This part of the report provides a review of the IGT’s performance during 2014–15 in relation to the agency’s outcome, deliverables and key performance indicators.
The outcome is supported by key strategies. The deliverables align with those key strategies and are monitored and measured by way of the performance indicators.
Improved tax administration
The planned outcome for the IGT is to improve tax administration through community consultation, review and independent advice to Government.
Key strategies to achieve Outcome 1 are:
- undertake community consultation, research and other processes to identify and prioritise areas of tax administration requiring improvement;
- call for submissions to review identified areas and stimulate input by, for example, issuing terms of reference and submission guidelines, as well as meeting with selected key stakeholders;
- review identified areas and provide independent advice and recommendations for improvements to Government and the ATO;
- maintain a positive public profile by, for example, participating in conferences and seminars as well as through the media;
- 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
- implement a taxpayer complaints handling function.
The IGT has three specific deliverables, namely: the work programme, independent advice to Government through the reviews, and implementing a taxpayer complaints handling function.
The IGT’s work programme arising from community input and consultation with other relevant agencies was announced in April 2014 and the work undertaken in conducting this programme is set out in detail in Part 1 of the report.
More information on the work programme, including updates, is available on the IGT website.
An additional ongoing feature of the work programme is sustained engagement with stakeholders and maintaining a public profile that ensures emerging tax administration issues of concern continue to be raised with the IGT. This is achieved by various means such as through the media (including social media), the IGT website, engagement with other government agencies and presenting at conferences, seminars and local tax practitioner discussion groups.
During 2014–15, the IGT and staff addressed a number of such forums. Attendance and participation at such domestic events helps improve understanding of issues at a community level whilst international forums provide opportunity for comparisons with our foreign counterparts, enhancing the office’s capabilities and objectivity.
As mentioned in Part 1, the IGT consults with a range of government agencies to develop the work programme and during the conduct of reviews. The IGT also maintains ties with international revenue authorities, scrutineering bodies and the OECD. Engagement with these organisations enhances IGT reporting and recommendations by better understanding whole-of-government initiatives and international developments respectively.
Independent advice to Government and improvements to tax administration
The IGT provides independent advice to Government primarily through the reports of completed reviews.
The conduct and completion of reviews is determined by the bespoke nature of each review as well as the priorities afforded by various parties and the small size of the IGT office. Ministerial direction and requests from the Commissioner of Taxation (Commissioner) or Parliamentary Committees are also factors that need to be considered. For example, as detailed in Part 1 of this report, in this financial year the IGT accepted a request from the House of Representative Standing Committee on Tax and Revenue to assist with its Inquiry into Tax Disputes. The IGT actively seeks to mitigate the tension between the need for flexibility and undue delay through regular project management review.
The review reports detail the IGT’s observations on, and the recommendations for, improvement. The number of recommendations made to the ATO and to Government in reports publicly released in 2014–15 is set out in Table 4 below. The nature of these recommendations and supporting IGT observations are described in Part 1.
The following table lists the reviews conducted during 2014–15 and their status at 30 June 2015.25
|IGT reviews||Status at 30 June 2015|
|Review into the Australian Taxation Office’s administration of penalties||Report publicly released|
|Follow up review into delayed or changed Australian Taxation Office views on significant issues||Report publicly released|
|Follow up review into the Australian Taxation Office’s implementation of agreed recommendations in five reports released between August 2009 and November 2010||Report publicly released|
|Review into the Australian Taxation Office’s administration of valuation matters||Report publicly released|
|The Management of Tax Disputes||Report publicly released|
|Debt Collection||Final stages of review|
|The Australian Taxation Office’s services and support for tax practitioners||Final stages of review|
The first five reviews in this table were publicly released during this financial year. The last two reviews listed were in the final stages of completion and expected to be released early in 2015‒16. These seven reviews are all described in Part 1 of this report.
Details on the above reviews are also available on the IGT website, www.igt.gov.au.
The Government’s Budget Measure to transfer the taxpayer complaints handling function from the Ombudsman to the IGT26 was implemented on 1 May 2015. The Government considered that this function would enhance the existing systematic review role of the IGT and provide taxpayers with more specialised and focused complaints handling for tax matters.
Part 1 of this report outlines the main tasks undertaken by the IGT to give effect to the above Budget Measure and how the IGT has been able to handle all taxpayer complaints about the ATO or the TPB since 1 May 2015.
The effective and efficient resolution of complaints demands a flexible process and approach. Some complaints require an investigation by the IGT whilst others may be resolved, for example, by simply providing the appropriate information.
Where an investigation is needed, the IGT provides the relevant agency with an opportunity to address the complaint and discuss the issues to determine the most appropriate course of action. The IGT may also seek information from the agency to narrow the issues and allay concerns.
It should be noted that in some investigations, the IGT may serve formal notices requiring employees of the ATO or TPB to provide information relevant to the IGT’s investigations.27 During this financial year only one such notice was issued to an ATO employee who had raised an issue for investigation by the IGT. The IGT considered it appropriate to issue a formal notice in this instance to allow the employee to provide supporting information without breaching the relevant secrecy provisions.
Throughout investigations, the IGT also maintains communication with complainants and provides them with an opportunity to raise any further issues for consideration at the conclusion of such investigations and before the complaint case is formally closed.
During the two-month period in which the IGT has conducted the complaints handling function, 340 complaints were received. Of these complaints, 308 related to ATO actions (90.6%), 12 related to TPB actions (3.5%) and 20 related to other matters (5.9%) such as those outside of the IGT’s jurisdiction to consider — see Table 2.
Of the 340 complaints received, 262 cases were resolved before the end of the financial year. The remaining complaint cases were in the process of resolution, including those cases in which investigations had been completed but were awaiting the expiry of time for taxpayers to raise any further issues for consideration.
During 2014‒15, the IGT began 190 investigations, 184 of which related to ATO actions (97%) and the remainder to TPB actions (3%). By the end of the financial year, 122 IGT investigations were completed — see Table 3 below.
Approximately 30 per cent of all complaints related to the ATO’s debt collection activities with other major sources of complaints relating to compliance activities (17%) and systems-related issues (17%). It is too early to draw any conclusions or insights from these statistics as they reflect only the first two months of operation.
Once the complaints handling function has been operating for an appropriate period of time and more statistics become available, the IGT will be in a better position to observe trends and potentially conduct more targeted reviews to address emerging issues.
The IGT has two key performance indicators — positive community stakeholder feedback and support as well as improvements to tax administration.
Performance indicator 1
Positive community stakeholder feedback and support
The IGT continues to receive positive feedback and support from community stakeholders which can be attributed to the IGT’s responsiveness in reviewing and investigating systemic tax administration issues of concern and evidenced by stakeholders’ ongoing engagement with the IGT’s work programme.
Positive comments have also been received on the IGT’s recent handling of tax complaints. Whilst not every complainant has obtained their desired outcome, positive feedback has been received on the effectiveness of the IGT in facilitating the resolution of complaints.
Performance indicator 2
Improvements to tax administration
The way in which the IGT’s advice to Government effectively contributes to the improved tax administration takes several forms.
First, the IGT’s recommendations for Government’s consideration may be policy in nature and lead to legislative change to address identified administrative issues. Examples of Government policy and legislative initiatives adopted in this financial year are set out in Part 1 of this report.
Second, the Commissioner or TPB may agree to and implement recommendations made by the IGT during a review or following the release of a review report.
The Commissioner and the TPB have statutory independence in their respective administration of the taxation laws. The IGT does not hold any powers to direct the Commissioner or the TPB in this regard. Historically, however, the vast majority of the IGT’s recommendations have been accepted fully or in part. This trend continues for reviews publicly released in 2014–15, with the Commissioner accepting fully or in part all of the 20 recommendations made to the ATO — refer to Table 4 below. No reviews were conducted into the TPB’s activities this financial year.
Third, implementing agreed recommendations addresses discrete areas of tax administration, yielding both direct and incremental improvements. Although direct improvements may be more readily observed, the full benefit of a review may not always be immediately apparent. Examples of incremental and gradual change include the cultural shift towards better engagement and dispute resolution across the ATO28 — this has its origins in the IGT’s objection29 and settlements reviews30 as well as more recent ADR31and Tax Disputes reviews.32
The ATO’s implementation of agreed recommendations has been verified through IGT follow up reviews. Two follow up reviews were concluded in 2014–15 and noted that the ATO had implemented, in full or in part, 53 of the 56 agreed recommendations directed to it. The remaining three agreed recommendations have been subsumed by subsequent IGT reviews as the issues underlying those recommendations have been or will be examined in those reviews — refer to Table 5 below. A description of these follow up reviews is provided in Part 1.
|IGT review||Number of recommendations accepted fully, in part or in principle by the ATO||Number of recommendations implemented, fully or partially, or ATO action taken consistent with the agreed principle or aspiration||Number of recommendations subsumed by subsequent IGT review|
|Follow up review into delayed or changed Australian Taxation Office views on significant issues||4||4||0|
|Follow up review into the Australian Taxation Office’s implementation of agreed recommendations in five reports released between August 2009 and November 2010||52||49||3|
It should be noted that no further IGT follow up review is anticipated as monitoring the implementation of agreed recommendations is now being performed by the ATO’s audit and risk committee whose members include independent professionals from the private sector. However, the IGT has reserved the right to conduct follow up or fresh reviews where concerns emerge with respect to the implementation of agreed recommendations.
Fourth, in respect to recommendations with which an agency may have disagreed, that agency may significantly implement that recommendation over time. For example, the ATO’s transfer of its entire objections function from the Compliance Group to the Law, Design and Practice Group33 followed recommendations made in a previous IGT review, namely the ADR review34, as well as in the IGT’s Submission to the 2011 Tax Forum35 and Tax Disputes review.36
Lastly, improved administration of the taxation laws may also be achieved without formal advice to Government or recommendation to an agency, but by direct day-to-day interaction between the IGT and the relevant agency. Such interactions have increased as a result of the transfer of the complaints handling function to the IGT. This is likely to become a major avenue for improvement to the tax system in the future. As mentioned above, already 122 of the 190 investigations into ATO and TPB actions have been concluded in two months with the remainder of the investigations being in the process of finalisation.
The IGT received an unmodified audit report on the 2014–15 financial statements from the Australian National Audit Office (ANAO). These statements can be found in Part 4 of this report.
The IGT ended 2014–15 with an attributable surplus of $283,651, compared to a surplus of $28,925 in 2013–14.
The entity has sufficient cash and reserves to fund its liabilities as and when they fall due.
25 Since 1 May 2015, the IGT’s reviews have been conducted under paragraphs 7(1)(c) and (d) of the Inspector-General of Taxation Act 2003 which provide for the power to investigate systems established by the ATO, TPB or the taxation laws.
26 Above n 1.
27 Section 9 of the Ombudsman Act 1976 which operates by virtue of section 15 of the Inspector-General of Taxation Act 2003.
28 Second Commissioner Andrew Mills, ‘It’s time for tax (administration) reform’ Keynote address to the Australasian Tax Teachers’ Association 27th annual conference, University of Adelaide, 20 January 2015.
29 Above n 13.
30 Above n 4.
31 Above n 4.
32 Above n 2.
33 Above n 28.
34 Above n 4, recommendation 6.1.
35 Above n 21.
36 Above n 2, p 120.