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 programme and the provision of independent advice to government on the administration of the tax laws. The scope of the work programme 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 programme, 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 programme by the Inspector-General.

Output 1.1.1 Identification of issues for review and prioritisation of work programme

The Inspector-General is required to establish his own work programme. 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 programme. As well, he has published a framework for review selection — refer Issues Paper Number 2 Policy Framework for Review Selection. This framework is currently being considered for review and updating in the light of three years’ experience and to incorporate aspects of legal (Australian Government Solicitor) advice on the scope of the Inspector-General’s role that was sought in 2005-06.

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 2005-06

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

  • developed a work programme 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 two reviews and reported to the Government on those reviews.

Key outcomes in 2005-06

  • has been completed to assist both in the development of a work programme 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. During the year, reference groups of interested taxpayers and their representatives have also been established to provide input to specific reviews.
  • 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 programme and to obtain input on the issues to be considered in reviews initiated during the 2005-06 year. A list of key speaking engagements is at Table 2.

During 2005-06, the Inspector-General has completed two reviews and has five reviews underway into issues identified through consultation as relevant to stakeholders:

  • Tax Office audit timeframes (Report to Minister, 19 July 2005);
  • review of Tax Office management of litigation (report to Minister 30 April 2006);
  • a review of the potential bias in private binding rulings (commenced August  2005);
  • a review of the Tax Office’s handling of complex matters comprising three case study reviews (commenced October 2005) with potential for a fourth, summary report:

– case study review into the ATO's handling of living away from home allowances (LAFHAs); – case study review into the ATO’s handling of service entity arrangements; – case study review into the ATO’s handling of research and development syndicates; and

  • a review of the extent to which the ATO has implemented recommendations from completed reports by my office (commenced June 2006).

These reviews have been timely in that they have 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
6 July 2005 Taxation Institute of Australia Queensland State Convention Sanctuary Cove, Qld
25 July 2005 Law and Finance Corporate Taxation Forum Sydney
13 September 2005 Federal Government Backbenchers Revenue group Briefing session Canberra
6 October 2005 Taxation Institute of Australia Victorian State Convention Lorne, Victoria
23 October 2005 Law Council of Australia (Business Law Section) 2005 Taxation Workshop Sydney
18 November 2005 Taxation Institute of Australia Tax Intensive Conference Ettalong Beach, NSW
15 February 2006 Law & Finance 4th Annual Australian Taxation Summit Sydney
12 April 2006 CPA Australia Financial Institutions Discussion Group Sydney
20 April 2006 ATAX, University of NSW 7th International Conference on Tax Administration Sydney
9 May 2006 University of Sydney Masters of Laws course Sydney
15 May 2006 University of Sydney Batchelor of Commerce 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 programme. 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 2005-06, the Inspector-General has completed the following reviews:

  • Tax Office audit timeframes (Report to Minister, 19 July 2005); and
  • review of Tax Office management of litigation (report to Minister 18 May 2006).

The Commissioner of Taxation has accepted the most 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. In addition, in June 2006 the Inspector-General commenced a review of the extent to which the ATO has implemented recommendations from completed reviews.