
disruptive.
1.38
Overall the Committee was pleased that the investment in the change
program was beginning to pay dividends in reducing processing time and in
identifying potentially fraudulent claims which would improve the integrity of
the system.
Compromised Tax File Numbers (TFN)
1.39
The Committee was particularly interested in the outcome of remedial
action taken relating to the 900 compromised tax file numbers that were
discussed at the previous JCPAA hearing in March.
1.40
The ATO stated categorically that the 900 compromised TFNs had all been
finalised.[18] It assured the Committee
that those taxpayers were now able to interact with the ATO and with agencies
such as Centrelink and Medicare, the banks and other financial organisations,
because they either had a new tax file number or the tax file number had been
categorised as a very low risk in terms of being potentially fraudulent.
1.41
The Committee was perturbed over the time some compromised TFNs remained
unresolved, with some outstanding for over a year. The ATO assured the
Committee that most were processed in under 28 days; however, there were
currently approximately 300 cases that were still unresolved after 90 days. Most
of those taxpayers had been provided with a new tax file number so they could
interact with the ATO, although the complexity of their tax affairs meant that
their cases could not be completely resolved.
1.42
The Tax Commissioner noted that there had been a significant increase in
compromised tax file numbers over the last couple of years, by nearly 100%.[19]
Although it represented a small fraction of the TFNs in the system - some 31,000
of the 27,000,000 in total - it did highlight the increase in fraudulent
attempts to steal people’s identities requiring the ATO’s attention.
1.43
Over the peak tax return processing period July/August, a spike of
compromised TFNs is normally created and currently the ATO has 3,000 unresolved
compromised TFNs on hand.
1.44
Given the sharp rise in the number of compromised TFNs, the Committee
sought the ATO’s view about any patterns emerging that might indicate it was
the work of organised crime. The Tax Commissioner confirmed that the revenue
system was under concerted attacks from organised crime syndicates, however this
remains at a low level and the ATO has been working with other law enforcement
agencies such as the Australian Crime Commission and AUSTRAC to overcome the
problem.[20]
1.45
The Committee is reassured that the 900 compromised TFNs considered high
risk, on hand at the time of the last hearing, have been dealt with and at very
least a new tax number issued so the taxpayer can interact with the ATO and
other agencies.
1.46
The Committee were also pleased to know that most compromised TFNs are
now being resolved quickly. At the next hearing the Committee would welcome
information on new strategies for trying to get resolution on the more complex cases
that remain outstanding for 3 months or more, recognising that the ATO often
requires information to be supplied by the taxpayer which may restrain
processing time.
Organisational Culture
1.47
At the March hearing of the JCPAA, the Committee was concerned by the
ATO’s organisational culture that showed reluctance to identify areas where it
considered improvement was required and recognise the importance of complaints
as a rich source of information on where to target those improvements. The
Committee asked the ATO in its submission to the next biannual hearing to
explicitly state and detail actions it had taken to make improvements and
outline further planned improvements.
1.48
The Committee noted that the results of a regular survey of tax
practitioners and the community on the ATO’s performance and professionalism, showed
a decline in levels of service delivery.[21] Again, the ATO attributed
this to the implementation of the new information technology processing system.
Now that this system is fully operational, the Committee would expect the
results of the next survey to show a marked improvement.
1.49
The following statement made in the ATO submission went some way to
assuring the Committee that the ATO had accepted that improvements were
necessary and that the organisation had taken on the need for continuous
improvement. ‘We continually aim to improve the services we provide and the
experience of the community in their interactions with the ATO. While generally
we provide a high level of service, there is always room for improvement as we
strive to learn from our experience and seek to deliver to a higher standard.’ [22]
1.50
The Tax Institute commented that when the ATO did not perform at an
expected level, in the majority of cases, they were willing to admit it and
work together to satisfactorily resolve issues.[23]
1.51
Following up on the Committee’s probe at the last hearing as to whether
or not there was ‘group-think’ at senior management levels, the ATO provided
information on the ways in which they refresh their staff and bring in more
skills.
Statistics on the ATO workforce were given
including:
n a record number of
graduates (403) recruited in the last year;
n a broadened range of
graduate disciplines including communications, behavioural psychology and
high-end mathematical analytics;
n high retention rates
for graduates - 96% for the 2010 cohort;
n a boost in the number
of lower level processing staff (126) to assist at peak periods;
n reduction in the
average age of employees from 47 years to 43 years;
n 80% of staff located
outside of Canberra, compared to the 85% figure given at the last hearing;
n approximately 50% of
the organisation with careers of 20 plus years;
n 43% of staff with
university degrees or diplomas, higher than the public sector average;
n a significant
proportion of senior executives having had experiences outside of the ATO; and
n the number of senior
executives tracking at 1% of the 22,000 person organisation, less than Australian
Public Service averages.
1.52
The Tax Commissioner acknowledged the importance of public confidence in
the ATO and its processes, including capacity building processes. The
Commissioner said ‘we have tried to build into our processes an integrated
quality framework, and we are receptive to doing anything more we can in that
area to build public confidence.’[24]
1.53
The Committee appreciated the ATO’s provision of detailed information
about recruitment and staffing profiles both in their submission and at the
hearing. The Committee was reassured that the ATO is making efforts to ensure
its culture is moving to one of greater openness and acceptance of the need for
improvement.
1.54
However the Committee will continue to take an interest in recruitment
practices, staff turnover, and training of ATO officers. The Committee will
monitor any attrition of the skills base at lower levels which might place a
burden on the longer serving, more experienced staff. The Committee will be
looking for evidence that audits and assignments are not just target or
quantity focused but also quality focused.
Theme 2: Compliance
1.55
In its previous report the Committee requested that the ATO include a summary
of its compliance activities in its next submission, detailing specific action taken
to make compliance easier and improve communications.
1.56
At this hearing the Committee focused on the relative ease and cost of
compliance on Small and Medium Enterprises (SMEs) and micro businesses.
Making compliance easier
1.57
The ATO’s submission explained how it takes a risk management approach
to compliance and is increasingly differentiating its engagement with taxpayers
based on its view of their relative likelihood of non-compliance and the
consequences of that behaviour.
1.58
The submission outlined the rationale for the Compliance Program which
is underpinned by the Compliance Model and also the taxpayer’s willingness to comply.
The ATO stated that ‘we want to make it as easy as possible for taxpayers to do
the right thing by providing information, tools, services and guidance to
assist with record-keeping, reporting and lodgement.’[25]
1.59
As well as the provision of practical support to meet the paperwork
requirements, the ATO gives forewarning of the particular areas of the economy
that will be under investigation in the upcoming year. The ATO’s 2011-12
Compliance Program was included as part of their submission.
1.60
The Tax Commissioner described the publication of the Compliance Program
as a way of seeking community feedback. ‘This is where we think our risks are
to the community. Please tell us if you think we are right.’ [26]
1.61
Another strategy employed to make compliance easier is the ATO’s use of
data to pre-fill lodgement forms. This helps to identify discrepancies and
anomalies as it is based on previous information held by the ATO or supplied by
employers, Centrelink or other organisations with which the ATO has data
sharing arrangements. More generally the ATO is promoting and fostering online
dealings because the Commissioner said ‘we believe that will make it easier for
people in the longer term and easier for businesses in particular.’[27]
Cost of compliance on small business
1.62
At the hearing a number of issues were raised around the ease/difficulty
with which businesses, particularly the smaller ones, were having with
compliance. These included:
n meeting obligations
in circumstances of extreme hardship such as caused by natural disasters;
n the burden of record
keeping;
n the applicability of benchmark
data;
n the complexity of
lodgement processes;
n the perceived u-turns
on interpretation of tax law;
n the impost of audits;
and
n problems with the
clarity of communication.
1.63
Committee Members discussed examples from their own constituencies of
the impost of tax compliance on small businesses. Similar examples were raised
by the representatives from the tax profession in attendance at the hearing.
The Inspector-General of Taxation also reported that his clients believe the
ATO’s administrative approach to timeliness, certainty and compliance costs
could be significantly improved.[28]
1.64
The Tax Commissioner noted that he met with the Small Business Advisory
Group a number of times a year and got feedback and guidance from the small
business representatives about where the ATO might improve services. The ATO
provided more than 85,000 assistance visits to businesses over the course of
the last year.[29]
1.65
The ATO informed the Committee that it had provided a great deal of
assistance to small businesses in distress, due to the natural disasters that
occurred in Australia earlier in the year. This included record reconstruction,
deferring lodgements and negotiating payment arrangements - some interest free.
1.66
The Committee acknowledged the support being offered to businesses though
sought to know if there had been any simplification of the lodgement processes.
They were aware that a recent MYOB study had found 7 in 10 business owners
believed Business Activity Statement (BAS) were too hard and needed to be
simplified. [30]
1.67
The ATO responded that ‘lodgement on its own has not been a major issue
that the businesses have raised with us in the many forums where we talk to
them.’ [31] The Inspector-General of
Taxation offered that from his experience, large business was better organised and
able to bring their issues forward, whereas often with Small and Medium
Enterprises (SME) his office had to be proactive, going out and talking to them
and taking their issues on board.[32]
1.68
The ATO asserted that they placed an emphasis on record keeping, giving
businesses information to assist them to keep good records so that their
business performance was enhanced as well as giving them the ability to meet the
tax obligations that flow from that. They pointed to the Small Business
Advisory Service that had been operating for a number of years where businesses
can request a ‘no strings attached,’ one-on-one visit from the ATO. ‘We just go
out and talk with them. It is not an audit. We just sit down with the business
and their records and give them advice about their situation. It is tailored
and practical. Some of our products that we send out now through the mail are
much more tailored to the business. Instead of sending them a booklet that
covers every possible obligation, it is tailored to them.'[33]
1.69
The Committee believes compliance and lodgement present challenges for
micro businesses and urges the ATO to simplify the processes, use plain
language communication and any other ways it can to lift the burden for them.
1.70
The ATO pointed to the work it had done with the tax agent community in
publishing benchmarks to assist business to help gauge their performance. Over
100 industries had been benchmarked using income tax return data which show the
broad expectations the ATO has of business performance, and hence tax payable, in
those industries.
1.71
The Inspector-General of Taxation noted that his office had heard from micro
businesses questioning the appropriateness of the use of benchmarking and the
level of record-keeping required. The micro businesses were saying that they
are quite different one from another and they can all differentiate themselves
from the benchmarks. They consider that the levels of record keeping they need
to show in order to disprove that these benchmarks do not apply to them are too
stringent for a business of their size. The Inspector-General of Taxation intends
to investigate those claims in an upcoming review.[34]
1.72
The Committee supports and encourages the ATO to work closely with the
Inspector-General of Taxation on this work.
1.73
The Committee endorses the publication of a Compliance Program
highlighting the areas where the ATO will focus their attention in the upcoming
year. It works as an important communication tool for the ATO increasing public
confidence in the transparency of its operations.
1.74
The assistance provided to the public, both private taxpayers and businesses,
around paperwork requirements and the pre‑filling of electronic lodgement
forms is acknowledged as making compliance easier. However, the Committee will
monitor unintended consequences such as the large number of ‘stops’ for
checking that were put on taxpayer refunds where discrepancies were identified
resulting in delays to many refunds.
1.75
The trust Australian taxpayers have in the ATO is critical to the
integrity of the tax system. The ‘no strings attached’ small business advisory
service is a clear way this trust can be increased. The use of benchmarks as
indicators of likely tax obligations is also an area where mutual trust can be
built, as well as being an effective administrative innovation by the ATO.
However, any taxpayer perceptions that either of these innovations is not being
managed in good faith will undermine any potential benefits. With these
comments in mind, that Committee notes the importance of avoiding any
perception that the ‘no strings attached’ small business advisory service is an
information gathering exercise for future audits.
1.76
The Committee felt that the ‘no strings attached’ small business
advisory service was a commendable initiative by the ATO and encourages wide
business sector participation. To maximise uptake, the Committee recommends
that the ATO consider additional cost effective promotion of this service – for
example through the existing communication channels of correspondence to
taxpayers; through tax information brochures; and through key industry bodies such
as Council of Small Business of Australia.
1.77
The Committee also emphasises the importance of evaluating the
practicality of applying benchmarks to some sectors and micro-businesses types.
There will be a need to adjust the approach if the benchmarks are found to be
overly generic or if they are perceived as an attempt to mould unique
businesses to fit a predetermined picture. The Committee has therefore
requested that the ATO report on an evaluation of the benchmarks method for
smaller businesses as part of the ATO’s next submission.
1.78
Finally, the Committee commends the ATO on their engagement with tax
practitioners, especially around Tax Time. The work of the Tax Practitioner
Forum in developing tips to reduce common errors and communicate warnings
around the risk of over-claiming and fraud was noted. The Tax Agent Portal was
highly praised by tax industry professionals.
The tax gap and random audits
1.79
The Committee sought a fuller understanding of the ‘tax gap’ concept -
the difference between expected and actual revenue raised by taxation.
1.80
In 2010 the ATO identified that the before-tax profit of companies
increased significantly, yet tax revenue budgeted by the government decreased.
The ATO said it was making ongoing efforts to track long-term trends to see
whether and why a tax gap exists.
1.81
The Tax Institute informed the Committee the tax gap issue was raised at
the National Tax Liaison Group, one of the ATO’s consultative committees. Their
interest was in knowing what sort of analysis was being undertaken by the Commissioner
and the ATO to ensure the revenue estimates are accurate.
1.82
The ATO pointed to work in other jurisdictions on how to measure whether
or not the right amount of tax is disclosed and brought to account. ‘We know
from all the international work that has gone on to actually be confident about
a figure you would need to support that with a random audit program. A random
audit program would be costly to the taxpayer.‘[35]
The Tax Commissioner said that approach has its own problems and that the
compliance costs of a random audit program that would be passed on to the
taxpayer would be prohibitive and unfair. ‘It is very expensive for the
community and at the end of the day you are not sure whether it produces a very
clear or robust outcome.’[36]
1.83
The Association of Taxation and Management Accountants representative
attributed the tax gap to the timing difference between when the money is
flowing into the coffers from good times and a rapid slowdown in revenue when
the good times turn bad. The effect of the bad times is reflected in the tax
revenues collected, but does not show up until 12-18 months afterwards, when
the revenue for that period is collected. ‘The tax revenue is always a
reactionary process of the moneys coming in well and truly after the event.’[37]
1.84
The ATO uses Australian National Accounts[38]
information to derive benchmarks on how the law is operating relative to the
intended outcome. This has highlighted a variance in company tax between the
accounting profits and the tax payable. The ATO agreed that one explanation
could be the time lag, as suggested by the Association of Taxation and
Management Accountants. However, this also calls into question whether or not
‘the costings associated with a number of legislative measures are playing out
in the way the parliament and government intended.’[39]
1.85
Despite the assertions that calculating the tax gap is a potentially
unproductive activity, concrete evidence was not provided to the Committee to
substantiate these opinions. It was not clear whether a thorough analysis had
been conducted into this issue to determine the possible costs and benefits. Given
the national importance of the tax gap, the Committee wishes to see a
comprehensive analysis of gap and its implications as part of the ATO’s submission
to the next hearing.
Tax base integrity
1.86
The Committee explored the broader issue of tax base integrity focusing
on the large number of prosecutions the ATO had pursued and their relative success
rate.
1.87
The tally of prosecutions for the past financial year totalled 1,700. From
March to June the ATO had made 600 prosecutions, consisting of 450 individuals
and 140 companies - resulting in penalties and back taxes of more than $9.5
million. However, the Committee noted that there seemed to be quite a high
strike rate of losses in rulings of the court. ‘The way the courts are
interpreting your prosecutions it seems to be a question of the integrity of
the tax system generally.’[40]
1.88
The Tax Commissioner asserted that the courts have almost unanimously found
in favour of the Commissioner in civil penalty or criminal penalty areas, with
some clear messages in sentencing for white collar crime. However, the Tax
Commissioner had concerns about the legal position and interpretation of the
law in relation to some claims of not having to pay tax on income or
deductions. ‘Our success rate is still very positive in terms of numbers, but
there are some very worrying signs in relation to the courts’ approach to the
general anti-avoidance provisions of the law.’[41]
1.89
The Committee asked the ATO about the integrity of the tax base in
relation to some of the recent court rulings. In response the ATO advised: ’it
is then a matter for government and parliament to say that we think this degree
of structuring of arrangements is more than the tax base can bear, because if
that is not within the net then the base is diminished accordingly.’[42]
1.90
The Tax Commissioner also referred to the consultative committees as
another way to give people opportunities to discuss collaboratively how the law
operates and is interpreted. ‘I would welcome more upfront real‑time
sharing of information so that we can make it clearer for people and give
practical certainty where we can.’[43]
1.91
The Committee sought to understand what is considered when making
decisions about when and whom to prosecute, and who had the responsibility to
make such decisions. The ATO described their risk management approach in making
judgements about where to allocate priorities. ‘There is a point about whether
or not it would be cost-effective, and we do make those choices in those sorts
of cases. We have that level of decision about, with our limited resources,
where we apply those resources.’[44]
1.92
Conscious of the importance of the on-going integrity of the tax base,
the Committee decided to continue to monitor the ATO’s success rate in the
courts and potentially provide support to the ATO for change if the anti‑avoidance
provisions are found to be ineffective.
Improving communications
1.93
At the previous hearing in March with the JCPAA, the Committee proposed
a future focus of the ATO could be on improving the quality of its communication
with members of the public, making its communication more accessible and easier
to understand. The ATO had admitted that, notwithstanding the work they had
undertaken on communications, there remained more to be done. The Committee
therefore were keen to see what had been achieved in the intervening six
months.
1.94
In their submission the ATO highlighted some of the actions they had
taken to improve the accessibility of their communications. These included:
n engaging ATO
consultative forums to seek advice and early design on products;
n engaging the
community directly through user-testing and market research activities;
n engaging tax
volunteers around Tax Time who helped about 50,000 people in the income bracket
under $40,000 or $50,000 with their tax returns;
n creating products to
assist people with non-English speaking backgrounds and people with
disabilities;
n established a
corporate correspondence capability to assist all ATO areas to review content
and improve their letters;
n set in place a
rolling schedule of reviewing and improving different types of correspondence
such as debt letters, Business Activity Statements, notices of assessment,
statements of account;
n piloting improvements
to debt letters and assessing how the language used impacts on compliance behaviour;
n undertaking a review
of 450 generic letters and rewriting some of them in a ‘people to people’ style
which is less formal, jargon-free with a simplified message;
n begun to interact
with taxpayers using social media – Twitter, YouTube and Facebook, providing
information to support the Tax Time campaign, responding to questions in a
time, manner and place suitable to users; and
n offered online tools
such as self-help calculators, a tool to help small business assess their
eligibility for capital gains tax concessions and currently developing a tool
to determine and assess GST implications for property transactions.
1.95
The submission also listed planned future improvements relating to
website navigation, form simplification and decision support tools.
1.96
The Ombudsman’s office rated communication with taxpayers as their highest
issue of current concern with the ATO. Almost a third of all the complaints
received about the ATO are resolved by the Ombudsman’s office providing a
better explanation for an ATO decision. The Ombudsman’s office said ’this suggests
to us that taxpayers are not understanding their interactions with the ATO or
do not understand what they are being asked to do.’[45]
1.97
Collaborative work between the ATO and the Ombudsman’s office is
continuing on the consistency of decision making across audits and in
communication of those decisions with taxpayers.
1.98
The Ombudsman is convinced that simplification is the key to making
compliance much easier. Using the United Kingdom’s tax administration as an
example, he said simplification could occur in two ways: firstly a tax system
where fewer people are required to lodge a return and secondly; use of a simple
communication form.
1.99
The Ombudsman also observed that across the range of business lines of
the ATO there has been a considerable improvement in responsiveness to some of
the difficult issues. He singled out the Debt business line as one that is leading
the way in experimenting and piloting better methods of communication.
1.100
The ATMA representative said the ATO was very conscious of words not
being understood totally by people and gave the following example: ‘In one of
the forums that I sit on, the accounting working group, we often look at
letters and correspondence going out to tax agents and to taxpayers, particularly
in the Business Activity Statement (BAS) area, to see whether they can make the
language simpler so that people understand more of it.’[46]
1.101
The Tax Commissioner assured the Committee that his office would
continue with their endeavours to simplify communication. He said: ‘The key
point is that every effort we can make to make things easier in terms of
understandability in communication is something that we support, and we are
more than happy to work with this committee and others to try to improve that
as much as we can. It is an ongoing challenge. We have done a lot of things. I
could list this and that. It is not as if we have been sitting on our hands in
this space. We are probably as innovative as any administration around the
world in what we have done, but I think there is always more that we can do.’ [47]
1.102
Members of the Committee raised questions of communication and access
more broadly, highlighted by the recommendations of an ANAO audit into ATO
shopfronts.
1.103
The ATO proposal will close off shopfronts at the end of their leases
and they are trialling alternative options of service delivery, particularly
online and call centre services. The Committee inquired about access for
particular groups who might not have the financial, educational or other
capacity to engage in those modes of communication, noting that they may be the
ATO’s preferred modes of engagement, but not necessarily those preferred by
everyone.
1.104
The Ombudsman echoed the Committee’s concerns over social exclusion saying
that a strong theme of his work across the whole of the Commonwealth Australian
Public Service was to ensure that vulnerable individuals, individuals with
disabilities and otherwise, do not lose ready access to services.
1.105
That ATO assured the Committee that despite closing of some shopfronts
it did not feel that the overall service delivery or accessibility would be
diminished. The ATO acknowledged the need to maintain easy public access to
face-to-face consultations and stated that they are working with other government
agencies, such as Centrelink, to ensure these services can be provided through
alternative shopfronts.
1.106
Overall, the Committee is pleased with the multiplicity of efforts to
improve communication happening across the ATO and is heartened by the innovation
highlighted in some areas. The Committee will however keep this area, as well
as equitable access to services, in focus while their constituents bring it to
their attention.
1.107
Acknowledging that tax law and its interpretation is a complex area and that
the ATO are required to inform taxpayers of their rights and responsibilities
under it, the Committee cannot stress enough the importance of plain language
communication. Taxpayers need to understand in clear and simple language what
is being communicated to them and what they need to do about it. Therefore, the
Committee has requested that the ATO include a report on progress they have
made in producing plain language communications, including ‘before’ and ‘after’
examples, as part of their submission to the next hearing.
Theme 3: Consultation on policy issues
1.108
At the previous hearing the Committee had requested the ATO detail, in
its next submission, the process for developing implementation plans for
policy. The Committee perceived the levels of consultation between the policy
development departments and the ATO to be ad-hoc and sought reassurance
adequate processes were in place.
Level of consultation
1.109
Although new policy formulation is outside the responsibility of the
ATO, the cost of compliance and the administrative feasibility of the policy
are areas where the ATO could provide useful input. This input could minimise
the negative impact on the tax administration and the operation of the tax
system more broadly, hence its importance for the Committee. This is another
key issue for the integrity of the tax system.
1.110
The ATO described their role in the design of tax policy and tax law as
‘the voice of administration’.[48] They gave examples of
advising on practical impacts of proposals, the lead times needed for affected
taxpayers and the ATO to prepare for new measures, the likely impact on
revenues and compliance costs and on the design of the law so that it is likely
to be interpreted by the courts in a way that achieves its policy intent.
1.111
The ATO informed the Committee that it is ‘currently implementing almost
200 new policy measures.’[49] A group of senior
executives, the Policy Implementation Forum, oversees the ATO’s implementation
of new tax and superannuation policies. Where policy proposals are deemed to
have significant administrative impacts for the ATO and the community, a ‘rapid
response’ process is used. This is a group of very senior level people who can
quickly provide advice on the ATO’s response.
1.112
The Tax Policy Co-ordination Committee is a monthly discussion forum, at
senior officer level, held between Treasury and the ATO. It operates to ensure
a high level of integration and coordination across policy, legislative and
administration including changes proposed by government and changes recommended
by Treasury. This supports day to day operations for developing implementation
plans for new measures.[50]
Timeliness, transparency and breadth of consultation
1.113
A protocol developed between Treasury and the ATO was provided to the
Committee setting out how they work together throughout the policy development
and legislative design process.[51] The protocol provides
that if Treasury and the ATO cannot reach agreement on tax policy and
legislation matters, Treasury will ensure that the ATO view is provided to the
Minister in a form agreed by the ATO, or the ATO may advise the Minister
separately in consultation with Treasury, but not alone. Although the protocol
looks to be a useful tool for ATO-Treasury interactions, the Committee notes
that it fails to address the issue of timing – i.e. the point at which the ATO should
be consulted.
1.114
The Committee received an unsolicited submission from a member of the
public who requested to remain anonymous. In this submission attention was
drawn to a section of the protocol with Treasury showing that the ATO notifies
Treasury of legislative problems the Commissioner encounters but that the
Treasurer does not provide the communications to the parliament or the public.
The writer claims such secrecy is inconsistent with the doctrine of the
separation of powers as the ATO is a statutory agency independent of
government. There is an obligation, he asserts, to be open, transparent and
accountable to the parliament as a whole, not just to the Treasurer.[52]
1.115
The Committee acknowledged the complexity of the issue the submitter had
raised and sought input from the Tax Commissioner and the representatives of
the external review agencies.
1.116
The Tax Commissioner confirmed that the protocol with Treasury was
consistent with the traditional protocol between the Commissioner of Taxation
and the Minister. The independence, he said, came in terms of the application
of the law to the facts of particular taxpayers, and the direct responsibility
to parliament in terms of the annual report process and the committee
processes. In addition the Tax Commissioner raised the responsibilities his
office has to Ministers to ensure they are kept informed of areas of the law
that are operating in an unintended way.[53]
1.117
The Inspector-General of Taxation thought the issue being raised was
about being able to understand the intention of the law. ‘Generally the Tax
Office would say that the intention does not become relevant; if the
legislation is clear on reading, you do not need to look at the intention. It
is when it is not so clear.’[54] The Inspector-General
of Taxation directed the Committee to relevant reviews he had completed in
2009, the so called U‑turn review. The Deputy Inspector-General added
that there is concern where taxpayers do not have access to material that would
explain an interpretation of the law consistent with the underlying policy
intent.
1.118
Regarding breadth of consultation, the Committee heard that in addition
to the Treasury the ATO works with a range of agencies, such as: the Department
of Education, Employment and Workplace Relations; the Department of Human
Services; and the Department of Families, Housing and Indigenous Affairs. The Committee
heard that further work is being done to boost the ATO’s profile with other
departments to have involvement on any possible tax implications of new policy
proposals.
1.119
Regarding overall policy development involvement, the Committee now has
greater confidence that the ATO is being brought into the policy design process
with Treasury and other departments in a more systematic way. This should allow
the ATO to have input on the impact of the policy on the administration and
operation of the tax system, and hence a more effective system being developed
over time.
1.120
The Committee notes the continued work of the ATO with Treasury in
relation to earlier involvement in the policy design process[55]
and will be seeking confirmation, at its next hearing, that it is occurring.
1.121
Finally, the Committee acknowledges the questions raised regarding the
transparency of the legislative problems highlighted to the Treasury by the
ATO. Although this is a difficult area - which involves balancing issues of
maintaining confidence in the tax system with ensuring appropriate
confidentiality of possible tax system problems before they are rectified – the
Committee felt that increased transparency was justified. If substantial
legislative problems have been identified, it is important that these issues
are promptly fixed and that, after time, the public is notified of the
improvements made. The Committee has therefore recommended that ATO
notifications to the Treasurer on tax policy and legislative problems be made
public within 12 months of submission, along with the Government’s response.
This could possibly be done through an annual statement or tabling in
parliament.
Recommendation 2 |
| |
The Committee recommends that Australian Taxation Office
notifications to the Government, either directly or through Treasury, on tax
policy and legislative problems be made public within 12 months of submission,
along with the Government’s response. |
Theme 4: External scrutiny and review
1.122
At the last hearing the Committee signalled its intention to become the
central monitoring and scrutiny body within parliament with regards to ATO
administration. In order to accomplish this, the Committee said it would seek
greater involvement of the external scrutiny organisations and incorporate
their work into future hearings.
1.123
In particular the Committee was looking to use the work of the
Australian National Audit Office (ANAO), the Commonwealth Ombudsman and the
Inspector-General of Taxation (IGT) to help assess the performance of the ATO.
The Committee also wanted to investigate the links and mechanisms by which
these organisations work together to scrutinise the operations of the ATO.
1.124
The Committee was also keen to enlarge future biannual hearings to
include public evidence from peak industry and consumer bodies since all of
these organisations have expertise and client experience upon which the
Committee can draw when scrutinising the administration and operation of the
ATO.
1.125
The following sections deal firstly with external scrutiny bodies and
then with the professional bodies. The discussion regarding external scrutiny
bodies considers the following four points:
n their respective
roles and responsibilities;
n their relationships
with the ATO;
n the handling of
recommendations made by the scrutiny bodies; and
n co-ordination between
the scrutiny bodies.
1.126
The discussion regarding professional bodies focuses on their respective
roles and responsibilities and on their relationships with the ATO.
The role of scrutiny bodies
1.127
Each of the scrutiny bodies has a mandate to consider different aspects
of the work of the ATO.
1.128
The ANAO undertake both financial statement audits of the ATO as well as
a range of performance audits.
1.129
The Inspector-General of Taxation is responsible for identifying
systemic issues in tax administration and making recommendations for their
improvement.
1.130
The Commonwealth Ombudsman is also the Tax Ombudsman. His office can
investigate the fairness of actions and procedures of the ATO. Individuals,
businesses, groups or organisations who consider they have been disadvantaged by
the ATO can make a complaint and the Ombudsman can investigate all complaints
related to tax administration. While the Ombudsman may disclose information
about any issue within his jurisdiction if he believes it is in the public
interest, there is no compulsion to act upon the recommendations in his
reports.
The ATO’s relationships with scrutiny bodies
1.131
On relationships with the ATO, the scrutiny bodies were unanimous -
relationships were ‘good and getting better’. The Auditor General said: ‘I
would rate our relationship as very good.’[56] The Inspector-General of
Taxation said: ‘the relationship with the ATO continues to evolve with some
resulting improvements’.[57] The Office of the Commonwealth
Ombudsman reported: ‘they are pleased with how the relationship is developing’[58],
crediting the last hearing as having assisted in improving relationships with
the ATO considerably.
1.132
The IGT acknowledged however that a degree of tension should exist between
an administrator and a scrutiny body to ensure true independence of the
scrutineering function and to provide the community with confidence in their
work.[59]
Recommendations made by scrutiny bodies
1.133
The Committee recommended in its report of the eighth biannual hearing
with the Commissioner of Taxation, that the ATO details its responses to
recommendations made by the external review agencies as set out in their
reports or reviews.
1.134
In its submission the ATO informed the Committee that it responds to all
reports and reviews of external scrutineers. These responses are published on
the scrutineer’s websites, as well as a summary provided in the ATO’s annual
report. External review agencies indicated that almost all of their
recommendations are agreed to in full or at the very least, in principle.
1.135
The scrutiny bodies also agreed that improvements in tax administration
were achieved informally through direct day-to-day interactions with the ATO
and not just from formal recommendations.
1.136
On some of the Inspector-General of Taxation’s reviews an advisory group
made up of external stakeholders, such as taxpayers or tax advisers, are included
in the discussions, leading to a high level of agreement with the final
recommendations. The Ombudsman’s office described the process as ‘seeking to
craft a recommendation that is implementable and that we basically agree
represents a good solution to the problem.’ [60]
1.137
The ANAO, as a general rule, has reduced the total number of
recommendations it makes in its reports where it can see an organisation is
already undertaking changes or improvements in an area under review. This is to
ensure the focus remains on the most significant issues. The ANAO considered
the ATO responded positively to their audit findings and understands the ATO monitors
progress in implementing the ANAO recommendations through its own internal
Audit Committee which includes three independent private members and representatives
from the ANAO.
1.138
The scrutiny bodies acknowledged the challenges the ATO faces relating
to ‘the inherent difficulties of administering complex taxation, excise and
superannuation legislation through a large and geographically dispersed
network’, [61]
with a diverse taxpayer population, however they believed the ATO could improve
the timeliness of the implementation of the recommendations they made.
1.139
The role of the Inspector-General Taxation is an advisory one and as
such there is no compulsion for the ATO to act on the recommendations made in his
reviews. ‘The Commissioner also has statutory independence in the
administration of the tax law. Accordingly, the Commissioner has discretion in
the acceptance or rejection of Inspector General Taxation recommendations.’[62]
1.140
Reviews by the office of the Inspector-General of Taxation are provided
to the relevant Minister and it is at his or her discretion as to when they are
released. This lag time, between the completion of a review and its release,
has caused some frustration for the Inspector-General Taxation who is keen for
the results of his work to be made public and acted on as soon as possible to
ensure currency and relevance.
1.141
The Inspector-General Taxation recently undertook a follow up review of the
implementation of agreed recommendations relating to six reports undertaken by his
office between June 2006 and October 2008. The review was completed in June
2010, but was not released by the Minister until March 2011. The Inspector-General
of Taxation was pleased to report that the ATO had agreed wholly, or in part,
to implement 41 of the 45 recommendations made in the six reports and had
implemented, or made significant progress, with the vast majority (38 of 41) of
the agreed recommendations.
1.142
There is now a reporting assurance process in place with the ATO to
ensure the Inspector-General of Taxation’s review recommendations are
appropriately implemented.
1.143
The Inspector-General of Taxation suggested the Committee may wish to
focus future hearings on recommendations which the ATO has not agreed to;
proposing that further open and transparent debates about the merits of those
recommendations could be beneficial. The Auditor-General commented that in the
ANAOs experience particular attention is paid to those recommendations which
are not agreed to because it is unusual for agencies to disagree, particularly
where a good relationship exists between them and where there is a clear
understanding of each other’s perspective.[63]
1.144
Overall, the Committee was satisfied with the ATO’s handling of the
recommendations in reviews and reports made by the external review agencies,
especially the large number of recommendations agreed to and implemented.
1.145
At the next hearing, in additional to checking the timely implementation
of agreed to recommendations from the external scrutiny bodies, the Committee pay
particular attention to the recommendations that are not agreed to by the ATO. The
Committee will be interested investigating the reasons given for not agreeing
to particular recommendations, especially given the reduced the number of
recommendations made and the partnership approach to identifying issues during
the reviews.
1.146
The Committee also urges the Assistant Treasurer to release the reviews
done by the Inspector-General of Taxation much more quickly. This will allow
earlier agreement to recommendations and commencement of their implementation.
Recommendation 3 |
| |
The Committee recommends the Inspector–General of Taxation’s
reviews be made public within a reasonable time. |
Co-ordination between the scrutiny bodies
1.147
The Ombudsman’s office raised the issue of oversight in the governance
structure and whether, ‘with the plethora of players in the oversight space or
the integrity agency space, there was some confusion and a need for greater
clarity.’[64]
1.148
The Inspector-General of Taxation referred the Committee to a submission
to the Tax Forum he had made in which he expressed his views on governance
arrangements for external scrutineers of the ATO.[65]
1.149
In this submission the Inspector-General of Taxation proposed a single,
centralised and well-resourced scrutineer function for the ATO. The roles and
responsibilities of the Inspector General of Taxation and aspects of those of
the Ombudsman and Auditor-General’s offices that relate to tax administration,
would be brought together into one statutory agency. Its work would cover
resolving complaints, considering taxpayers administration issues and
identifying systemic issues. By removing the overlap between the current
scrutineer agencies, the Inspector-General of Taxation argues, it would provide
economies of scale and scope. The ATO would only be required to deal with one
tax administration scrutineer agency, reducing the time and cost associated
with a multiplicity of scrutineers arguably enabling the ATO to enhance its
responsiveness. It is envisaged that the head of the centralised scrutineer
agency would participate on the management board level of the ATO. As well the
scrutineer agency would provide reports on issues and improvements to be
considered by the JCPAA, to ensure Parliament receives independent and candid
information on the problems taxpayers are experiencing and the scrutineer’s
opinion on their redress.
1.150
The Committee understands that the external scrutiny agencies currently
communicate their broad future work programs to each other, but only to a
limited extent. The extent to which the agencies can strategically co‑ordinate
their work programs and share relevant information during investigations, in a
manner appropriate to their legislative positions, is less clear.
1.151
The Committee agrees that overlap and duplication of effort is to be
avoided and welcomes ideas for the external scrutiny agencies to work together as
effectively and efficiently as possible. However, the Committee also recommends
proceeding with caution on any proposal that separates out parts of the roles
of the statutory officers such as the Auditor-General and Ombudsman.
1.152
The Committee feels that the level of scrutiny of the ATO provided by
the Auditor-General, the Inspector General of Taxation, and the Ombudsman is of
high quality and should provide the public with confidence in the robustness of
their tax system. However, the Committee is also keen to see continuous
improvement in this area. Therefore the Committee has requested that further
analysis be undertaken as to possibilities for more strategic planning and
improved information sharing between the external review agencies.
Recommendation 4 |
| |
The Committee recommends that the external review agencies
investigate and report on opportunities for more strategic planning and
improved information sharing as they undertake their reviews to avoid
duplication of their efforts and the Australian Taxation Office’s resources |
The role of professional bodies
1.153
At the last hearing with the Tax Commissioner in March, the Committee
expressed a desire to draw upon the expertise of peak industry and consumer
bodies when scrutinising the administration and operation of the ATO, to add
another degree of transparency and accountability to its work.
1.154
The ATO has over 50 consultative bodies with whom it interacts
regularly. One of the most influential is the National Tax Liaison Group (NTLG)
which addresses the key strategic issues facing the tax system. Three tax
professional organisations from that group were invited to attend the hearing:
CPA Australia; The Tax Institute; and the Association of Taxation and
Management Accountants.
1.155
The Tax Institute and Association of Taxation and Management Accountants
(ATMA) were represented at the hearing. CPA Australia was unable to attend. The
Tax Institute provides professional development events and education for its
13,000 members. It undertakes research activities and discussions with
government and the media on tax policy and its administration. The ATMA promotes
the welfare and professional development of its members and represents their
special interests and needs to government and statutory bodies. The membership
consists of small business accountants; suburban and country practitioners who
focus on taxations, management accounting and small business management plus
management accountants in commerce and government.
The ATO’s relationship with professional bodies
1.156
The ATMA said that relationships with the ATO had improved in the last
10 to 15 years. ‘The openness and ability to talk to senior people within the
ATO and the communication coming out of the ATO, is constantly improving.’[66]
They also commended the proactivity of the ATO when the need arose for some
direct action in the area of tax relief for businesses in times of natural
disaster. This has been very well received and shown the ATO to ‘have a heart.‘[67]
1.157
From The Tax Institute’s point of view there is a strong relationship
with the ATO and that ‘overall they do a pretty good job. There are times when
they do not and they will admit that in the majority of cases, which is great.’
[68]
1.158
The willingness to have so many consultative forums and engage at such a
senior level was seen in a very positive way by the tax professional
organisations. ‘In terms of the consultation and engagement with industry, the number
of fora the ATO is involving in and where they welcome participation from
professionals I think is really world class.’[69] The Tax Institute said
that what the profession values in the relationship is the open dialogue to
work through problems and resolve issues that arise. ‘There are candid
discussions. At times there are robust discussions in these forums, but the
point is that it is all about making sure the tax system functions as well as
it can.’[70]
1.159
The Committee welcomes the reassurances provided by the professional
bodies that relationships and interactions with the ATO were solid and also
continuously improving. Having robust input on the impacts of tax
administration as well as suggestions for possible improvements is of obvious
benefit to the ATO. The Committee recognises the ATOs significant and
commendable efforts in this area.
Other Issues
1.160
Three other issues where considered by the Committee during the hearing.
These included:
n The administration of
self managed super funds;
n The administration of
inefficient taxes; and
n The governance
structure of the ATO.
1.161
Each of these areas is detailed below.
The administration of self managed super funds (SMSFs)
1.162
The ATO is responsible for administering the superannuation guarantee
charge, self-managed superannuation funds and the lost members register, co‑contributions
and unclaimed superannuation money.
1.163
In its submission to the Committee the ATO reported that the ATO is
implementing a suite of changes to the superannuation system, following the Government’s
acceptance of certain policy recommendations from the Super System and Australia’s
Future Tax System reviews.
1.164
The Committee were informed that there are 435,000 self managed
superannuation funds (SMSF) with some $403 billion of funds invested.
1.165
The Tax Institute Counsel said ‘It is a very challenging area for
taxpayers and for people who are investing in SMSFs. The superannuation
legislation is incredibly complex. We would see a lot of people who are
investing in these vehicles using the services of tax agents and our members
just to be able to understand the legislation and their obligations.’[71]
1.166
It is further complicated because there is co-regulatory responsibility
between Australian Securities and Investments Commission (ASIC) and the ATO.
1.167
Committee members raised examples of representations to their offices
from people concerned about the strict governance of SMSF and the consequences
of inadvertent errors by people who were in some cases still learning how to
manage their funds. They questioned the amount of flexibility the Commissioner
of Taxation has to respond when a genuine occurred.
1.168
The ATMA confirmed that heavy fines and penalties are imposed for
inefficiencies, particularly for contributions in excess of the limit and noted
that the Tax Commissioner does not have a lot of discretionary power in that
area. Their representative called for the Tax Commissioner to be given more
discretionary power where a genuine mistake had been made.[72]
The Tax Institute welcomed the recent announcement of the $10,000 discretion
for, in effect, first time breaches of the SMSF contribution cap.
1.169
The Tax Counsel for the Tax Institute said that there should be some
safeguards for SMSFs to make sure the money is both protected and the strict
laws are adhered to. ’I would say that the ATO does devote a lot of time and
effort towards consulting with the profession on the way the laws should be
interpreted, and that is welcomed.’[73]
1.170
In response to questions on whether the rules should be different for
SMSFs from those of other superannuation funds, the Tax Institute argued that
as a private savings vehicle they would not be subject to as much corporate
governance as an industry fund or large public offer fund. ‘There are different
operational structures, so I think it probably is appropriate that they have
different regulatory structures to some extent.’[74]
However the ATMA did not favour making more regulation for SMSF as it would
become more complicated for people. They commended the ATO’s simply written publications
on SMSFs, available both on the website and in hard copy. They raised the idea
of some formal training for SMSFs trustees so they become aware of their
obligations.
1.171
In its submission the ATO reported they had ’worked with industry to
implement a number of initiatives focussing on areas previously susceptible to
illegal early release of superannuation monies, including rollovers to self
managed superannuation funds and the registration stage for new funds. This
resulted in a visible and significant reduction in the instances and inherent
risk of illegal early access to superannuation monies.’[75]
1.172
At the hearing there was a focus on the conditions for early release of
funds where there was a genuine pressing hardship and whether some reform might
be introduced to help speed up being able to access a proportion of their superannuation.
1.173
It was the ATMA’s view that ‘you have to have a condition of release to
have access to your super moneys. You can’t just do what you want to do with it
at any time. You must follow the process and the rules, because super is there
for a purpose. You have to remember the sole purpose test of what a
self-managed super fund is; to provide income and benefits in retirement.’[76]
1.174
The ATO were of the view that superannuation funds were responsive to
the cases they saw where there was a need for people to have money quickly, acknowledging
there may be some very tough cases where people are suffering and are delayed. However,
the tax professional representatives and the Committee members reported that
from the experiences shared with them, even when it was agreed that funds could
be released early, people had to wait for months to receive them.
1.175
The Tax Commissioner promised that ‘one of the things that came out very
clearly from this committee is: do not forget those who are vulnerable, and
make sure that you have processes in place that protect them as best you can.
We will take that away. One of the things that we will do, for instance, in
that super area is to see whether or not there is anything we can do from our
processes to speed up those situations.’[77]
1.176
The Committee welcomes this acknowledgement and undertaking by the Tax
Commissioner. Due to the complexities of this area and the need to ensure the
rules and administration of SMSFs are appropriate, the Committee intends to follow
up SMSF issues further at its next Tax Commissioner hearing.
The administration of inefficient taxes
1.177
In the context of the national Tax Forum held in October 2011, the
Committee sought input from the representatives of the external review agencies
and the tax professional bodies on the ATO‘s role in the administration of
inefficient taxes.
1.178
There was agreement among the witnesses that the question of inefficient
taxes was a matter of policy and therefore outside their area of interface with
the ATO.
The governance structure of the ATO
1.179
In the context of the national Tax Forum held on 4 and 5 October, the
Committee sought input on the governance structure of the ATO from the
representatives of the external review agencies and the tax professional
bodies.
1.180
In its submission to the Committee, the ATO stated that it has
arrangements in place that support robust corporate governance and transparency
of their administrative processes and that the Committee’s scrutiny was an
integral part of those arrangements. ‘The ATO welcomes parliamentary scrutiny,
including by this Committee, as a significant and appropriate element in the
structural model of governance, and as a positive opportunity for further
constructive dialogue between the Commissioner and the Committee to the benefit
of the Australian community.’[78]
1.181
The scrutiny bodies at the hearing were in accord that the ATO had sound
governance structures in place and a strong leadership group. In particular
they made mention of an effective Audit Committee which has processes in place
to see that the recommendations are being implemented, obtain feedback from the
operational areas on how the implementation is going and provide updates to the
external review agencies. [79]
1.182
The ATMA declared the governance structure within the ATO, with its
range of responsibilities as a government agency, to be doing an excellent job
in both meeting its statutory obligations with openness and transparency in its
dealings.[80]
1.183
The Tax Commissioner referred the Committee to a paper on governance
issues currently under consideration by the government. This contained a
proposal for a Tax System Advisory Board, as a new oversight board for the ATO.
It would consist of government-appointed members with a range of diverse skills
and an independent Chair. The proposal included involving experts, such as in
Human Resource or Information Technology management. It is envisaged that the
Board would operate as a small set of trusted external advisers with whom the
Tax Commissioner could freely discuss organisational issues tapping into the
Board members experience and expertise. The Tax Institute commented that they
had been active in consulting with government on the Tax System Advisory Board
and was eagerly anticipating the next stage of its development.[81]
Concluding Comments
1.184
The Committee considers that its hearings with the Tax Commissioner add
to both the transparency and accountability of the ATO. Such scrutiny helps to
shape improvements in the ATO’s operations, and leads to better outcomes for
the Australian public. Through the hearings, the public has also heard
reassuring evidence that the ATO is in fact listening to taxpayers, and that
the ATO is being responsive to what they are being told.
1.185
The new enlarged format for the hearings worked well, and provided a
useful framework for future hearings. The Committee found it valuable to draw
on the expertise of different organisations and their interactions with
taxpayers and the ATO. The Committee therefore intends to invite the Ombudsman,
the Auditor-General and the Inspector-General of Taxation to again give public
evidence at the next hearing. Representatives from peak industry and consumer
bodies will also be invited, with a likely focus on organisations which deal
with small to medium sized business issues.
1.186
The Committee’s work was further assisted by receiving the ATO’s
submission a month before the hearing. This allowed time to consider the issues
it raised and to relate the material in the submission to other information,
including the experiences provided by Member’s constituents. The Committee expects
that future submissions from the ATO will continue to meet this timeframe in
advance of the hearings.
1.187
The approach taken by the Committee in this report has focused on
requesting information as part of ATO’s submission to the next hearing – with a
summary of areas to be covered included in the recommendation below. The
Committee expects that the information provided will demonstrate that concrete
actions have been taken throughout the year to improve ATOs administration and
effectiveness. Given the constructive approach taken by the ATO during the past
six months and at the recent hearing, the Committee has full confidence that
the ATO will work towards this goal also.
1.188
Furthermore the Committee is keen to see how the external review
agencies can build on their already strong operations through more co‑ordinated
and collaborative work. The Committee has asked them to explore opportunities,
within the constraints of their mandated areas, for greater sharing of their
investigations’ findings, looking for greater efficiency and less duplication
of effort.
1.189
Due to the expanded scope of the hearing, both in terms of the time
needed and the increased number of witnesses giving public evidence, combined
with the effort and resources required to complete the preparatory work, the
Committee has decided to hold future hearings with the Tax Commissioner
annually rather than biannually.
1.190
The next hearing is likely to be held in September 2012. This new
timeframe acknowledges the size and complexity of the ATOs operations and that
the ATO would benefit from having a longer timeframe to implement improvements
and to evaluate related outcomes.
1.191
Meanwhile, the Committee will monitor any significant proposed changes
to Australia’s tax system and recommits to advocating that the ATO is well
resourced and supported to be able to implement any such changes.
1.192
Finally, the Committee wishes to thank the organisations and individuals
who took part in the hearing. In particular, the Committee would like to
acknowledge the time taken by the Commissioner of Taxation; the Ombudsman; the
Auditor- General; and the Inspector General of Taxation. Representatives from
The Tax Institute and the Association of Taxation and Management Accountants
also deserve acknowledgement for their valuable contribution and time they have
taken to meet with the Committee.
Recommendation 5 |
| |
The Committee recommends that all
future Australian Taxation Office submissions are provided at least one month
before the scheduled public hearing into tax administration. |
Recommendation 6 |
| |
The Committee recommends that
the next Australian Taxation Office submission include information on the
following areas:
n findings
of the review of service standards;
n gaps
identified between international best practice service standards and current
Australian Taxation Office performance;
n learnings
from complaints and their nexus with clear communication;
n initiatives
for simplification of communication and the use of plain language – including
some ‘before’ and ‘after’ examples;
n trends
in compromised Tax File Numbers and identity fraud, including work with crime
detection agencies;
n new
strategies for resolving complex compromised Tax File Numbers;
n simplification
of lodgement processes for medium, small and micro businesses;
n efforts
to promote the update of the ‘no strings attached’ small business advisory
service;
n evaluation,
including taxpayer feedback, of the use of benchmarks;
n work
done on estimating the tax gap and its possible impacts;
n interaction
with Treasury and other key agencies on policy development consultation;
n a
summary of legal cases that may have significant tax administration
implications;
n progress
on any changes to the Australian Taxation Office governance structure;
n progress
on the Australian Taxation Office Online 2015 project;
n implementation
of recommendations by the external scrutiny bodies, and recommendations not
agreed to and why; and
n processes
for speedy release of superannuation funds in crisis situations. |
Rob
Oakeshott MP
Committee
Chair
November
2011