Initiating the Review
1.1 This is the report on the follow-up review into the Tax Office's implementation of recommendations included in all six publicly released reports prepared by the Inspector-General of Taxation (Inspector-General or IGT) from the Office's inception in August 2003 to June 2006. The review was conducted pursuant to subsection 8(1) of the Inspector-General of Taxation Act 2003 (IGT Act), being a review conducted on the initiative of the Inspector-General.
1.2 The Inspector-General considered it important and necessary to assess, after a reasonable period, the implementation of improvements to tax administration recommended in his reviews and agreed to by the Tax Office. The extent of implementation is a reflection both on the outcomes of the work of the Inspector-General and on the Tax Office's openness to scrutiny and commitment to making improvements.
1.3 It is also a reflection of the valuable contribution made by accounting, tax, legal and business organisations and their members to the Office of the Inspector-General of Taxation. These organisations have provided submissions and the time, and other material, to the Inspector-General's office to enable particular reviews to be undertaken.
1.4 This review was announced on 29 June 2006. Its terms of reference are reproduced at Appendix 1 to this report. Details of how the review was conducted are provided in Appendix 2. The Second Commissioner's detailed response to the review is in Appendix 3.
Scope and focus
1.5 As of 30 June 2006, the Inspector-General had completed the following reports on systemic tax administration issues identified through consultation as relevant to stakeholders:
- Review of Tax Office Management of Part IVC Litigation (publicly released 7 August 2006).
- Review into Tax Office Audit Timeframes (publicly released 28 September 2005).
- Review into the Tax Office's Administration of Penalties and Interest Arising from Active Compliance (publicly released 28 September 2005).
- Review into the Tax Office's Small Business Debt Collection Practices (publicly released 24 May 2005).
- Review of Tax Office Administration of GST Refunds Resulting from the Lodgement of Credit BASs (publicly released 24 May 2005).
- Review of the Remission of the General Interest Charge for Groups of Taxpayers in Dispute with the Tax Office (publicly released 18 November 2004).
1.6 In these reviews the Inspector-General made a total of 73 recommendations for improvement, of which the Tax Office agreed to implement 65, wholly or in part. The following table shows the numbers of recommendations for each review:
|IGT Review||Number accepted/total recommendations|
|Review of Tax Office management of Part IVC Litigation||27/32|
|Review into Tax Office audit timeframes||4/4|
|Review into the Tax Office's administration of penalties and interest arising from active compliance||4/4|
|Review into the Tax Office's small business debt collection practices||2/2|
|Review into Tax Office administration of GST refunds resulting from the lodgement of credit BASs||12/12|
|Review of the remission of the General Interest Charge for groups of taxpayers in dispute with the Tax Office||16/19*|
1.7 The main focus of this follow-up review was to investigate to what extent the Tax Office has implemented the agreed recommendations. Throughout the review, particular attention was given to:
- evidence of a commitment to timely implementation of agreed recommendations;
- Tax Office policies and procedures in respect of implementing these recommendations, including systems used to monitor implementation and to report progress to senior management;
- processes adopted by the Tax Office where relevant to communicate to taxpayers changes brought about by the implementation of the recommendations; and
- determining whether the Tax Office had addressed systemic issues identified in the reports.
1.8 In assessing the implementation status of particular recommendations, the Inspector-General has used the following terms:
- Implemented — this term means that the Tax Office has demonstrated to the Inspector-General that the particular recommendation has been satisfactorily addressed. In some cases this status has been allocated to a recommendation where some work remains to be done, but only where there are detailed plans, actions and commitment to complete implementation in a short timeframe.
- Partly implemented — this term means that the Tax Office has not only commenced implementation but has made substantial progress and is actively pursuing completion.
- Not implemented — this term means that the Tax Office has, in the Inspector-General's view, not made satisfactory progress and is falling well short of implementing the recommendation.
1.9 During the course of the review, the Tax Office worked with the Inspector-General's office to make changes to some of its implementation work in order to demonstrate an implemented or partly implemented status. This was a very satisfactory and cooperative process. It demonstrated that following up on implementation is not simply an exercise of establishing status but can of itself assist in clarifying expectations and making improvements.
1.10 The assistance and cooperation provided by the Commissioner of Taxation and his officers to the Inspector-General and his team during the course of the review are gratefully acknowledged. The Inspector-General acknowledges with thanks the staff of the Australian National Audit Office.
Structure of the report
1.11 Chapter 2 of this report provides a summary of what the review found.
1.12 A chapter for each of the Inspector-General's six reviews is provided with a more in-depth analysis of the status of implementation.
1.13 Chapter 9 of this report discusses how the Tax Office:
- monitors and reports on the implementation of IGT recommendations to senior Tax Office management; and
- communicates to taxpayers of the changes brought about by the implementation of recommendations.
1.14 Appendix 1 contains the terms of reference issued upon the announcement of the review.
1.15 Appendix 2 contains a summary of how the review was conducted.
1.16 Appendix 3 is the formal response to the review received from the Second Commissioner of Taxation (Law).
1.17 Appendix 4 lists the meaning of abbreviations used in this report.