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

The role of the IGT is to improve the administration of the tax laws for the benefit of all taxpayers. Key strategies to achieve Outcome 1 are:

  • undertake community consultation, research and other processes to identify and prioritise areas of tax administration that can be systemically improved;
  • call for submissions to review and to stimulate input by, for example, issuing terms of reference and similar materials;
  • maintain a positive public profile for the IGT through participation in conferences and seminars;
  • build on approaches that increase the ATO's involvement and contribution to review processes and outcomes;
  • selectively engage external expertise and undertake overseas comparisons to enhance capabilities and objectivity for appropriate reviews; and
  • review identified areas and provide independent advice and recommendations to Government on improvements to the administration of the tax laws.

The IGT'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 IGT. 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 IGT 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.

The Commissioner of Taxation has statutory independence in his administration of the tax laws. The IGT does not hold any powers to direct the Commissioner of Taxation in the administration of the tax laws. The way in which the IGT'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, more commonly, the Commissioner of Taxation may independently address a systemic issue identified by the IGT 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 IGT. Improved administration of tax laws can also be achieved without formal advice to government by direct interaction between the IGT and the ATO.

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

In 2008-09 the IGT established a new work program for 2009-10 and beyond through a broad-based community consultation process. Broad-based community involvement in the identification of issues and the opportunity for all stakeholders to provide submissions ensures that reviews undertaken are relevant and timely for all stakeholders.

Performance information

Following his appointment, the IGT consulted widely with business, taxpayers, tax practitioners (legal and accounting), professional bodies and industry associations about areas of tax administration that could be improved. The Assistant Treasurer, the Hon Chris Bowen MP, Joint Committee on Public Accounts and Audit (JCPAA), the Commonwealth Auditor-General, the Commonwealth Ombudsman, the ATO and the Treasury were also consulted. Overall, the consultation process considered over 50 written and oral submissions from the community, which collectively raised over 160 issues and concerns about tax administration that the community considered should be reviewed by the IGT. At the direction of the Assistant Treasurer and in response to submissions from concerned taxpayers, the IGT included in his work program a review into the implications of any delayed or changed ATO advice on significant issues. Taxpayers and tax professionals cited examples of where they considered that the ATO's views had undergone "U-turns" on significant interpretative matters or on past practices, especially where these had retrospective application. ATO opinions that came after lengthy periods of having no ATO view (at times perceived to be inconsistent with policy intent), but with retrospective application were also raised as concerns. In response to an invitation from the Commissioner, the IGT also included a review of the private rulings system in his program. One of the most repeated concerns raised in submissions to the IGT was the ATO's proposal to withdraw public access to the edited versions of rulings held on the public register of private rulings. Having conducted its own consultation process including discussions with the IGT, the ATO decided to retain the register and access, and suggested that the IGT undertake a broad review of the private rulings system. From the wide range of other issues raised in consultation, the IGT distilled the following further issues that will form his work program for 2009 and into 2010 (subject to any matters of overriding priority that may arise):

  • review into the ATO's administration of the SGC. Submissions questioned the adequacy of the ATO's efforts to improve employer compliance with their SGC obligations, the consequences for employees and the ATO's timeliness in collecting unpaid SGC.
  • review into the ATO's practices for finalising large company audits. Stakeholders applauded the ATO's commitment to finalising large company audits within two years. However, a number of concerns were raised particularly in relation to initial delays resulting in truncated processes being adopted towards the end of the two years in order to achieve the targeted timeframe.
  • review into the ATO's compliance focus on SME taxpayers and their advisers cited unmanageable and at times unnecessary costs and workloads caused by the ATO's approach to its current compliance focus on all SMEs in the $100 million to $250 million turnover range.
  • review into the efficiency of the ATO's compliance and regulatory approaches to SMSFs. Discussions with industry representatives indicated that the ATO has made good progress in relation to SMSFs and that relationships are generally good. However, a number of submissions and tax professionals cited the heavy compliance workloads and processes, and opportunities for improved efficiency.
  • follow-up review into the ATO's implementation of agreed IGT recommendations. This second follow-up review will focus mainly on the ATO's progress with implementing changes agreed in the IGT's 6 reviews released between April 2007 and October 2008.

Other strong candidates for review topics came forward from the consultation process and some were shortlisted for review but have not yet been included in the active work program. In several cases this is because they are being considered elsewhere, including through the Henry review or through direct stakeholder work with the ATO. The IGT will monitor progress with these potential review topics and may elevate them into his active work program as priorities and resources allow. These reserve topics include:

  • issues of concern with the ATO's outsourcing of aspects of collecting tax debts;
  • the ATO's administration of income tax refunds;
  • the appropriateness of the ATO's dual role of regulator and tax administrator for charities;
  • ATO governance and appropriate level of independent oversight; currently we are addressing this issue by providing input to the Henry Review.
  • the role and capacity of the ATO's Tax Counsel Network (TCN);
  • the ATO's use of its formal information gathering powers;
  • opportunities for efficiencies and cost savings through more flexible use of the Commissioner's substituted accounting period (SAP) discretion;
  • the extent to which the ATO's Change Program will deliver improvements to taxpayer services including taxpayer accounts, assessment notices and objections handling;
  • the potential for proactive use of the Commissioner's general powers of administration to make it easier for taxpayers to meet their obligations; and
  • the reasons why a substantial proportion of penalties raised by the ATO is conceded at objection, settlement or litigation.

The IGT thanks all those in the community that provided input over recent months to the development of his work program. As well as assisting in the development of a work program, consultation and maintaining a community profile is used to assist the conduct of the IGT's reviews. During the year, a significant number of organisations have been consulted and reference groups of interested taxpayers and their representatives have provided 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. A list of key speaking engagements is at Table 3.

Table 3: Key speaking engagements

Date Organisation Type of function Location
29 August 2008 KPMG GST Briefing Melbourne
4 September 2008 ICAA Corporate Tax Conference Sydney
5 September 2008 TIA National GST Intensive Sydney
1 October 2008 CPA Australia Discussion Group Sydney
14 October 2008 Corporate Tax Association GST Big Day & a Half Conference Manly, NSW
17 November 2008 Law Council Tax Committee Discussion Group Sydney
3 December 2008 PriceWaterhouseCoopers Indirect Tax Forum Sydney
3 December 2008 ABC Lateline Business TV Interview Canberra
8 December 2008 KPMG Financial Services Forum Sydney
16 December 2008 PriceWaterhouseCoopers Senior Tax Executive Dinner Sydney
18 February 2009 Law Institute of Victoria Discussion Group Melbourne
16-18 April 2009 UNSW / ATAX GST & Indirect Tax Workshop Noosa, Qld
23 April 2009 Victorian Tax Bar Association Seminar Melbourne
30 April 2009 PriceWaterhouseCoopers Tax Director Forum Dinner Melbourne
7 May 2009 PriceWaterhouseCoopers Indirect Tax Forum Melbourne
18 May 2009 Tonkin Corporation Annual Corporate Tax Forum Sydney
21 May 2009 National Institute of Accountants Public Practice Symposium Sydney
25 May 2009 PriceWaterhouseCoopers Tax Director Forum Sydney
28 May 2009 CPA Australia Victorian Public Accountants Convention Lorne, Vic
29 May 2009 Minter Ellison Senior Executive Taxation Boardroom Melbourne
4 June 2009 CPA Australia Qld Public Practice Conference Gold Coast
10 June 2009 Northern Beaches Discussion Group Discussion Group Dee Why, NSW
16 June 2009 Corporate Tax Association Convention Conference speech Melbourne

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

Reports resulting from the IGT's reviews, outlining findings and recommendations, are submitted to the Government after providing the Commissioner of Taxation with the opportunity to make a submission. Once the IGT has given a report to the Government, the report must be published, either by tabling in both Houses of the Parliament or otherwise within 25 sitting days of receipt.

Performance information

During 2008-09, the IGT completed four reviews and at end June 2009 has five reviews underway.

Reviews completed during 2008-09:

  • review into the non-lodgement of income tax returns - (submitted to the Minister on 11 June 2009);
  • review into the underlying causes and the management of objections to Tax Office decisions - (submitted to the Minister on 15 April 2009 and publicly released on 11 August 2009);
  • review into the Tax Office's administration of public binding advice — (submitted to the Minister on 7 April 2009 and released publicly on 7 August 2009); and
  • 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 the year - (publicly released on 29 October 2008).

Reviews underway at 30 June 2009:

  • review into the Tax Office's administration of the SGC — (commenced 2 June 2009);
  • review into the implications of any delayed or changed ATO advice on significant issues - (commenced 21 April 2009);
  • review into the Tax Office's administration of private rulings - (commenced 6 April 2009);
  • follow-up review into the ATO's implementation of agreed IGT recommendations - (commenced 24 June 2009).This second follow-up review will focus mainly on the ATO's progress with implementing changes agreed in the IGT's 6 reviews released between April 2007 and October 2008; and
  • Tax Office approaches to settling and finalising issues with taxpayers - (commenced 12 October 2007 and expected to be completed in September 2009).

Outcomes

The Commissioner of Taxation has accepted fully or in part most (122 of 138) of the recommendations of reviews published since the inception of the IGT — refer Table 1. In several reviews completed in 2008-09, the IGT considered that systemic improvements could not be made by the ATO alone under present tax laws. The IGT therefore made several recommendations to the Government to consider changes to the tax laws that underpinned the administrative systems. The outcomes of these reviews, combined with feedback from community stakeholders and the ATO, provide clear evidence that the role of the IGT is achieving its objectives and is improving aspects of tax administration for the benefit of all taxpayers.