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 varies. 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. Improved administration of tax laws can also be achieved without formal advice to government by direct interaction between the Inspector-General and the Tax Office.

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. This framework will be reviewed and updated during 2008-09 in the light of five years’ experience. It is planned to undertake a new, broad-based scoping review to establish the extent of systemic issues in tax administration requiring consideration by the Inspector-General for undertaking of future reviews.

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 2007-08

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

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

Key outcomes in 2007-08

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 4. A significant number of other organisations have also been consulted. During the year, reference groups of interested taxpayers and their representatives have continued to provide input to specific reviews.

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 his work program and to obtain input on the issues to be considered in reviews initiated during the 2007-08 year. A list of key speaking engagements is at Table 3.

Table 3: Key speaking engagements

Date Organisation Type of function Location
9 August 2007 Taxation Institute of Australia WA State Conference Margaret River, WA
13 August 2007 Deloitte Breakfast Presentation Perth
13 August 2007 Deloitte Lunch Presentation Perth
30 August 2007 Taxation Institute of Australia Television CPE Sydney
8 October 2007 Corporate Tax Association 2007 GST Big Day and a Half Palm Cove, Qld
26 October 2007 HLB Mann Judd Practitioner Conference Lorne Vic.
22 November 2007 CFO Forum Lunch Presentation Sydney
27 March 2008 University of NSWFaculty of Law — ATAX 8th International Tax Administration Conference Sydney
12 April 2008 University of NSWFaculty of Law — ATAX 20th Annual GST Conference Noosa, Qld
17 April 2008 National Institute of Accountants National Public Practice Symposium Perth
22 April 2008 University of SydneyFaculty of Law Masters of Law — Tax Administration course Sydney
12 May 2008 Corporate Tax Association National Conference Sydney
31 May 2008 CPA Australia NSW Public Practitioners Conference Hunter Valley, NSW
5 June 2008 National Institute of Accountants NSW State Congress & Business Expo Sydney
12 June 2008 Institute of Chartered Accountants in Australia Corporate Tax Conference Sydney
24 June 2008 Baker & McKenzie Breakfast Briefing for GST Audits release Sydney

Table 4: Private sector stakeholders

Australian Industry Group
Australian Chamber of Commerce and Industry
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
NSW Business Chamber
Taxation Institute of Australia
Taxpayers Australia

Updated work program

Twice during the year the Inspector-General consulted representatives from selected industry, business, accounting, legal practitioner and tax organisations about the prioritisation of his future work program. Participants were given an update on reviews currently underway and nearing completion. Participants also discussed key issues of concern that have been raised with the Inspector-General over the past year. The Commonwealth Auditor-General, the Commonwealth Ombudsman and the Tax Office have also been consulted.

As at 30 June 2008, the Inspector-General had five reviews underway, as follows:

  • a review into the underlying causes and the management of objections to Tax Office decisions (commenced January 2007);
  • a fourth, summary report on the review of the Tax Office’s handling of complex matters arising from the three case study reviews completed during 2007 (commenced June 2007). This report was submitted to the Minister on 6 August 2008;
  • a review into the Tax Office’s administration of public binding advice (commenced November 2007);
  • a review into the non-lodgement of income tax returns (commenced November 2007);
  • a review into aspects of the Tax office’s settlement of active compliance activities (commenced November 2007).

Proposed reviews announced by the Inspector-General in May 2007 but not yet commenced include the following issues:

  • The extent to which the Tax Office has fulfilled its obligation in a self-assessment system to provide adequate and contemporary guidance to taxpayers on matters it has publicly identified as a compliance risk.
  • The potential use of guidance such as the service entity booklet to increase certainty in other areas of compliance focus.
  • The Tax Office’s level of investment in staff that set legal precedents.
  • The Tax Office’s management of the Higher Education Loan Program (HELP).

The precise timing of these reviews will be determined in part by when reviews already underway are completed. Following the announcement by the Government on 4 August 2008 not to re-appoint David Vos to the role of Inspector-General, future work programs, no doubt, will be announced by his replacement.

Reviews completed in 2007-08

During 2007-08, the Inspector-General completed three reviews:

  • a review of the potential revenue bias in private binding rulings (publicly released 25 February 2008);
  • a review of the extent to which the ATO has implemented recommendations from completed reports by my office (publicly released 5 March 2008);
  • a review into the Tax Office’s administration of GST audits (publicly released 11 June 2008).

Completed reviews have been relevant in that they focussed on identifying systemic improvements arising from major issues under Tax Office management. All have contemporary relevance to stakeholders including the taxpayers directly involved. They have also 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.

At the end of 2007-08 the Inspector-General had five reviews underway into issues identified through consultation as relevant to stakeholders. These are reported under Output 1.1.2 below.

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 constraints. The report, outlining findings resulting from the review, is submitted to the Government after providing the Commissioner of Taxation with the opportunity to make a submission. 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 in 2007-08

During 2007-08, the Inspector-General completed three reviews and has five reviews underway into issues identified through consultation as relevant to stakeholders:

  • a review of the potential revenue bias in private binding rulings (publicly released 25 February 2008);
  • a review of the extent to which the ATO has implemented recommendations from completed reports by my office (publicly released 5 March 2008);
  • a review into the Tax Office’s administration of GST audits (publicly released 11 June 2008);
  • a review into the underlying causes and the management of objections to Tax Office decisions (commenced January 2007);
  • a fourth, summary report on the review of the Tax Office’s handling of complex matters arising from the three case study reviews completed during 2007 (commenced June 2007). This report was submitted to the Minister on 6 August 2008;
  • a review into the Tax Office’s administration of public binding advice (commenced November 2007);
  • a review into the non-lodgement of income tax returns (commenced November 2007);
  • a review into aspects of the Tax Office’s settlement of active compliance activities (commenced November 2007).

The Commissioner of Taxation has accepted fully or in part most (100 of 113) of the recommendations of reviews published since the inception of the Inspector-General — refer Table 1. 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.