Conduct of the review

1.1 The Inspector-General of Taxation’s (IGT) review into the Future of the Tax Profession1 was undertaken in response to a request from the Commissioner of Taxation (Commissioner) as well as concerns raised by stakeholders within the tax profession, particularly tax practitioners, through our complaints handling service and in our other engagements with tax professionals.

1.2 In 2015, the IGT undertook a review into the Australian Taxation Office’s [ATO] services and support for tax practitioners.2 That review largely examined the ATO’s relationship with, and services provided to, tax practitioners at the time. The current review is not intended to be a follow-up to the 2015 review but, rather, it is a forward looking examination of a range of current and future factors, such as advancement in technology, that are likely to reshape the tax profession and the way tax systems may be administered.3

1.3 The IGT received a range of submissions and also consulted with a number of stakeholders including taxpayers, registered tax and Business Activity Statement (BAS) agents and their representative bodies, tax (financial) advisers (TFAs), academics, legal practitioners, software providers and industry associations as well as senior staff at the ATO and other government departments to gain a better understanding of the issues. From these submissions and consultations, the IGT distilled four main themes under which the review was conducted, namely:

  • technological changes;
  • social changes;
  • policy changes; and
  • regulatory changes.

1.4 The IGT review team has undertaken considerable research and turned to an extensive body of literature in discerning the upcoming changes, the challenges they pose and the opportunities for the ATO and professionals working in tax to meet those challenges and reap the benefits. In doing so, a range of international revenue agencies have been consulted to understand their approaches to the future changes and initiatives to address them.

1.5 The IGT review team has also worked progressively with senior management of the ATO and the Tax Practitioners Board (TPB) to distil potential areas for examination and future action.

1.6 The Commissioner and the Chair of the TPB were provided an opportunity to make submissions on any implied or actual criticisms in this report.4 In addition, the TPB also lodged a formal written submission in response to the IGT’s terms of reference.

Professionals, disruption and the future

1.7 This review is about the future but it does not to seek to predict the future – history is littered with failures on that account – nor is it to engage in picking economic winners and losers for the tax profession.

1.8 Whilst it is the first time that the IGT has conducted a review that is largely forwarding looking in nature, where relevant, at certain points the current state of play regarding the tax profession will be required to contextualise the propositions or forecasts that have been advanced by various parties.

1.9 Engaging in a future state discussion does require a consideration of what changes are expected to impact upon those parties within particular groups or the underlying functions they perform. Many of the anticipated or touted changes are not unique to the tax profession — the review is being conducted with respect to a specific profession but the relevant developments have far wider impact. Indeed, at the extreme boundaries, it is the entire social and economic fabric of society that is evolving. We are on the cusp of a total ‘paradigm shift’ in how we live our lives. As the Executive Chairman for the World Economic Forum stated: ‘[t]he changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril’.5

1.10 The source of the changes is the quantum leap in technology which is considered in Chapter 2. These technologies that have or are anticipated to emerge are commonly referred to as being ‘disruptive’ for a range of social, political and economic endeavours. Groups that may have been previously exempt from such changes may now also be disrupted. These affected groups include professional services or so-called ‘white collar’ jobs. The expectation is that these roles are being, and will continue to be, substituted by machine based capital.

1.11 There is a key overarching theme which is ‘this time it’s different’ because of the likelihood and consequences of the changes. Of course claims of this nature have been made before. When new technologies largely diminish previous services or supplies, they pose serious challenges and opportunities depending upon your relative position. Improved technology, in the form of substituting human capital for machine capital, is not new and, throughout history, has been adopted out of competitive need or for survival.

1.12 The industrial revolution was a major transformation of social and economic arrangements. The process of labour or service substitution by machine based capital was applied in many industries at that time – a process that has continued to the present day. At that time, new roles, such as mechanical engineers, did emerge through that process of change.

1.13 A more recent example of current technology disruption presented in the media is the driverless or automated vehicle. The likely effect and expectation is that human drivers are replaceable. The advent of such change is also expected to have so-called ‘knock-on’ effects, in the form of risk transfers. For example, insurance premiums may reduce significantly due to the lower incidence of accidents.6

1.14 While all professionals have been cited as being at risk of machine capital substitution, taxation and audit related work have been identified as being ‘at particular risk from technology’.7 An interesting underlying point of distinction is also raised in this context, namely that professions will continue to be needed but professionals currently conducting them may not or at least not in the manner in which they have been conceived historically.

1.15 The objective of this report is to provide insights regarding presently emerging and anticipated technologies to enable tax professionals to better inform their decision making process and consider the implications for their business models and livelihood. The aim is to forearm tax professionals regarding their own assessments of strengths, weaknesses, opportunities and threats in a manner that is empowering and, in doing so, promote positive and proactive thinking rather than conjure doomsday scenarios.

1.16 Change has been, and will be, a constant companion of the tax profession. The approach should always be to consider how one adapts to take advantage of that change. By way of progression using the earlier example, prior to the automobile driver there was the horse and cart coachmen. The latter still exists but on a smaller scale fulfilling an altered function.

1.17 Indeed, currently, there is no universal agreement on what constitutes a tax professional.8 Taxation, as a regulatory obligation, touches nearly every facet of modern life and as will be seen there are currently a myriad of professionals engaged in its various aspects. The key point underlying the review is to anticipate the likely responses of consumers or taxpayers in the future. In particular, what professional services consumers or taxpayers will want and how much they would be willing to pay, as compared to alternatives that may emerge. The underlying success of a taxation system rests upon the achievement of vertical and horizontal equity for citizens and the economy it serves.9

1.18 It is also important to appreciate the views of certain stakeholders and commentators who argue that while new technologies will have an impact, the nature of it is more limited in magnitude and likely to arise over a much longer term. Furthermore, the emerging and anticipated technologies carry a range of downside risks that may impact on their effectiveness. Some of these risks arise from perverse incentives that are actually enabled by the newer technologies, such as the continued growth in identity crime. These downside risks are often referred to collectively as ‘cyber risks’ and are not new but are being enabled in a manner that is highly scalable and pervasive in impact.

Terminology used in this report

1.19 Throughout this report the IGT has adopted the term ‘tax professional’ in the general sense of referring to professionals working in tax. Given the nature of tax and its relationship to nearly every facet of modern life, the numbers of professionals whose work relates in some way to tax is myriad. The IGT will explore the definition and the need for regulation in detail in Chapter 6.

1.20 The term ‘tax practitioner’ is used to collectively refer to only registered tax and BAS agents. Where necessary, for clarity of discussion, the IGT will specifically refer to other tax professionals such as TFAs, digital service providers (DSPs) including software developers, and legal practitioners.

Structure of the report

1.21 The report is arranged under the four main themes identified in the terms of reference, namely technology, social, policy and regulation. Accordingly, it is divided into the following chapters:

  • Chapter 2 outlines the current and anticipated technological advancements that are driving digital disruption and the potential future application to tax administration and the work of tax professionals;
  • Chapter 3 provides an international perspective on the adoption of new technologies across a wide range of revenue authorities in search of emerging best practices;
  • Chapter 4 discusses the nature of the social impacts and opportunities presented by technological changes on the community, the tax profession and the ATO to foster greater understanding and empower decision making;
  • Chapter 5 considers matters potentially requiring policy change in the tax and superannuation system arising from the technological disruption; and
  • Chapter 6 examines the current role of the TPB in regulating the tax profession, followed by the potential expansion of the profession to include wider disciplines and its regulation in the future.


References made in this report to particular commercial firms, software or platforms are for illustrative purposes only. They should not be taken to be endorsement by the IGT.

1 This review is undertaken pursuant to section 7(1)(d) of the Inspector-General of Taxation Act 2003 and the report is produced pursuant to section 7(1)(f) of the Inspector-General of Taxation Act 2003.

2 Inspector-General of Taxation (IGT), Review into the Australian Taxation Office’s services and support for tax practitioners (2015).

3 Terms of reference for the review were announced on 6 June 2017, a copy of which appears in Appendix 1.

4 In accordance with sub-section 8(5) of the Ombudsman Act 1976 which has effect by virtue of section 15 of the Inspector-General of Taxation Act 2003.

5 Klaus Schwab, The Fourth Industrial Revolution (2016) p 2.

6 Oliver Ralph, ‘Cost of car insurance to plunge with rise of driverless vehicles,’ Financial Times (28 June 2016) <>.

7 Richard Susskind and Daniel Susskind, The Future of the Professions – How Technology will Transform the Work of Human Experts (2015) p 88.

8 It should be noted, however, that the Tax Agent Services Act 2009 defines ‘registered tax practitioner’ as including tax agents, BAS agents and tax (financial) advisers.

9 Richard Tresch, Public Finance: A Normative Theory, 3rd ed. (Academic Press, 2014) pp 171 and 175.