2.1 The Tax Office has implemented** or partly implemented** 62 of the 65 agreed recommendations made by the Inspector-General in his first six reviews and, in doing so, has made significant improvements to tax administration. A few agreed recommendations have not been implemented, but all have been progressed by the Tax Office to some extent. The following table summarises from a numerical perspective the findings of this review:
|IGT Review||Number of IGT recommendations in the review||Number accepted by the Tax Office||Number partly implemented**||Number implemented**|
|Review of Tax Office management of Part IVC Litigation||32||27||3||23|
|Review into Tax Office audit timeframes||4||4||0||4|
|Review into the Tax Office's administration of penalties and interest arising from active compliance||4||4||0||4|
|Review into the Tax Office's small business debt collection practices||2||2||0||0|
|Review into Tax Office administration of GST refunds resulting from the lodgement of credit BASs||12||12||1||11|
|Review of the remission of the General Interest Charge for groups of taxpayers in dispute with the Tax Office||19*||16||0||16|
** See paragraph 1.8 for explanation of these terms.
2.2 Some of the key improvements which this review has confirmed as implemented by the Tax Office include:
- fairer penalty and interest remission policies both in the broad and in respect of fairer outcomes for people caught up in compliance activity on certain Employee Benefit Arrangements (EBAs);
- establishment of a Tax Office panel of senior officers to determine the appropriateness of widely based settlement offers;
- increased Tax Office capability to differentiate approaches between serial defaulters and debtors who seek to comply but need short-term assistance to do so;
- improved communication during audits including commencement and finalisation notifications and progress reports;
- practical and accessible information for the community and directions to Tax Office staff regarding the remission of interest charges, particularly around interest prior to the issue of an amended assessment;
- significantly reduced amounts of GST refunds that are held up for compliance checking from $20.48 billion (65 per cent of total GST refunds) in 2003-4 to $12.94 billion (31 per cent of total GST refunds) in 2006-7, and greater transparency in reporting;
- a new reporting system which monitors not only the processing times of refunds but also reasons for delay;
- correction of Tax Office practices where taxpayers were inappropriately being charged interest for periods of Tax Office-caused delays;
- promptly published decision impact statements to inform stakeholders of Tax Office intentions following significant court decisions;
- an independent review process for test case applications rejected by the Tax Office;
- improved reporting of test case program operations and outcomes;
- new management arrangements to bring together overall responsibility and authority for managing litigation;
- senior case management arrangements to intervene where matters appear to be taking too long to resolve or are going off the rails;
- Tax Office adoption of guidelines on what constitutes good administration when it decides to challenge a court interpretation of the law.
2.3 The review has also found significant delay in the implementation of some recommendations. Some recommendations relating to reviews conducted in 2005 have only recently been implemented, demonstrating the direct benefit of this follow-up on agreed recommendations.
2.4 A few recommendations have not been implemented by the Tax Office. This fact remains a concern to the Inspector-General in view of the time that has lapsed since a number of the recommendations were made. However, there are no recommendations that have not at least been progressed to some extent. For example:
- the Tax Office has a prolonged and ongoing process to develop an automated risk profiling capability that will enable debt management strategies to be based on the individual risk profile of the debtor. After more than two years since the recommendation was made, the Tax Office is still working through this process;
- the Tax Office has not provided evidence that it has considered or developed any changes to its own administrative approaches that would assist business to manage cash flows and to meet tax obligations as and when they fall due;
- guidelines for funding respondents' costs in Tax Office appeals against court and tribunal decisions adverse to the Commissioner are yet to be published.1
2.5 There have also been continuing delays, although more understandable, to the development of new systems, processes and procedures in line with a variety of the Inspector-General's recommendations, arising in part because of the prolonged Tax Office Change Program2. The Inspector-General notes that the Change Program is a massive undertaking that requires old systems to be locked down and strict prioritisation of new system capabilities that will inevitably stall some desirable changes.
2.6 Although these examples indicate that the Tax Office has more to do in order to fully address a few of the Inspector-General's recommendations, the Inspector-General knows from his more recent reviews that the Tax Office continues with its own significant agenda of improvements to tax administration.
2.7 A welcome aspect of this review has been the general willingness of the Tax Office to work 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 and has been facilitated with the deployment of senior executive Tax Office staff to ensure that assistance has been appropriately provided.
2.8 Other matters observed during the review included a review of the monitoring and reporting of the implementation of recommendations to senior Tax Office management. Monitoring of the progress with recommendations from all external scrutineers of the Tax Office is undertaken quarterly by the Tax Office's Audit Committee based on reports prepared by the Tax Office's Internal Audit Branch (IAB) from input by business lines. The IAB updates the Tax Office's Audit Committee as to the status of implementation. On the evidence of reports sampled, the Inspector-General found these reports to be patchy and they contained very limited analysis. The Tax Office has referred to a recently instigated project to improve and streamline the reporting process.
2.9 The second ancillary matter considered by the Inspector-General was how well the Tax Office has communicated to taxpayers about the implementation of the recommendations. As discussed later, the Tax Office has been quite proactive in undertaking appropriate forms of communication. These efforts must continue in view of the significant amount of change resulting from the implementation of the recommendations.
2.10 In summary, this follow-up review has demonstrated that the Tax Office has responded to reviews conducted by the Inspector-General. This is evidenced through the number of recommendations that have been implemented as well as through the corresponding improvements in Tax Office administrative practices and approaches. Given the number of recommendations involved, this represents a very positive outcome. Although work needs to be done to complete implementation of some recommendations, it is clear that the issues raised in the first six reviews of the Inspector-General's tenure are being addressed by the Tax Office.
2.11 In due course, the Inspector-General will follow-up Tax Office progress with implementation of agreed recommendations of the five3 further reviews that have already been completed since May 2006 and any of the current reviews4 that are completed and ready for follow-up at that time.
1 The Tax Office continues to work with the Treasury and the Attorney-General's Department in the development of such guidelines.
2 The Tax Office Change Program is an extended update and improvement of online, phone and paper products, services and experiences for taxpayers. The Change Program comprises a number of stages and is proposed to continue through 2008 and 2009.
3 Three Case Study Reviews into Research and Development Syndicates, Service Entities, and Living-Away-From-Home-Allowances; Review of the Potential Revenue Bias in Private Binding Rulings Involving Large Complex Matters (awaiting final response from the Tax Office); and Review into the Tax Office's Administration of GST Audits (awaiting final response from the Tax Office).
4 Four reviews are currently under way: Review into Aspects of the Australian Tax Office's Settlement of Active Compliance Activities; Review into the Non-lodgement of Income Tax Returns; Review into the Underlying Causes and the Management of Objections to Tax Office Decisions; and Review into the Tax Office's Administration of Public Binding Advice.