The Inspector-General of Taxation's (IGT) review into the Future of the Tax Profession was undertaken in response to a request from the Commissioner of Taxation as well as concerns raised by stakeholders within the tax profession.
The review examined the challenges and opportunities presented by new and emerging digital technologies, along with the accompanying social, policy and regulatory impacts on the administration of the tax system and the tax profession. It highlights the need for prompt and well-coordinated action by all within the tax system to manage the challenges and opportunities ahead.
As technology advances, whilst it may facilitate ease of compliance for taxpayers, it may create new complexities and the services required from tax professionals may vary accordingly potentially requiring changes to their business models. There are also opportunities for both the Australian Taxation Office (ATO) and the Tax Practitioners Board (TPB) to consider devolving certain aspects of their functions to the profession or professional associations, where that work could be undertaken more efficiently or cost-effectively.
The ATO plays a critical role in preparing the tax system for the future and its own technological innovation program is a key factor. The important role of tax practitioners within the Australian tax system must also be acknowledged. Given the interconnectedness of the ATO, the TPB and tax practitioners, it is imperative that they take collective and well-coordinated action. Such action is only possible through a strong working relationship. However, in recent years, the working relationship particularly between the ATO and the tax profession has been strained as a result of persistent IT outages and stability issues as well as unfortunate ATO commentary such as those in a recent speech by the Commissioner regarding work-related expenses. There are recommendations in this review which are aimed at improving this important relationship.
The IGT has also identified opportunities for the ATO consider its future workforce capability needs. Whilst some work has already been undertaken, it does not appear to have been done at the whole-of-ATO level. Additionally, as advancing technologies pose greater risks to the tax system, recommendations have been made to the ATO to consider its approaches to identifying and managing emerging tax issues as well as cyber security risks.
The TPB also plays a significant role in the tax system by regulating tax practitioners. The IGT observed that the TPB's role may need to expand in the future to keep pace with developments in the tax profession and workforce more generally. Specifically, the IGT believes that the TPB should consider the flexibility of the regime established by the Tax Agent Services Act 2009 to deal with a wider range of professionals who may provide tax services in the future. Moreover, where emerging technology enables more unregistered people to provide tax services, the TPB would have to determine the extent of such risks and be prepared to address them including through collaboration with the ATO, the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission.
Overall, the IGT made nine recommendations comprising 28 parts (three parts were for the Government's consideration, 19 parts for the ATO and six parts for the TPB).
The three parts of recommendations for the Government's considerations relate to reforming work-related deductions which will assist to fully realise the benefits of automation, enhancing whole-of-government digital transformation and bolstering the sanctions that the TPB may impose on non-compliant tax professionals.
The TPB has agreed with all recommendations made to it. While the ATO had initially indicated agreement with the majority of the IGT's recommendations, it ultimately disagreed with eight parts of recommendations. The disagreements relate to those parts aimed at enhancing the ATO workforce, assisting tax practitioners to prepare themselves to meet the future challenges and ensuring that the fragile relationship between tax practitioners and the ATO is carefully managed. Notwithstanding the disagreements, the ATO has agreed with 11 parts and has advised that seven of these have been implemented or are part of an existing programme of work. The appropriate implementation of recommendations and whether existing programmes of work address the concerns raised in this review are matters for the ATO's Audit and Risk Committee in the first instance.
Given the level of the ATO's disagreement, the benefits of the package of recommendations made in this review may not be fully realised. To the extent that concerns persist, the IGT may either undertake a follow-up review of the ATO's implementation of the recommendations or commence a new review covering the same or similar areas.