Outcome 1: Improved administration of tax laws for the benefit of all taxpayers

The role of the Inspector-General of Taxation is to improve the administration of the tax laws for the benefit of all taxpayers.

This is to be achieved by reviewing both the systems established by the Tax Office to administer the tax laws and the systems established by tax laws in relation to administrative matters.

The Inspector-General's two outputs derive from the statutory functions. These outputs involve the identification of systemic issues for inclusion in the work program and the provision of independent advice to government on the administration of the tax laws.

The scope of the work program is determined by the Inspector-General. However, the Inspector-General of Taxation Act 2003 also provides that the Minister may direct that a matter be included on the work program, and that the Inspector-General considers requests to conduct reviews from:

  • the Minister (separate from the direction provision);
  • the Commissioner of Taxation;
  • a resolution of either House, or both Houses, of the Parliament; or
  • a resolution of a committee of either House, or both Houses, of the Parliament.

Broad-based community involvement in the identification of issues and the opportunity for all stakeholders to provide submissions ensure that reviews undertaken are relevant and timely for all stakeholders. In view of this, the Inspector-General requires the flexibility to vary review priorities so as to allow emerging and important systemic issues to be addressed in a manner that is timely and relevant to government.

The Commissioner of Taxation has statutory independence in his administration of the tax laws. The Inspector-General does not hold any powers to direct the Commissioner of Taxation in the administration of the tax laws.

The way in which the Inspector-General's advice to government contributes to the achievement of the outcome of improved administration of tax laws may be difficult to assess. In some instances, the provision of advice to government may lead to legislative change to address an identified systemic issue. However, on other occasions the Commissioner of Taxation may independently address a systemic issue identified by the Inspector-General either during a review, following the release of a review report by the Minister or the publication of an issues paper or work program by the Inspector-General.

Output 1.1.1: Identification of issues for review and prioritisation of work program

The Inspector-General is required to establish his own work program. He must take into account any directions from the government to undertake a particular review. The Inspector-General must also consult with the Commonwealth Auditor-General and the Commonwealth Ombudsman to avoid overlap of work. The Inspector-General has chosen to consult widely with business, accounting, legal and tax organisations in setting his work program. As well, he has published a framework for review selection — refer Issues Paper Number 2 Policy Framework for Review Selection.

Performance information

The performance information of Output 1.1.1 is as follows:

  • broad-based community involvement in the identification of systemic issues in the administration of tax laws; and
  • reviews undertaken are relevant and timely for the government and other stakeholders.

Key activities in 2004-05

The Inspector-General of Taxation undertook the following key activities for Outcome 1.1.1:

  • developed a work program based on regular consultation and ongoing contact with key business, accounting, legal and tax organisations;
  • developed strong links with both public sector stakeholders and private sector stakeholders; and
  • completed a number of reviews and reported to the Government on those reviews.

Key outcomes in 2004-05

Wide-ranging consultation has been completed to assist both in the development of a work program and the conduct of the reviews initiated by the Inspector-General. A schedule of private sector organisations with which regular contact has been made is at Table 3. A significant number of other organisations have also been consulted.

Speakers have been provided for key business, tax, accounting and legal conferences, and other opportunities have been taken to meet with taxpayers and their advisers. This has enabled the Inspector-General to share information on the direction of the work program and to obtain input on the issues to be considered in reviews initiated during the 2004-05 year. A list of key speaking engagements is at Table 2.

During 2004-05, the Inspector-General has completed five reviews into issues identified through consultation as relevant to stakeholders:

  • Remission of the General Interest Charge for Groups of Taxpayers in Dispute with the Tax Office (Report to Minister, 5 August 2004);
  • Tax Office Administration of GST Refunds Resulting in the Lodgment of Credit BASs (Report to Minister, 19 January 2005);
  • Tax Office's Small Business Debt Collection Practices (Report to Minister, 12 April 2005);
  • Tax Office's Administration of Penalties and Interest Arising from Active Compliance Activities (Report to Minister, 18 May 2005); and
  • Tax Office Audit Timeframes (Report to Minister, 19 July 2005).

Also, at 30 June 2005, a review of the Tax Office's management of its litigation program, including the Test Case program, was well underway.

These reviews have been timely in that they were undertaken within fairly short timeframes following consultation. They have also been reported to Government in a timely manner following their completion and following the statutory period for the Taxation Office to provide comment.

Table 2: Key speaking engagements
Date Organisation Type of function Location
19 July 2004 PricewaterhouseCoopers Dinner Sydney
22 July 2004 KPMG Partner/Client Lunch Brisbane
11 August 2004 KPMG Partner/Client Lunch Adelaide
12 August 2004 College of Law, Sydney Continuing Legal Education Seminar Sydney
19 August 2004 Tax Committee, Law Council of Australia (Victorian Branch) Monthly Committee Meeting Melbourne
20 August 2004 CPA Australia President's Boardroom Luncheon Melbourne
28 August 2004 National Institute of Accountants Annual Strategic Workshop — Divisional Presidents & Board of Directors Melbourne
21 September 2004 CPA Australia CPA/PwC Australia Dinner Canberra
16 October 2004 Law Council of Australia Workshop/Conference Canberra
18 October 2004 Capital Partners Pty Ltd Presentation Sydney
23 October 2004 HLB Mann Judd Practicing Accountants Inaugural Forum Lorne, Vic
12 November 2004 Pitcher Partners Critical Point Network Seminar Melbourne
20 November 2004 Taxpayers Australia & World Taxpayers Association Conference Gold Coast
1 January 2004 Council of Small Business Organisations of Australia Ltd National Executive Canberra
14 December 2004 Macquarie Taxation Discussion Group Dinner Sydney
7 February 2005 3rd Annual Australian Taxation Summit Conference Sydney
16 March 2005 Institute of Chartered Accountants in Australia CA Country Congress 2005 Coffs Harbour, NSW
13 April 2005 Peninsula Professional Peer Group Tax Agent Group Brookvale, NSW
27 May 2005 CPA Australia NSW Public Practitioners' Conference 2005 Terrigal, NSW
14 June 2005 Sydney University Tax Administration Course Sydney
Table 3: Private sector stakeholders
Australian Industry Group
Australian Business Limited
Australian Chamber of Commerce and Industry
Business Coalition for Tax Reform
Business Council of Australia
Corporate Tax Association
Council of Small Business Organisations of Australia Limited
CPA Australia
Institute (The) of Chartered Accountants in Australia
Law Council of Australia
Law Society of NSW
Law Society of Western Australia
Law Institute of Victoria
National Institute of Accountants
National Tax & Accountants' Association Ltd
Small Business Coalition
State Chamber of Commerce (NSW)
Taxation Institute of Australia
Taxpayers Australia

Output 1.1.2: Provision of independent advice to the Government on the administration of the tax laws

The Inspector-General undertakes reviews into particular systemic issues in the administration of tax laws in accordance with his work program. The approach and processes associated with the conduct of the review are determined by the Inspector-General, and there are no time restraints. The report, outlining findings resulting from the review, is submitted to the Government after providing the Commissioner of Taxation with the opportunity to provide comments. However, once the Inspector-General has given his report to the Government, the Government must publish the Inspector-General's report, either by tabling in both Houses of the Parliament or otherwise within 25 sitting days of receipt.

Performance information

The performance information of Output 1.1.2 is as follows:

  • reports, undertaken in accordance with required processes, are of a high standard, timely and useful to government; and
  • findings and recommendations achieve improved administration.

Key outcomes

During 2004 – 2005, the Inspector-General has completed the following reviews:

  • Remission of the General Interest Charge for Groups of Taxpayers in Dispute with the Tax Office (Report to Minister, 5 August 2004);
  • Tax Office Administration of GST Refunds Resulting in the Lodgment of Credit BASs (Report to Minister, 19 January 2005);
  • Tax Office's Small Business Debt Collection Practices (Report to Minister, 12 April 2005);
  • Tax Office's Administration of Penalties and Interest Arising from Active Compliance Activities (Report to Minister, 18 May 2005); and
  • Tax Office Audit Timeframes (Report to Minister, 19 July 2005).

Also, at 30 June 2005, a review of the Tax Office's management of its litigation program, including the Test Case program, was well underway.

The Commissioner of Taxation has accepted the majority of the recommendations of completed reviews. The outcomes of these reviews, combined with feedback from community stakeholders, provide clear evidence that the role of the Inspector-General is working well and is very effective in improving tax administration for the benefit of all taxpayers.