Stakeholder concerns and management challenges

2.1 Two of the most strongly expressed and broadly held concerns raised by stakeholders related to the Australian Taxation Office's (ATO) strategic approach to identifying and dealing with transfer pricing issues. These concerns were:

  • the lack of efficient and effective transfer pricing compliance management. In particular, ATO organisational arrangements, such as providing generalist case teams with decision-making authority on technical issues and ambiguous roles and responsibilities for the various units involved were considered to be major impediments; and
  • the ATO selecting 'garden variety' transfer pricing cases for its compliance activities and not tackling the more complex cases that involve the greatest loss to the Government revenue or 'stateless income'.

2.2 These concerns underlie a number of ATO management challenges, which are discussed in the sections that follow.

ATO compliance activity effectiveness and change management

2.3 As outlined in Chapter 1, a number of issues, such as the loss of key transfer pricing staff, have impacted the ATO's management of transfer pricing matters over time. As a result, in October 2010, the ATO made substantial changes to its strategic approach to international tax risks and related organisational arrangements. Of these changes, the most significant were:

  • the expansion of the Transfer Pricing Practice's (now called the Profit Shifting Practice or PSP) focus to a broader range of international tax risks, such as non-resident withholding tax and thin capitalisation, and the interaction of these risks with other tax risks, such as capital gains tax and royalty income;
  • the removal of the Internationals unit's conduct of certain matters, such as the Advance Pricing Arrangement (APA) program, so that increased focus can be given to risk and strategy issues; and
  • a 'decentralised' organisational arrangement whereby generalist operational case teams conduct all compliance activities with advice from specialist units.

2.4 Since that time, the ATO has continued to makes changes to respond to international developments in relation to base erosion and profit shifting (BEPS), such as through 'stateless income' and 'tax arbitrage' between different jurisdictions.

2.5 The developments include an Organisation for Economic Co-operation and Development (OECD) 15-point action plan aimed at fostering increased international collaboration and coordination of efforts to address BEPS as well as OECD work on transfer pricing issues involving intangibles. Australia will also play a role in the G20 to harness international cooperation on these issues.

2.6 The Government has provided key support to the ATO's profit shifting strategy by providing substantial funding and amending the existing domestic transfer pricing legislation.276 Other measures include the ATO review of foreign investment review board applications. There are other legislative measures also in train. For example, there is a proposal to repeal section 25-90 of the Income Tax Assessment Act 1997 (ITAA 1997) and debt dumping via the thin capitalisation rules.

2.7 The ATO's response to these organisational changes, international developments and legislative measures require experienced officers to provide timely and cogent advice to Government as well as to oversee the effective and efficient conduct of risk identification and treatment strategies.

IGT observations

2.8 The initial observations below are directed at the narrow issue of the transfer pricing element within the ATO's new profit shifting strategy given the specific nature of this review. The IGT's broader observations from this review are set out later in this section.

2.9 Historically, the ATO had relied on a number of key ATO officers to provide swift and targeted advice on matters involving transfer pricing issues including the interrelationship with other tax issues. The experience and knowledge of these officers was developed over many years through their direct involvement in a variety of cases and industries with multiple transfer pricing and related tax risks.

2.10 The knowledge and experience of these key officers, however, were not broadly shared or disseminated within the ATO and the ATO's capability in this area was diminished upon their departure. Consequently, in 2010, the ATO found itself in a difficult position where:

  • it was expected to respond to the increasing international focus on base erosion and profit shifting in an economic environment of declining sovereign revenues; but
  • with reduced levels of experience and technical capability in transfer pricing and its interaction with other tax risks.

2.11 As a result, following the ATO's Internationals Review,277 key changes were made to increase the ATO's strategic focus on base erosion and profit shifting, including transfer pricing.

2.12 The team implementing the 2010 changes, however, inherited a challenge to 'corporatise' efficient and effective approaches and processes on a broader range of interrelated tax risks with comparatively reduced experience and technical capability. However, government funding was received in 2013 to increase the ATO's capability to better focus on BEPS risks.

2.13 Developing sufficient organisational capability to effectively and efficiently execute the intended scope of work takes time. Stakeholders have estimated that such capability, in transfer pricing alone, takes between five to ten years to develop as the work requires a mindset that investigates the potential alternative postulates from the perspective of an independent business owner rather than the mindset of a tax practitioner who is merely seeking to evidence whether the components of a statutory provision have been fulfilled. Additionally, this capability is difficult to develop as officers need to frequently undertake different types of transfer pricing work in a variety of industries. The ATO also faces losing such capable officers to the private sector who can offer greater remuneration.

2.14 Notwithstanding these challenges, the ATO may become increasingly efficient and effective in identifying and dealing with these risks over the longer term. Currently, however, stakeholders have highlighted extended timeframes and unwillingness of operational case teams to discuss technical issues on transfer pricing matters and pursuit of unnecessary issues that impose considerable compliance costs for both the ATO and taxpayers. These issues are discussed more fully in the following chapters. The general suggestion is that the ATO currently does not have sufficient specialist resources needed to undertake its current scope of transfer pricing work in an efficient and effective manner.

2.15 The ATO's Internationals Review also initiated a restructure of organisational arrangements that were aimed to better identify international tax risks and deal with an increased number and scope of matters. This restructure has presented a number of challenges and learnings for ATO management. In the new structure the PSP has been removed from conducting case work and also has a much broader range of technical issues to manage. The ATO has also internally reorganised the focus of two key business lines (the Large Business and International (LB&I) and Small and Medium Enterprises (SME) business lines), amongst others, from one of taxpayer turnover to one of taxpayer ownership. The operational teams conducting case work are generalists for all domestic and international tax issues. The ATO will need to exercise tremendous care and attention, as an inability to conduct compliance activities efficiently may compromise the ATO's broader profit shifting strategy.

2.16 By way of contrast, the United States Internal Revenue Service (IRS) recently faced similar problems with its focus and approach to dealing with transfer pricing. Specifically, the IRS did not have a centralised focus, resulting in ad hoc consideration of transfer pricing and limited risk assessment. This caused some difficulty for the IRS in taking a strategic approach to transfer pricing matters and deciding which cases should be pursued. Due to the significant government revenue at risk and complexity of transfer pricing issues, the IRS restructured its Large Business and International Division in 2012. This restructure involved bringing together international generalists, economists and transfer pricing specialists under a single Deputy Commissioner for International Tax. The IRS considered that creating a national team of international generalists also makes it easier to deploy resources where they are most needed. This was more difficult when relevant personnel were part of regionally defined teams. Another key objective for the new structure was to improve capability. The IRS now seeks to take a more practical and collaborative approach to transfer pricing instead of solely focusing on the strict interpretation of the law.278

2.17 One key difference between the approach of the IRS and the ATO is that the IRS' operational and technical responsibilities for addressing transfer pricing issues are located in one area. The IRS case teams also have a greater degree of international specialisation than those of the ATO.

2.18 Whilst in the current environment, it may no longer be possible to have specialist transfer pricing case teams, the ATO should consider having more specialised case teams, such as those with a particular focus on international issues. Operational case teams with greater international focus will also act as an improved training ground for developing greater international tax capability, including transfer pricing. The current mix of domestic and international tax, i.e. all income tax issues, is too broad particularly when, for example, in a transfer pricing context they are frequently interacting with specialists representing the taxpayer. This imbalance not only causes frustration for taxpayers but also does not serve the best interest of the ATO and Government revenue.

2.19 There is also a need to balance the scope of work with the available resources whilst taking into account available capabilities. The recreation of taxpayers' transfer price is resource intensive, particularly if every transfer pricing risk was to be addressed in this way. The situation is exacerbated when there is a capability deficit. A later section in this chapter will further discuss the issue of case selection and resource allocation.

Recommendation 2.1

The IGT recommends that the ATO:

  1. develop case teams that have a particular focus on international tax including transfer pricing issues; and
  2. match the scope and scale of compliance activities of transfer pricing risks to the available resources and capability of its generalist and specialist officers to conduct such work efficiently and effectively.

ATO response

Agree

Maintaining separate risk and operational functions

2.20 The separation between the risk function and operational compliance (or 'case work') function is a common feature of many revenue authorities as it allows them to identify the highest priority risks.279 Such a separation involves systematic and strategic management of risk at a national and organisational level, rather than a taxpayer-by-taxpayer basis or auditor discretion basis.280 The IGT has discussed this separation of functions in relation to the ATO's corporate approach in the IGT's Review into Aspects of the ATO's use of Compliance Risk Assessment Tools.281

Identification and treatment of risk — strategic level

2.21 As explained in Chapter 1, the International Steering Committee (ISC) governs ATO work on transfer pricing and other international tax risks at the enterprise level.282 The ISC is supported by the Profit Shifting Working Group (PSWG), whose role, amongst others, is to evaluate the effectiveness of the ATO's work in managing and addressing these risks.283 The PSWG is informed by senior ATO officers from the PSP and operational compliance areas of the LB&I and SME business lines, amongst others. It should also be recalled that the ISC is currently reviewing the PSWG. Each business line also has its own risk groups which are considered strategic. These are LB&I's International Risk Strategy and Intelligence Unit (IRSI) (within the 'Internationals unit') and SME's International Strategic Unit (ISU).

2.22 From the documentation maintained by the ATO, it is not clear how these units interact with the ISC and PSWG. The ISC charter only mentions that the PSWG 'work actively' with LB&I's Risk Management Committee (RMC) and Case Selection Sub-Committee (CSSC). It does not mention any SME risk unit, nor does it mention the IRSI. A diagram in the ISC charter, however, does indicate some form of relationship between the PSWG and LB&I Internationals. The nature of this relationship, however, is not described in any detail. The ATO has advised, however, that membership of the ISC includes representatives from the SME business line, which allows input into the management of transfer pricing risk at a business line level.284

2.23 The responsibilities of risk managers do not include overall responsibility for the management of tax risks, such as profit shifting, at the enterprise or operational level as discussed in Chapter 1.285

2.24 Generally, the IRSI and ISU have a role of assessing risks and developing 'treatment plans' to test the risk hypotheses, consistent with the broader ATO approach, but also within the scope of the business line's work. These treatment plans are expected to be endorsed by the relevant business line executive and reviewed annually.

2.25 Risk treatment plans can include conducting compliance activities, amongst others. In respect of such compliance activities, taxpayers are selected as a result of the application of risk filters developed by the risk manager and the business lines' case selection processes.

2.26 Therefore, while the 'strategic risk' is managed by the ISC and PSWG, the risk posed by particular taxpayer arrangements is 'treated' by the risk manager and LB&I Operations case teams. Broadly, similar arrangements for case selection are in place in the SME business line.

2.27 Implicit in developing a treatment plan is the design of a compliance strategy that is achievable with the available operational resources. In this respect, as described in Chapter 1, the LB&I Operations SES Group is responsible for the allocation of LB&I Operations resources to cases and ultimately decides on how many cases will be conducted.

2.28 However, as the business lines are responsible for delivering ATO outcomes, they control their own budgets and allocate their resources according to their own views when faced with competing priorities, such as other tax risks. The result is that a strategic risk management group such as the ISC or PSWG may have difficultly allocating resources to what they consider to be higher risks as they do not control any resources. Although, there is an expectation that the PSWG would 'work actively with the LB&I Risk and Intelligence Committee (RIC) and the LB&I CSSC to ensure risks are properly managed and resourced within the Enterprise Risk Management Framework', it is unclear how these expectations are fulfilled.

Identification and treatment of risk — operational level

2.29 The ATO applies risk filters to income tax return and International Dealings Schedule (IDS) data to detect potential compliance risks and their likelihood. The process to design risk filters, involves the risk manager developing a risk hypothesis and determining how the risk will manifest itself in tax returns and associated schedules.286 In the LB&I business line, the risk manager then engages the Risk, Intelligence and Support System (RISS) unit to develop the risk filters. Once the risk filters are developed, the ATO plans to review their effectiveness twice a year by running them against cases with known risks.287 In relation to the risk filters based on IDS data, the ATO has advised that the LB&I risk manager works in collaboration with the SME risk manager in designing the risk filters.288

2.30 During the finalisation of this review, the ATO has advised the IGT that transfer pricing risk filters based on IDS data have now been developed and run over LB&I and SME taxpayers who had lodged their tax return and IDS at the time. The 'risk filter output' for LB&I289 has been analysed by the risk manager to determine 'compliance risks' that should be followed up by operational case teams. Where a 'compliance risk' is determined following a profiling process, it is called a 'risk recommendation'.290

2.31 Although the risk manager is responsible for designing the risk identification and treatment plans, the operational areas are responsible for the conduct of compliance activities in executing the treatment plans as described in Chapter 1. This separation of responsibility presents a management challenge in ensuring that the operational descriptions of risks are effective in detecting non-compliant taxpayers. This challenge includes the need to ensure that:

  • there is adequate and timely feedback from operational case teams on the results of cases to effectively refine risk descriptions— for example, if the risk manager is using a certain risk description to recommend cases for review and those risks are ultimately found not to exist, then the description of the risk should be modified to reduce future 'false positives'291 and which result in unnecessary administrative and compliance costs;
  • there is adequate and timely information from operational case teams on the evolution of risks emerging from new commercial arrangements— for example, although the risk manager is expected to undertake research to better understand how a risk manifests itself in tax returns or otherwise in the marketplace, most of the current data is gathered by operational case teams through their regular contact with taxpayers and conduct of commercial research in the course of compliance activities and other matters; and
  • the risk manager is sufficiently resourced to support case teams to identify risks— since the risk manager is expected to consult specialists in their risk area and understand how risks manifest themselves in taxpayer circumstances, they are expected to support operational case teams to understand the targeted risk hypothesis underlying a taxpayer's selection for review and audit so that the case teams may undertake targeted enquiries at first instance.

2.32 A visual representation of these interactions between risk managers and operational case teams is provided below in Figure 7.

Figure 7: Interactions between risk managers and operational case teams

Graphic depicting interactions between risk managers and operational case teams.

Source: IGT.

2.33 The ATO has advised that there are feedback loops from operational case teams to risk managers on the risks that have been identified and the cases nominated for review by the latter.292 However, some senior ATO officers acknowledge that these feedback loops do not work as effectively as intended.293

2.34 As mentioned in Chapter 1, during the review, the ATO further advised that the International Structuring and Profit Shifting (ISPS) unit to be formed will straddle its risk function and operations function.294 This approach is more consistent with the ATO's broader 'early engagement' of technical specialists approach. Its involvement is intended to provide more refined risk hypotheses leading to more focussed audits which also consider strategies to obtain information from overseas counterparts. The ATO also intends that this group will perform a role in conducting ongoing callovers and, through a dedicated resource, disseminate the information or 'learnings' obtained more broadly within the ATO to increase organisational knowledge and capability. However, it is unclear what involvement this group will have in profit shifting and international restructuring risk, including transfer pricing, identification and case selection.

IGT observations

2.35 The separation between risk and operational functions highlights the ATO's challenge in maintaining accurate risk identification and effective treatment plans as the information obtained by one function influences the performance of the other.

Ensuring coherence of activities

2.36 As the business lines control their own budgets and allocate their resources according to their own treatment plan priorities, the ISC or PSWG may have difficultly allocating resources to what they consider to be higher risks, since these groups themselves do not, although some of the individual members may, control any resources. This is compounded where generalist case teams deal with the largest taxpayers with considerable influence on what may be reviewed.

2.37 The separation between risk and operational functions, therefore, raises the possibility that:

  • the focus may not be on the highest risks;
  • inappropriate compliance activity design may be employed, such as using standard business line compliance products rather than tailoring activities to the peculiarities of transfer pricing work; and
  • inappropriate treatment strategies may be employed, such as unnecessarily conducting compliance activities and litigation rather than providing greater certainty and guidance.

2.38 The separation of strategic and operational functions is not unique to the ATO. Other revenue authorities, such as the IRS adopts a similar separation. Indeed, the IRS recognised its limited ability to link strategic risk assessment with case work. To address the issue, the IRS implemented a functional restructure which was driven from an external perspective.295

2.39 The IGT considers that a clear line of sight is needed from organisational strategy through to operational measures. This implies a seamless reconciliation between various activities of the various areas.

2.40 However, it is not clear how different risk assessments between ATO-wide and business line based groups are reconciled. Whilst the PSWG is expected to 'work actively' with business line groups such as the LB&I business line's RIC and CSSC, no further information is provided in the ISC charter on how this interaction should occur. Furthermore, the general case selection process, which outlines key roles for CSSC and LB&I Operations, does not mention the PSWG or the Profit Shifting Governance Group (PSGG).

2.41 It is also unclear how business line based strategic risk groups, such as the IRSI, RIC and ISU, interact with ATO-wide forums and the business line operational risk forums. The ISC charter only mentions that the PSWG is to work actively with the LB&I business line's RIC and CSSC. It does not mention any SME business line risk unit, nor does it mention the IRSI. A diagram in the ISC charter, however, does indicate a relationship between the PSWG and the Internationals unit. The nature of this relationship, however, is not described in any detail.

2.42 The SME296 and Indirect Tax business (ITX) lines maintain their own risk managers for profit shifting related tax risks, such as transfer pricing. The LB&I Profit Shifting Risk Manager has corporate responsibility for profit shifting risk and the various manifestations. The other business line risk managers ensure that transfer pricing risks are managed appropriately given the particular nuances arising in their respective business lines.297 There is an expectation that the risk managers would liaise closely with the business line's risk committees so that the business lines' risk assessments are coordinated.

2.43 Notwithstanding the above business line arrangements, it is unclear how these processes interact with the work of the LB&I Profit Shifting Risk Manager. For example in the SME business line, senior case leaders are involved in the selection and conduct of transfer pricing cases for review in that business line.298 It is unclear how the ATO ensures that the risk treatment plans are coordinated and the role that the Profit Shifting Risk Manager should play in this regard.

2.44 The ATO's arrangements for the management of transfer pricing risks are complex and difficult to reconcile. There are general statements about the intended focus of different risk committees and their interaction with each other and operational committees. However these are broad statements that do not paint a clear picture.

2.45 The ATO has previously recognised that there are duplicated functions and complex interactions between the various committees. These issues pose a more critical 'risk that commitments will not be delivered or managed because of assumed accountability elsewhere'.299 As part of an ATO commissioned report prepared by Fyusion (Fyusion Report), a survey conducted as part of the report also found that ATO officers tended to be 'undecided' on the effectiveness of risk management in relation to certain risks and many disagreed or were undecided that there was clear and enforced accountability.300

2.46 The key responsibilities, however, appear to be that of the risk managers, who are to identify risks, develop mitigation strategies and monitor their effectiveness, and the PSGG, who are to identify emerging risks and the patterns that arise from the outcomes of transfer pricing reviews. However, these responsibilities do not appear to be strongly linked to the risk committees and it is unclear whether the PSGG will have a role in the future.

Recommendation 2.2

The IGT recommends that the ATO rationalise the current complex management and committee structures which deal with transfer pricing risks and operations:

  1. ensuring that the various ATO transfer pricing risk identification and treatment activities form a coherent strategy with a clear line of sight from organisational strategy through to operational activities; and
  2. reconciling the responsibility of all risk committees dealing with transfer pricing issues and clearly explain their relationship with each other.

ATO response

Agree

Operational risk identification and treatment

2.47 Risk assessment in the ATO is about managing operational tax risks whilst case selection focuses on identifying taxpayers that have engaged in particular behaviour. Both processes, however, also influence the allocation of resources.

2.48 Effective compliance treatment strategies require strong feedback loops at the operational level to inform the broader risk strategy. As the ATO developed transfer pricing risk filters based on IDS data towards the end of the review, it is not possible to comment on the effectiveness of the risk filters. However, the ATO has signalled that it will review their effectiveness twice a year.

2.49 The role of the risk managers responsible for transfer pricing inherently requires an officer with:

  • exceptional leadership ability to drive the entire risk assessment, case selection and feedback process;
  • strong project and risk management knowledge and experience to efficiently and effectively drive the abovementioned process, including drawing on relevant expertise when necessary; and
  • sufficient knowledge and experience with respect to transfer pricing and related tax risks to credibly lead the abovementioned processes.301

2.50 Accordingly, there is a substantial risk to the ATO's risk assessment and case selection processes if its risk managers do not have such abilities and experience. The Fyusion Report made similar observations that risk leaders should be suitably skilled to manage risks.302

2.51 The IGT is also of the opinion that using the ATO's transfer pricing specialists upfront to select cases and issues for compliance activities will also improve the targeting of appropriate taxpayers and issues for compliance activities and reduce unnecessary compliance costs on compliant taxpayers. Whilst this may have upfront resource impacts for the ATO, more effective case selection will minimise later unnecessary administrative costs and should result in overall cost savings. Indeed, the ATO was implementing the ISPS unit at the time of writing.

2.52 The ATO also acknowledges that case selection has flow-on effects and is, therefore, a critical area for improvement. The ATO has recognised during the course of this review that operational case teams and risk managers needed to work together more collaboratively to improve risk data analyses and case selection.303

2.53 The IGT is of the view that when recommending cases and issues for compliance activities, risk managers should support operational case teams to understand the underlying risk hypotheses and assist in case planning to resolve those risks. Correspondingly, operational case teams should assist risk managers to refine their risk filters, based on their experiences in compliance activities. Accordingly, the ATO should ensure that this two-way communication between the operational case teams and risk areas operates seamlessly. The Fyusion Report has similarly touched upon the need for greater staff focus on developing risk strategies and improved collaboration within the ATO and broader taxpayer community.304

Recommendation 2.3

  1. The IGT recommends that the ATO ensure that:
    1. the effectiveness of transfer pricing risk filters are reviewed twice a year as intended;
    2. its risk managers responsible for transfer pricing have the necessary attributes required for the efficient and effective functioning of transfer pricing risk assessment, case selection and feedback process; and
    3. transfer pricing 'specialists' are involved in selecting cases for transfer pricing reviews and audits.
  2. The IGT recommends that the ATO improve the interaction between the risk and operations functions by requiring:
    1. risk managers to assist operational case teams to:
      1. understand the underlying risk hypotheses when recommending cases for compliance activities;
      2. develop case planning to resolve those risks; and
    2. operational case teams assist risk managers to refine their risk filters and the associated risk hypotheses, based on their experiences in compliance activities.

ATO response

Agree

During the course of the Inspector-General's review, the ATO embarked upon an internal re-organisation and refresh of our working arrangements to ensure there is appropriate specialist input into the case selection process and that compliance teams and risk managers have stronger and more direct links at case selection and during casework.

Strategic risk identification and treatment

2.54 The multi-jurisdictional nature of the activities of Multi-National Enterprises (MNE) means that the associated tax risks may not be initially apparent or limited to Australia. Rather, many jurisdictions may be involved. This implies a need for strong and cooperative relationships with the revenue authorities of Australia's major trading partners. Such international cooperation has also been advocated by the OECD particularly with respect to BEPS.

2.55 Given the diversity and complexity of the activities of MNEs, there is also a need to continually monitor the economic environment, industry and individual businesses to identify emerging trends and associated tax risks.

2.56 Whilst compliance activities may provide the most comprehensive information to the ATO for identifying emerging trends and associated tax risks, those activities impose substantial costs for both the ATO and taxpayers and may take many years to resolve. Long timeframes can also cause perceptions of 'U-turns' as discussed in the IGT's so-called 'U-turn' review.305 The limited ATO resources and capabilities should be applied to instances which pose the highest risk to Government revenue and where the ATO has the strongest grounds for challenging the taxpayer's position. Therefore, great care is required in choosing which cases to pursue. Indeed the Fyusion Report, it was asserted by an interviewee that '[the Internationals unit officers] are spread too thinly, too much work and not necessarily the most important work'.306

2.57 To address the issue above, the IGT considers there is considerable benefit in enhancing the ATO's transfer pricing risk identification process rather than simply 'redoubling effort'.307 By identifying strategic risks, the ATO would be able to conduct targeted projects on the identifiable characteristics of known risks, or 'risk typologies'. Focussing on these typologies may also make it easier for the ATO to agree with taxpayers on the relevant evidence that should be provided and therefore increase efficiencies.

2.58 By using risk typologies the ATO may also better select the scope and scale of its compliance activities based on the resources and capabilities it has available, both at an operational and specialist levels. This will reduce resources allocated to broad reviews and audits for comparatively lower risk cases.

2.59 Therefore, as an immediate measure, the IGT considers that a compliance approach which has a stronger focus on risk typologies may provide the ATO with a more efficient approach to delivering better results expeditiously whilst further developing its transfer pricing capability.

2.60 The IGT is of the view that broad risk reviews are not the best source of identifying emerging risks and should be limited to identifying unknown risks in cases potentially involving the most significant risk to revenue.308 Furthermore, audits should be reserved for verifying identified risks or areas of considerable uncertainty and not the detection of emerging risks.

2.61 There may be exceptions to the above general principle. For example, transfer pricing specialists could be part of operational case teams for a sample of higher consequence taxpayers. Since higher consequence taxpayers are already subject to continuous real time review (such as Pre-lodgment Compliance Reviews (PCR)) and risk reviews are expected to be comprehensive in nature, this would provide a valuable opportunity for transfer pricing specialists to understand the current trends in transfer pricing arrangements and identify emerging risks and their characteristics or typologies. This intelligence, combined with data generated via the IDS, would serve to enhance the ATO's transfer pricing risk identification process.

2.62 Once emerging risks are identified, there is also a need to develop an appropriate treatment plan. Again, there is danger on placing over-reliance on compliance activities to treat transfer pricing risks. Due to the evidentiary nature of transfer pricing matters, considerable time and resources can be expended in pursuing ultimately fruitless positions. However, compliance activities linked with improved guidance on emerging areas have shown to generate improved longer term compliance. For example, in the ATO's Transfer Pricing Record Review and Improvement project, ATO views were developed and published in public binding advice and a compliance program was rolled out soon after. This compliance program provided graduated ATO administrative responses according to clear objective measures of the ATO's view of compliance. As a result of this project, the amount of tax paid by affected companies increased by 32 per cent, even though the income for these companies fell by 5 per cent.309

2.63 It could be argued that requiring the ATO to issue appropriate guidance on any emerging concerns before it could commence related compliance activities may unduly place the revenue at risk. The IGT considers that, it is generally better for the ATO to notify taxpayers publicly of its concerns and provide incentives for voluntary disclosure. Such public notification can be effected through a number of means, for example, issuing a Taxpayer Alert or offering remission of penalties. It is also appreciated that in limited situations this may not be appropriate — for example, where a particular risk is significant from a revenue perspective and the period for amendment for a taxpayer may be about to close.

2.64 It should be noted that the ATO aims to deliver an appropriate risk treatment plan to ensure the targeting of resources is proportionate to the level of risk and to update this plan on an annual basis. The ATO has not updated its annual treatment plan for transfer pricing since 2011.

Recommendation 2.4

The IGT recommends the ATO:

  1. give priority to project-based compliance activity that targets cases which pose the highest risk to Government revenue and where it has the strongest grounds for challenging the taxpayer's position;
  2. limit broad-based and resource intensive risk reviews for identifying new transfer pricing trends and hitherto unknown risks to cases potentially involving the most significant risk to revenue with the exception of a sample of risk reviews of taxpayers where transfer pricing specialists may be used to identify emerging risks and their identifiable typologies; and
  3. update its risk treatment plan for the new profit shifting strategy including a commitment to publish guidance regarding emerging risks.

ATO response

Agree

Align decision-making authority with area of specialisation or expertise

2.65 As stated earlier, the ATO's model for conducting transfer pricing compliance activities relies on generalist operational case teams having the authority to apply the ATO view to particular taxpayers and obtaining advice from the relevant specialist units at the right time. Obtaining this advice is aimed at ensuring that the right technical views are applied to the relevant facts and are supported by the necessary evidence.

2.66 The separation of generalist operational functions and specialists' functions, therefore, presents a key challenge for the ATO to ensure that compliance activities are efficiently and effectively carried out.

2.67 In this respect, stakeholders observe that different ATO units find it difficult to reach consensus and coordinate their resources, which impedes the efficient progress of transfer pricing matters. Stakeholders attribute these difficulties to unclear responsibilities and decision-making authorities of the many units involved in transfer pricing compliance activities.

2.68 Indeed, the ATO is aware that delays are caused due to the limited number of decision makers who are also specialists and the lack of clarity of roles, responsibilities, personal incentive and accountability.310 In particular, there is 'a perception of diffused responsibility', a need to clarify 'who has authority... to make decisions' and a need for 'clear and measureable Key Performance Indicators (KPI)'.311

2.69 As outlined previously, the figure below sets out the various units that may assist the LB&I operational case teams with transfer pricing issues.

Figure 5: LB&I operations case teams and specialist areas on international tax

Graphic showing LB&I operations case teams and specialist areas on international tax.

Source: IGT.

2.70 The ATO describes the interaction between the relevant specialist units and operational case teams using a number of different terms. For example, the role of the:

  • Economist Practice includes 'advice', 'support' and 'assistance';312
  • TPRP includes 'advice' and 'guidance';313
  • Transfer Pricing Network (TPN) includes 'supervision', 'direction', 'support', 'guidance' and 'mentoring';314
  • LBI Technical Leadership Group (TLG) includes 'advice', 'guidance', 'support' and 'work closely';315 and
  • PSP includes 'support', 'advice' and 'assistance'.316

2.71 The IGT will refer to these terms collectively as 'advice'. Further description of the key roles and functions of the various team and specialist units was described earlier in Chapter 1.

IGT observations

2.72 Maintaining professional independence is of fundamental importance to the function of the special unit. Although operational case teams are charged with the responsibility for decision making, where the capability of these case teams is such that they rely more heavily on specialist units for guidance, a de-facto loss of ownership and leadership of the case may occur.317 This outcome is likely to be exacerbated in circumstances where there are difficulties in reaching 'consensus' between units with competing views. Such an outcome invariably leads to protracted decision making, case timeframes and unproductive internal escalations.

2.73 For generalist and specialist units to work together effectively, each must clearly understand their roles and responsibilities, i.e., what they are expected to do, how they are expected to do it and what will enable them to perform their role, as well be accountable for their performance.

2.74 The IGT is of the view that roles, responsibilities and accountabilities are clearer where a number of factors are explicitly identified in terms of engagement for the units. These factors include:

  • the scope of role;
  • the decision maker for the role;
  • the scope of authority is delimited by function or expertise;
  • whether a decision is mandatory or advisory in nature — for example, who can direct whom to do what;
  • measureable KPIs; and
  • what the consequences are if that decision and subsequent escalation processes are not followed.

2.75 To complete transfer pricing compliance activities, there are a number of different functions required, including:

  • the interpretation of economic evidence;
  • 'commercial acumen', or the ability to stand in the shoes of an independent business owner to determine an arm's length price in light of all of the economic and business factors;
  • creating and maintaining productive relationships with the taxpayer and their adviser; and
  • supervision of the resolution of technical issues and case management decisions.

2.76 For example, the role of the LB&I operational case teams are considered by the ATO as 'specialists' in dealing with particular taxpayers in compliance activities. Therefore, the scope of this role appears to be delimited to questions of how to deal with particular taxpayers, such as the conduct of compliance activities. Economists from the Economist Practice are considered 'specialists' for identifying the best evidence to determine an arm's length price as well as the economic interpretation of that evidence.

2.77 The IGT considers that using terms of engagement, such as those set out by the Economist Practice in Practice Statement PSLA 2013/2, is a useful means to ensure the roles, responsibilities and accountabilities are clearly understood.

2.78 It should be noted that in fulfilling their role, the specialist units require all information needed to provide independent and accurate advice. The gathering of this information is within the function of the operational case teams. Accordingly, there is a need to ensure that operational case teams gather all necessary information and provide it to the specialist units in a timely manner. However, to provide accurate and sustainable advice, specialists should consider both taxpayers' and operational case teams' positions and evidence.

Recommendation 2.5

The IGT recommends that for transfer pricing matters, the ATO ensure that:

  1. for each ATO specialist unit or operational case team, terms of engagement be developed and those terms:
    1. explicitly identify its function, the decision maker for that function, what decision may be made and the consequences if that decision and subsequent escalation processes are not followed;
    2. require operational case teams to gather all information necessary for the specialist unit to provide accurate and independent advice in a timely manner;
    3. ensure the specialist unit considers both taxpayers' and operational case teams' positions and evidence before the ATO position is finalised;
    4. set out measureable Key Performance Indicators; and
  2. a clearly designated senior management decision maker be vested with the authority to resolve any internal disagreements that may arise with or between the teams or units.

ATO response

Agree

Operational case team and economist unit interaction

2.79 Stakeholder comments regarding the Economist Practice unit were generally positive. A number of examples were provided in submissions describing the efficient resolution of transfer pricing matters where experienced economists engaged with taxpayers and their advisers.

2.80 In this respect, stakeholders considered that experienced economists could provide broader economic input in terms of the structure and context of transactions and industry analysis, rather than a narrow role in determining the appropriate transfer price.

2.81 However, stakeholders raised concerns with inexperienced economists and questioned whether they had adequately considered information provided by taxpayers to the case teams and whether their subsequent advice had considered that information.

ATO materials and information

2.82 The Economist Practice provides economist advice through a 'service provider model' to 'support' international and non-international compliance work across the ATO.318 During the review, the ATO published Practice Statement PSLA 2013/2 which states that Economist Practice provides 'operational advice on cases including active compliance, [advice] and litigation, particularly in relation to multinational taxpayers'.319

2.83 The Economist Practice comprises 60 officers with 52 allocated to compliance and research activities. Of these officers, 27 are allocated to transfer pricing matters.320 The attrition rate in Economist Practice is 15 per cent compared to 3— 5 per cent for other ATO units. This may at least partly explain why over 40 per cent of the economists have less than two years' experience and why the work of the Economist Practice is flexible and moves between advice and research.321

2.84 In Transfer Pricing Record Reviews (TPR Reviews), when determining the realism of a taxpayer's commercial outcomes (taking into account the functions performed, assets used and risks undertaken) and review their benchmarking study, operational case teams are directed to 'seek advice' from the Economist Practice and 'should discuss difficulties' with the Economist Practice. The operational case teams are also directed to 'consult' with the Economist Practice in selecting the most appropriate ratio to be used. The operational case teams, in 'conjunction' with the Economist Practice, 'should' also come to an agreed position on the risk rating assigned to taxpayers and the recommended follow-up strategy.322

2.85 The ATO documentation sets out that the operations teams are required to consult with the Economist Practice in the conduct of audits and in doing so, the Economist Practice should:

  • assist with the preparation of audit plans and information gathering tasks for the resolution of economic issues;
  • supply much of the general economic, industry and corporate information;
  • complete the functional analysis;
  • assist with the comparability analysis;
  • provide advice on statistical methods to determine arm's length ranges and address the impact of accounting differences on comparability; and
  • provide input to the audit position paper.323

2.86 Operational case teams are required to engage the Economist Practice through the International and Economist Gateway (IEG). The IEG allocates economists based on the following criteria:

  • availability of economists;
  • materiality and revenue impact;
  • risk to the ATO reputation and the integrity of the system;
  • technical complexity and precedential value; and
  • Compliance Program and ATO objectives.324

2.87 Practice Statement PSLA 2013/2 also provides the following guidance with respect to how economists are allocated:

26. Accepted referrals will be allocated to an economist who will work collaboratively with the referring area to develop a plan, outline the scope and action required. This includes participating in taxpayer meetings and resolving the issues. In order to resolve matters efficiently and effectively:

  1. the type of assistance and the timeframes will be negotiated on a case-by-case basis and will be dependent upon the factors listed at paragraph 24 of this practice statement.
  2. the economist will determine the economic issues to be examined with the referring area, and will outline the approach to analysing and resolving the economic issues. In a case advice setting, this may include determining:
    1. the information required;
    2. characterisation of issues including functional analysis;
    3. analytical approach;
    4. choice of method; and
    5. benchmarking and arm's length range (where applicable).
  3. the referring area needs to provide support throughout the process to allow the economist to form an appropriate view in a timely manner. This includes:
    1. including the economist in case planning;
    2. gathering and documenting facts and evidence;
    3. collecting the information and data requested by the economist;
    4. liaising with the taxpayer;
    5. providing the economist with the opportunity to attend relevant meetings;
    6. providing regular updates and timely notification of material changes in the case; and
    7. taking into account the economic advice when making decisions on the case.325

2.88 Within the ATO, there are economists who are not part of the Economist Practice but who are, nevertheless, part of the Economist Network which is managed by the Economist Practice. The Economist Network provides a bigger pool of economic expertise to the whole of the ATO.326

2.89 Generally, the work done by both the Economist Practice and Economist Network is reviewed, for quality assurance purposes, by a senior economist from another state to ensure objectivity and consistency.327

2.90 In situations requiring highly specialised expertise or knowledge which is not available within the Economist Practice or Economist Network, external economic advice may be obtained subject to approval by the Assistant Commissioner of Economist Practice and the business line budget holder.328

IGT observations

2.91 The ability to quickly draw appropriate inferences from an extensive amount of economic, business, management and accounting information is essential for sustainable and timely decision making in matters involving transfer pricing issues. These inferences establish the characterisation of the function of the taxpayer for determining the appropriate comparables.

2.92 Therefore, the effective interaction between operational case teams and the Economist Practice is critical in determining a transfer price which is both appropriate and sustainable. In the conduct of compliance activities, the operational teams are the decision makers. However, much of the processing and analysing of information for determining the arm's length price requires economic expertise which is the domain of the Economist Practice.

2.93 Although operational case teams are responsible for the resolution of technical issues through collaborative processes with other ATO units329, they need only to 'take into account'330 the advice provided by the Economist Practice. There is no explanation of the consequences if that advice is not followed in ATO materials.

2.94 Arrangements, such as the above involving the operational case teams and the Economist Practice, also exists in the private sector. However, in the private sector, there are external pressures, such as competition for advice work and accountabilities to the client, which strongly direct internal teams to work within the scope of their expertise. However, the ATO is a monopoly administrator and cannot be sued for incorrectly applying adjustments unless done in bad faith. Therefore, stronger internal controls may be needed to ensure that interactions between internal units are operating as intended.

2.95 Whilst the ATO's procedural documents set out the roles of the operational case teams and the Economist Practice, the interaction between them is uncertain where views differ or confidence in each other is not established.

2.96 One of the difficulties is that the decisions of operational case teams may not reflect the advice from the Economist Practice or other 'specialist' units. This can arise, for example, where the operational case team is much more experienced than the junior economist with whom they interact. Providing directions for the resolution of such matters is important, especially where organisational or cultural issues may need to be overcome, such as where the economist is relatively new to the ATO and the operational case team leader is not.

2.97 The IGT considers that the publication of Practice Statement PSLA 2013/2 is a step in the right direction in clarifying the role and responsibilities of the Economist Practice and the scope of its function in relevant matters. The IGT observes, however, that officers in the Economist Practice are not provided with documented work processes or guidelines on the conduct of their work. The IGT considers that such guidelines may also assist to further clarify the interaction between economists and operational case teams.

2.98 Another aspect of the interaction between the two units is that the operational case team has to provide all relevant information to the Economist Practice and the latter, then, has to independently assess that information and provide its advice. This is akin to the engagement of external advisers. The ATO has observed that, in some cases, operational case teams have taken a long time to provide information to the Economist Practice.331 Compliance with the newly published Practice Statement PSLA 2013/2 should minimise these occurrences. The IGT also considers that implementing Recommendation 2.5 will result in further improvements in this regard.

ATO supervision of transfer pricing compliance activities

2.99 Stakeholders have raised a number of concerns with the supervision of technical issues in transfer pricing matters.

2.100 First, stakeholders consider that practical oversight of operational case teams by transfer pricing 'experts' is necessary. However, they also appreciate that there is insufficient senior transfer pricing 'expertise' to effectively oversee technical and case management decision making. Stakeholders believe that many of these 'experts' have either left the ATO or are performing other functions such as management roles.

2.101 Secondly, stakeholders assert that there is a dispersion of authority that makes it difficult for the ATO to resolve conflicting internal technical views. Stakeholders also observe that the ATO's key panel for overseeing transfer pricing matters, the TPRP, does not effectively oversee or influence operational case teams' technical and case management decisions. Further, as there are no formal escalation processes from the TPRP, stakeholders comment that they must use informal networks or relationships above case teams to resolve disputes.

2.102 Thirdly, stakeholders are of the view that the TPRP does not meet often enough to provide timely advice and guidance to operational case teams. Stakeholders attribute this to the number of transfer pricing cases that the ATO has on hand.

2.103 Fourthly, stakeholders have raised concerns that the TPRP is not independent. Stakeholders observe that the members of the TPRP are closely linked to the compliance activities being reviewed and consider that the Economist Practice heavily influences the TPRP.

2.104 Lastly, stakeholders observe that they do not have an opportunity to ensure that the TPRP is considering all relevant information or test auditors' conclusions of fact or evidence and respond to any auditor's incorrect understanding of the taxpayer's business operations. They claim that they can only engage with case teams that appear to have little power or are reluctant to make decisions. Stakeholders comment that this results in incorrect decisions being made, such as moving a case to audit as a result of incorrect inferences or conclusions being made by the TPRP. This in turn, results in further misdirection of case teams' enquiries.

2.105 The above concerns were said by stakeholders to result in:

  • untargeted information requests and operational case teams not being able to understand information provided by taxpayers and resolve concerns;
  • inconsistent advice on similar arrangements within the same industry or taxpayers with similar fact patterns;
  • procedural inconsistencies, such as not using the documentation checklist in TPR Reviews or not following the four-step process in Taxation Ruling TR 98/11; and
  • protracted timeframes and increased compliance costs.

2.106 Stakeholders considered that the ATO's compliance activities would improve if the TPRP was properly resourced to obtain a detailed knowledge and understanding of the cases and the difficulties case teams were encountering. Stakeholders also considered that if taxpayers were represented at the TPRP, the ATO's transfer pricing compliance activities would improve. Stakeholders suggest that any presentation to the TPRP could be conducted at the same time with the ATO case team as this would ensure transparency of the decision-making process. Stakeholders point to the ATO's General Anti-Avoidance Rules (GAAR) Panel as an example.

ATO materials and information

2.107 As set out in Chapter 1, the ATO supervises the resolution of transfer pricing issues encountered in compliance activities through its operational case team leaders, call over processes, such as LB&I site governance, and technical panels, such as the TPRP. It should also be recalled that the ATO has signalled its intention to disband the TPRP and implement the ISPS unit which may take over some functions of the TPRP.

2.108 The role of the TPRP is to maintain a high standard of technical and case management decision making in all transfer pricing compliance activities by providing advice on the planning of work, quality reviewing transfer pricing compliance activities and providing advice to facilitate the making of transfer pricing determinations.332

2.109 The ATO advises that the TPRP maintains a list of 33 officers that the ATO considers are transfer pricing 'specialists' and 15 'intermediate' level officers that may form a TPRP. The intermediate level officers possess important characteristics that make them suitable to be a member of a TPRP, such as industry specialisation.333 The ATO further advises that the membership of a TPRP as a whole should provide the collective skills and experience necessary.334

2.110 The Compliance Audit Directors in operational case teams are responsible for the resolution of issues335 for particular taxpayers. Where operational case teams conduct TPR Reviews or transfer pricing audits, they are directed to refer compliance activities to the TPRP for 'endorsement' or 'advice'.336 The advice given by the TPRP 'should be followed'337 by operational case teams.338 However, there is no explanation of the consequences if that advice is not followed.

2.111 Whilst there are other specialist units, such as the Economist Practice, that may also provide advice to operational case teams, these units do not have an oversight function.

2.112 In the conduct of TPR Reviews, the TPRP either:

  • 'endorses' the recommendation of the operational case team (that was agreed in conjunction with Economist Practice);339 or
  • provides 'advice and guidance on the proposed documentation and commercial realism ratings'.340

2.113 The TPRP will also endorse the operational case team's follow-up strategy.341

2.114 A set out in Chapter 1, at various stages of an audit, the TPRP may be called upon to 'sign-off' on case plans where appropriate, assist in developing draft position papers where material transfer pricing risks are identified and endorse the final position paper. However, the ATO has acknowledged that in some instances, the TPRP may not have appropriately assisted case officers resulting in protracted case timeframes.342

2.115 In Practice Statement PSLA 2004/13, the ATO states that TPRP meeting days will be 'scheduled' on a regular basis in Sydney, Melbourne and Brisbane and as required, in other locations.343 However, during the review, the ATO advised that TPRP meetings are held on an 'as needs' basis, with at least one meeting held every fortnight on average.344

2.116 The ATO has also advised that the TPRP is not specifically resourced in terms of dedicated funding or travel budget. Rather, the TPRPs draw resources from the Internationals unit and from the business lines according to the case needs.345

2.117 The ATO has advised that independence of the TPRP is maintained by ensuring that all TPRP members are not directly involved in the particular case being considered.346 This requirement, however, is not contained in formal documentation.

2.118 In relation to taxpayer access to the panel, the ATO's Practice Statement PSLA 2004/13 states,

The TPRP is a part of the Tax Office's internal quality assurance processes [in addition to other mechanisms such as, the IQF] and is not accessible by taxpayers and their advisers. Taxpayers do not have a right to representation at TPRP meetings. In exceptional circumstances a taxpayer may be given the opportunity to liaise with the TPRP through access to a member or members where the Chairperson in consultation with the case owner regards this as appropriate. This may, for instance, be the case if it is necessary to assist the TPRP's consideration of the case or it is necessary to assist the taxpayer in understanding the outcome of the TPRP's consideration of the case. A taxpayer may be given the opportunity to review and comment upon the factual accuracy of materials prepared for consideration by the TPRP, at the case owner's discretion.347

2.119 It is not clear from the Practice Statement why taxpayers are not generally permitted to access the TPRP.

2.120 The ATO advises that TPRPs are not 'locally formed' as 'generally consistent' members can 'dial-in'. The ATO also advises that the various TPRPs convene quarterly to discuss common and emerging issues to ensure national consistency.348 These quarterly meetings involve the ATO Profit Shifting Risk Manager.

2.121 The ATO advises that whilst there may be departures from its expected procedures, such as regional practices, most departures are not of substance as the case outcomes and decisions remain appropriate. Additionally, where there are 'substantial departures', officers are required to justify them to the quality assurance forums.349 It is uncertain whether these 'quality assurance forums' register and report on 'substantial departures'. For example, the ATO has advised that the TPRP does not maintain a centralised repository of the cases it reviews. TPRP advice is 'attached' in Siebel on a case-by-case basis. Furthermore, it is not possible for the ATO to consolidate the TPRP advice in Siebel.350

IGT observations

2.122 The IGT observes that the ATO expected that its Transfer Pricing Management System (TPMS), which was implemented in 2007, would resolve many issues, including those identified by PricewaterhouseCoopers (PWC) Legal in its 2008 APA Review. However, many of the issues identified by PWC Legal in 2008 still remain. Indeed, PWC Legal warned that if the TPMS was not fully implemented on a timely basis, the impact of current issues experienced by external stakeholders will increase, causing further frustration and uncertainty within the ATO.351

2.123 As stated earlier, generalist operational case teams are responsible for the conduct of all matters involving transfer pricing issues as well as all other international and domestic tax issues. Improving the links between the risk and operational functions of the ATO and assurance of the resourcing of specialist units should help to address 'bottom up', or case team initiated, avenues for advice.

2.124 Generalist case teams may not fully appreciate what specific information is needed to quickly conclude the ATO's view on transfer pricing issues, or not appreciate the information that they already possess. As a result considerable unproductive time and resources may be expended by both case teams and specialist units in the absence of early and sufficient guidance. Therefore, there is a need for effective 'top-down' supervision of technical issues. To some extent the existing site governance and aged case call over processes allow the ATO to identify those cases languishing, but will not help to provide preventative measures. It is important to ensure that generalist operational case teams are able to quickly identify when specialist advice may be beneficial.

2.125 The IGT is of the view that the scope of the operational case team's decision-making authority may extend beyond their level of expertise. TPR Reviews and transfer pricing audits involve technical and case management decision making, requiring specialist technical skills that are within the scope of the TPRP's function. Without an oversight body that has the authority to resolve such issues, case teams may not agree or fully appreciate the advice provided. This may lead to inefficient or inappropriate outcomes. Additionally, the IGT observes that no detailed guidance exists for taxpayers or the ATO's operational case teams outlining how issues or inconsistent advice from the specialist units can be resolved, such as avenues for escalation.

2.126 Ultimately, a binding decision must be made that is consistent and based on a strong understanding of transfer pricing issues. In this respect, the TPRP appears to have been set up by the ATO as an important step in the transfer pricing compliance process to ensure a high standard of technical and case management decisions. Such supervision also influences the extent to which operational case teams develop their own knowledge and experience. A failure to adequately transfer or nurture more advanced knowledge and experience to the operational case teams will propagate their dependence on specialist units, contributing to the demands on the specialist units.

2.127 As operational case teams improve their transfer pricing 'capability' and experience, the need for such supervision reduces. Accordingly, a type of graduated licensing system may permit more experienced operational case teams to conduct transfer pricing compliance activities with less intervention of supervisory units. The IGT notes that PWC Legal, in its 2008 APA Review, similarly recommended that 'all key transfer pricing decisions should be made by a transfer pricing specialist' and the use of a 'transfer pricing accreditation system'.352

2.128 The effective resolution of transfer pricing matters involves both the ATO and taxpayers having a strong understanding of the facts, the functional analysis and the legal interpretation. To come to this understanding and determine a position requires a consideration of large amounts of information with an understanding of their relevance to resolving transfer pricing issues. This requires time.

2.129 Accordingly, it is important that the TPRP is promptly provided with all relevant facts when providing guidance to case teams. However, as stated earlier, the TPRP meetings are no longer regularly scheduled and there is no dedicated funding or budget for the TPRP. It is, therefore, foreseeable that such unplanned budgetary pressure may adversely impact the frequency of the TPRP meeting resulting in bottlenecks and protracted case timeframes.

2.130 Furthermore, in an attempt to adequately manage congested transfer pricing matters within the limited time available, the TPRPs may be forced to heavily rely on operational case teams' interpretation of facts and conclusions. As a result, there is no means to ensure that all relevant information is considered in providing direction.

2.131 Similar potential congestion problems and reliance on case team's interpretation of facts may also arise with respect to the specialist units that also provide advice and guidance.

2.132 The above pressures on the TPRP and specialist units may lead to inconsistent advice that may require escalation to resolve creating further congestion and adversely impact on the TPRP's independence.

2.133 As transfer pricing issues can, and do, involve considerable amounts of information, efficiencies can be achieved by allowing taxpayers and their advisers to present their views on the relevant evidence and comment on the case teams' position and evidence. Furthermore, such a forum may also provide a useful means for developing the capability of operational case teams with respect to resolution of technical and case management issues.

2.134 The IGT is of the view that there is a potential for inadequately supervised work to drain ATO resources and result in significant frustration and unnecessary compliance costs for taxpayers. The supervisory function needs to also be properly resourced to direct operational case teams on the conduct of the compliance activities, and make decisions on key technical and management issues. In this respect, the Commissioner of Taxation may reconsider his delegated or authorised powers to ensure the supervisory function has appropriate decision-making authority.

2.135 Furthermore, the IGT notes that currently, the TPRP does not maintain a central repository of the transfer pricing matters considered. Instead the details of the TPRPs, including minutes, are attached to the relevant case in Siebel. It is also not possible to search for all attachments or events in Siebel to extract information on all TPRP minutes.353 The IGT considers that there are significant benefits of maintaining a central repository of the advice provided by the TPRP as it would be a particularly useful tool for the operational case teams and risk managers.

2.136 The ISPS, mentioned earlier, is also likely to take over the function of the TPRP. It is important that the ISPS maintains some of the attributes of the TPRP, however, some changes are needed to address the issues identified above.

Recommendation 2.6

The IGT recommends that the ATO:

  1. maintain an overseeing body, which consists of transfer pricing 'specialists' and those with experience in key industries;
  2. the overseeing body to consider transfer pricing issues at key stages during compliance activities, including formulating risk hypotheses, case planning, information requests, and (after receiving new taxpayer information) refining risk hypotheses, discussions with taxpayers on technical issues and preparation of the position paper; and
  3. ensure that the overseeing body:
    1. members are authorised to challenge officers on the conduct of transfer pricing work and, where necessary, escalate key technical and management issues for senior management resolution;
    2. is sufficiently resourced and provided with enough time to consider the facts and evidence underlying case teams' positions;
    3. maintains a central repository of the transfer pricing matters considered by the body, advice provided by them and the outcome of the case; and
    4. provides an opportunity for taxpayers to present their position to the body and test the position of the case team.

ATO response

Disagree

Under our new profit shifting strategy, the ATO is seeking to enhance the capability of compliance officers as well as provide additional access to specialists to assist compliance officers in the conduct of their casework. This is consistent with the ATO's model for compliance work, where compliance officers are accountable for decision making in a case and the role of specialists is to provide expert advice. We do not support the creation of a separate body which oversees the work of compliance officers and takes on a formal review function. This would be contrary to the fundamental principle of compliance officers being accountable for decisions.

Resourcing of key specialist functions

2.137 Although risks may be identified and advice provided by the TPRP or ISPS, a case can only be successfully completed if there are also enough resources at the case team and specialist unit levels.

2.138 The following data summarises ATO information provided on the Full Time Equivalent (FTE) staff allocated for all transfer pricing work across the ATO. It includes the FTE staff allocated to the Transfer Pricing Strategic Compliance Initiative (TPSCI).

Table 1: ATO resources allocated to transfer pricing matters, as at 19 February 2013
    Risk Audit MAP APAs Other Total
LB&I BAU Staff 0.00 0.00 0.00 0.00 0.00 143.00
FTE 17.65 44.05 1.30 27.30 0.65 90.95
LB&I TPSCI Staff 0.00 0.00 0.00 0.00 0.00 29.00
FTE 1.50 23.50 0.00 1.00 0.00 26.00
SME Staff           22.00
FTE 6.00 6.00   8.00 2.00 22.00
PSP Staff 2.00   5.00 5.00   12.00
FTE 1.00   1.00 3.00 3.00 8.00
Economist Practice Staff           30.00
FTE 9.10 10.70 2.00 5.20   27.00
TOTAL Staff           236.00
FTE 35.25 84.25 4.30 44.50 5.65 173.95

Source: ATO, Communication (29 February 2013).

2.139 The data above shows that the total FTE staff allocated to transfer pricing matters in the ATO is 173.95 (but includes 236 officers) across LB&I operational case teams, SME General Compliance case teams and the specialist units, the Economist Practice and the PSP.

Planned transfer pricing matters and staff allocations

2.140 The ATO's LB&I and SME business lines also plan for the numbers of different transfer pricing matters undertaken during a given year which is compared with the actual numbers of these matters undertaken.

2.141 The table below compares the planned LB&I Operations transfer pricing matters to actual performance.

Table 2: LB&I Operations transfer pricing matters — planned and actual
Product Planned Completions 2012/13 Planned new Starts 2012/13 WIP 1/7/12 Commenced in 2013 FY Finalised in 2013 FY On Hand to 20/11/2012
TP focussed audits 24 8 28 0 2 26
Risk Reviews 40 27 13 12 6 19
APAs 30 20 33 9 2 40
Annual Compliance Reports 100 93 7 35 25 17
Mutual Agreement Procedures 8 5 15 1 0 16

Source: ATO, Communication (14 December 2012).

2.142 The above table suggests that the LB&I case teams planned to complete far more transfer pricing activities for the 2012-13 financial year than they actually finalised.

2.143 Using the data in two tables above, it appears LB&I Operations requires: 44.05 FTE staff to undertake 28 audits (2 finalised and 26 on hand); 17.65 FTE staff to undertake 25 risk reviews (6 finalised and 19 on hand); 27.3 FTE staff to undertake 42 APAs (2 finalised and 40 on hand); and 1.3 FTE staff to undertake 16 Mutual Agreement Procedures (MAP) (0 finalised and 16 on hand).

2.144 The ATO's timeframes for transfer pricing compliance activities will be described in greater detail in Chapter 3. At a broader level, however, it should be noted that in the past six years, in LB&I Operations, approximately 31 per cent of all transfer pricing reviews, 41 per cent of all audit products, 19 per cent of all APA products and 30 per cent of MAPs exceed the ATO's service standards.354

2.145 The table below compares the planned SME General Compliance transfer pricing matters to actual performance.

Table 3: SME General Compliance transfer pricing matters — planned and actual
Product Planned Completions 2012/13 Planned new Starts 2012/13 WIP 1/7/12 Commenced in 2013 FY Finalised in 2013 FY On Hand to 20/11/2012
TP focussed audits 8 8 9 4 3 10
Risk Reviews 40 11 14 6 14 6
APAs 20 15 30 11 11 30
Annual compliance Reports 60 47 6 32 23 15
Mutual Agreement Procedures 0 0 0 0 0 0

Source: ATO, Communication (14 December 2012).

2.146 The above table suggests that the SME General Compliance case teams also planned to complete far more transfer pricing compliance activities in the 2012-13 financial year than were actually finalised.

2.147 Using the data in Tables 1 and 3 above, it appears that SME General Compliance would require: six FTE staff to undertake 13 audits (three finalised and 10 on hand); six FTE staff to undertake 20 risk reviews (14 finalised and six on hand); and eight FTE staff to undertake 41 APAs (11 finalised and 30 on hand). No staff in the SME business line were allocated to MAPs in the 2012-13 financial year.

2.148 At a high level, for SME transfer pricing matters, in the past six years, approximately 41 per cent of all risk review products, 20 per cent of all audit products, 15 per cent of all APA products and 100 per cent of MAPs exceeded the ATO's service standards.355

2.149 It is clear that both in the LB&I and SME business lines, the ATO does not have sufficient resources available to resolve matters it has undertaken within the timeframes it predicted.356

2.150 From the data maintained by the ATO, it is possible to estimate the number of FTE staff required to complete all transfer pricing matters within their respective service standards.357 Resourcing will be further discussed in the IGT observations section later.

Internationals unit

2.151 As described earlier, the funding for the Internationals unit is determined by the LB&I executive as it plans what the Internationals unit delivers.358

2.152 The February 2013 meeting of the Internationals Leadership Team (ILT) (comprising the Internationals unit executive) outlined the current budget situation for the Internationals unit. The Internationals unit has budgeted for 136 FTE staff (including the Economist Practice) but currently has 119.12 FTE staff. Although the area is under-staffed, the budget is under pressure due to the higher job classification of officers.

2.153 The inadequate number of higher paid ATO officers is particularly acute in the PSP. As described above, the PSP provides advice to case teams, such as staffing the TPRP amongst others, subject to available capacity.

2.154 The FTE staff for the PSP was 26 and 35 in 2010 and 2013 respectively. Although there appears to be substantial increase from 2010 to 2013, the figures for 2013 include an additional unit, the International Risk, Strategy and Intelligence (IRSI) unit, that was separately accounted for in 2010. In 2010, the IRSI area had 7 FTE staff. Accordingly, the increase may not have materially affected the level of advice provided to case teams. Indeed, one ILT meeting in 2012 noted that the PSP actually lost 15 FTE staff.359 It is unclear whether these staff members left the ATO or were simply allocated to a different unit. As set out in Table 1 above, the PSP has only allocated 8 FTE staff to assist with transfer pricing matters.

2.155 The ATO has advised that the reduction in positions is generally a result of a number of factors, including accommodating salary increases, agency efficiency dividends and management decisions360 that implement measures to rationalise its budget.

Risk managers resourcing

2.156 As discussed in Chapter 1, one officer in the LB&I business line and another officer in the SME business line were allocated to perform their respective roles of transfer pricing risk manager. The ATO has advised that the LB&I transfer pricing risk manager had other roles, including performing the role of Secretariat to the PSWG. The SME business line previously merged the role of its transfer pricing risk manager into a single role for all international tax risks. Similarly, during this review, the LB&I business line subsumed the role of a number of its risk managers, including the transfer pricing risk manager, into one risk manager for all manifestations of profit shifting risk.361

2.157 Senior ATO officers have expressed concerns that the role of the transfer pricing risk manager is critical to the effectiveness of the transfer pricing compliance program, that the role should not be shared and requires a full time focus.362

Transfer Pricing Review Panel resourcing

2.158 As discussed earlier in this chapter, there is no specific overall budget for TPRPs. The TPRPs are held on an as needs basis and resourced according to case needs and availability of suitable officers from the Internationals unit and the business lines.363

2.159 Some submissions to this review observe that the TPRPs are under a great deal of pressure in terms of resourcing the number of cases in which they are expected to provide advice.

Economist Practice

2.160 As also mentioned earlier in this chapter, the Economist Practice has suffered from relatively high turnover with a considerable number of newer personnel moving through the unit. Stakeholders have experienced cases in which the Economist Practice declined to provide an economist to advise the case team or be present at taxpayer presentations. As a result, protracted delays were experienced because the case team had to repeatedly seek piecemeal advice from the Economist Practice.

2.161 The Economist Practice also allocates its economists to research tasks.364 Stakeholders observe that this diversion of resources reduces the support for transfer pricing matters and has resulted in a deterioration of the ATO's overall capability in relation to case work.

2.162 The impacts of the above resourcing issues for the Economist Practice have been noted in ATO internal callover processes. In particular, it was identified that there are 'systemic issues' with a significant amount of Economist Practice work outstanding, requiring a rearrangement of economist work schedules to bring forward delivery timeframes. These impacts were observed to highlight elements of a 'capability need' which is more acute in some particular sites.365

2.163 The Economist Practice's resourcing constraints have also been discussed at senior levels in a number of ILT meetings. The ILT meetings have raised awareness of the increased demand for economic advice, high workloads and the relatively high attrition rate. In response to these challenges, the ILT has discussed the need to increase the Economist Practice's FTE at both the junior and senior levels and prioritise transfer pricing matters.366

2.164 As discussed previously, to help address the above challenges, the Economist Practice has developed a Practice Statement which sets out the priorities for its work. The Economist Practice area also trialled a new structure by locating economists in the operational areas of the business lines. However, the trial was discontinued as it did not provide the desired outcome.367

2.165 The table below sets out the workload for Economist Practice during February 2013.

Table 4: Economist Practice workload for February 2013
Work type description 1 February 13 — 28 February 13
Opening stock Received Finalised Closing stock
3.4.3 Audit casework 50 5 5 50
3.4.3 Litigation 1     1
3.4.9 CRR (TP & other) 8 1   9
3.4.9 TPRR 22 3 5 20
3.4.13 APA 56 4 5 55
3.4.13 MAP 10     10
3.4.13 ACA 1     1
3.4 Other case advice 8     8
3.5.1 Research project work 7 9 4 12
3.5.1 Economist network 1     1
3.5.5 CEM 2     2
3.5 Other research 17     17
Total 183 22 19 186

Source: ATO, Communication (14 March 2013).

2.166 The table below sets out the workload for Economist Practice over the 1 July 2012 to February 2013 period.

Table 5: Economist Practice workload 1 July 2012-February 2013
Work type description YTD
Opening stock   Received   Finalised   Closing stock
Total   Total   LB&I SME SCI RRT Others Total   LB&I SME SCI RRT Others Total
3.4.3 Audit casework 55   13   12 3 2 1 18   39 4 7 50
3.4.3 Litigation 1 1 1
3.4.9 CRR (TP & other) 7   8   4 2 6   5 4 9
3.4.9 TPRR 33   18   22 7 2 31   16 4 20
3.4.13 APA 62   22   13 16 29   29 24 2 55
3.4.13 MAP 14 2 2 4   6 3 1 10
3.4.13 ACA 1   1   1 1   1 1
3.4 Other case advice 4   11   6 1 7   6 1 1 8
3.5.1 Research project work 6   30   19 5 24   10 1 1 12
3.5.1 Economist network 2   1   2 2   1 1
3.5.5 CEM 2   2   1 1 2   1 1 2
3.5 Other research 13   11   3 4 7 1 15 1 17
Total 200   117   85 32 4 4 6 131   114 42 9 15 6 186
Percentage total 65% 24% 3% 3% 5% 100%   61% 23% 5% 8% 3% 100%

Source: ATO, Communication (14 March 2013).

2.167 As indicated earlier, as for the other ATO units involved in transfer pricing matters, the workloads for the Economist Practice, its FTE and case timeframes could be used to predict the resourcing needed for transfer pricing matters.

IGT observations

2.168 Operational planning should consider whether the matters can be completed on time with the available resources including specialist as well as operational case staff.

2.169 Since the specialist units are outside the business lines' operational units, the operational units do not have control over the specialist units' resources. Conversely, while the specialist units are able to control the level of advice they provide to case teams, they do not have control over the number and scope of matters selected.

2.170 Whilst the LB&I business line's CSSC must consult with the LB&I Operations SES Group about resources, the latter is not in a position to determine or predict the availability of specialist resources which may be required to effectively carry a transfer pricing case to completion. This may cause competing demands on limited resources where multiple LB&I operational case teams call upon the resources of the specialist units. For example, approximately one-third of the Economist Practice's work is unplanned work, responding to operational case teams' requests for advice.368 The IGT considers that whilst the ATO's broader 'profit shifting' strategy is laudable, the practicalities of its implementation heighten the need for the appropriate planning of resources.

2.171 Further to Recommendation 2.1(2) above, the ATO should examine all of its finalised and current transfer pricing matters conducted over the last few years to determine not only the actual FTE staff of operational units in the matters, but also that of all the relevant specialist units to better predict the level of resourcing needed to conduct such matters. That is, the ATO can use historical data to identify the relationship between the number and type of specialists needed to finalise different types of transfer pricing matters within benchmark cycle times. This will allow the ATO to better estimate the resources needed to complete transfer pricing matters within service standards. Such work was similarly conducted by the SME business in 2009, in relation to the objection's function resourcing needed on average, for each compliance activity selected.

2.172 The ATO should also ensure that where the availability of specialist resources will be less than originally planned or agreed, the operational case teams and the SES group supporting these teams can quickly reprioritise case work. This may involve reducing the scope of planned cases, their number or managing expectations on planned timeframes. The IGT has observed in other reviews the consequences of inadequately responding to circumstances which deviated from original plans for compliance activities.369

Recommendation 2.7

The IGT recommends that the ATO improve its planning of compliance activities by:

  1. requiring business line executives to seek assurance from specialist units that sufficient support resources will be available for the planned number and scope of compliance activities to be undertaken;
  2. identifying the type and level of the specialist units' resources that were provided in past and current cases as an evidentiary basis for this assurance; and
  3. limiting the number of compliance activities based on resources available, past history and emerging risks.

ATO response

Agree

With respect to part 1, we consider this to be an expectation of all planning and management of compliance work and will continue to reinforce this expectation with staff.


276 Replacement of Division 13 of the Income Tax Assessment Act 1936 with Division 815 of the Income Tax Assessment Act 1997.

277 ATO, 'International Review', above n 117.

278 OECD, Dealing Effectively with the Challenges of Transfer Pricing (OECD Publishing, 2012) p 61; IGT, Communication with the US IRS (5-6 November 2012).

279 For example, New Zealand's IRD Compliance Risk Analysts, HMRC's Risk and Intelligence Service, and the ATO's separation in functional focus.

280 Munawer Sultan Khwaja, Rajul Awasthi and Jan Loeprick, World Bank, Risk Based Tax Audits: Approaches and Country Experiences (2011) pp 15-16.

281 IGT, Review into Aspects of the ATO's use of Compliance Risk Assessment Tools (transmitted to the Minister on 21 October 2013).

282 ATO, 'ISC Charter', above n 126.

283 ibid.

284 ATO, 'Communication (24 October 2013)', above n 101.

285 ATO, 'PS CM 2003/02', above n 134.

286 ATO, 'LB&I Risk Filter Development - Guide for Risk Managers' (December 2012) Internal ATO Document.

287 ATO, Communication (25 March 2013).

288 ATO, 'Communication (31 October 2013)', above n 139.

289 Due to the changes in the ATO business lines from LB&I and SME to PG&I and PG&H respectively, former SME taxpayers now within PG&I will be reviewed in 2014: ATO, 'Communication 1 (1 November 2013)', above n 137.

290 ATO, Communication 2 (14 March 2013); ATO, Communication 2 (24 October 2013); ATO, 'Communication 1 (1 November 2013)', above n 137.

291 'False positive' describes compliance activities that do not result in outcomes. The taxpayer is actually compliant, but the risk method inaccurately detected the taxpayer as being non-compliant.

292 ATO, 'Communication (19 March 2013)', above n 265; ATO, 'Communication 2 (17 April 2013)', above n 104.

293 ATO, 'Communication 2 (17 April 2013)', above n 104.

294 ATO, 'Communication (19 July 2013)', above n 146.

295 Fyusion, ATO, 'Review of Internationals: Draft Report' (21 May 2012) Internal ATO Document, p 15.

296 ATO, 'S&ME Risk Rule Development and Case Selection: Part of S&ME's Risk Management Process' (4 June 2012) Internal ATO Document.

297 ATO, 'Communication (19 July 2013)', above n 146.

298 ATO, 'Communication (24 October 2013)', above n 101.

299 ATO, 'LBI Executive Draft Minutes: LBI Management Committee' (25 March 2011) Internal ATO Document.

300 Fyusion, above n 294, pp 19, 27.

301 ATO, 'Communication 2 (17 April 2013)', above n 104; ATO, 'Communication (19 March 2013)', above n 265; ATO, 'Communication 2 (24 October 2013)', above n 289.

302 Fyusion, above n 294, p 18.

303 ATO, 'Communication 2 (17 April 2013)', above n 104.

304 Fyusion, above n 294, pp 24-25, 36.

305 IGT, Review into Delayed or Changed Australian Taxation Office Views on Significant Issues (2010) p 11.

306 Fyusion, above n 294, p 28.

307 ATO, 'LBI Executive Minutes' (31 January 2013) Internal ATO Document, p 5.

308 Further discussed in Chapter 3.

309 Braithwaite, above n 99, pp 90-92.

310 ATO, 'LBI Executive Agenda: Agenda Item 2 - Case Callover Report' (21 March 2012) Internal ATO Document; ATO, 'LBI Executive Draft Minutes' (13 December 2012) Internal ATO Document; ATO, 'LBI Executive Minutes: Health of the Performance Management System in LBI' (24 May 2012) Internal ATO Document.

311 Fyusion, above n 294, pp 13, 28-30, 35.

312 ATO, 'PS LA 2013/2', above n 189.

313 ATO, 'PS LA 2004/13', above n 167.

314 ATO, 'TPN Charter', above n 168.

315 ATO, 'Technical Leadership Group', above n 200.

316 ATO, 'JIP - About us', above n 161.

317 ATO, 'LB&I AC Case Callover Summary: Transfer Pricing November 2012 - C&TL Call-Over' (7 December 2012) Internal ATO Document.

318 ATO, 'Economists', above n 188; ATO, 'PS LA 2013/2', above n 189, para [10].

319 ATO, 'PS LA 2013/2', above n 189, para [10].

320 ATO, 'Communication (11 February 2013)', above n 212.

321 ATO, 'Communication 1 (14 March 2013)', above n 149; ATO, 'Organisation Chart', above n 188; ATO, 'LBI Executive Agenda' (18 December 2012) Internal ATO Document; ATO, 'LBI Executive Minutes' (25 October 2012) Internal ATO Document; ATO, 'Economics Capability Strategy' (November 2012) Internal ATO Document.

322 ATO, 'TPRR Procedural Manual', above n 145; ATO, 'PS LA 2005/14', above n 148.

323 ATO, 'Audit Manual', above n 148; ATO, 'PS LA 2013/2', above n 189.

324 ATO, 'PS LA 2013/2', above n 189, para [24].

325 ibid para [26].

326 ibid paras [15]-[16].

327 ibid paras [28]-[30].

328 ibid paras [31]-[33].

329 ATO, 'Communication (18 April 2013)' above n 154.

330 ATO, 'PS LA 2013/2', above n 189, para [26]; ATO, 'TPRR Procedural Manual', above n 145; ATO, 'Audit Manual', above n 148.

331 ATO, 'Case Callover Summary', above n 316.

332 ATO, 'PS LA 2004/13', above n 167, paras [1], [4].

333 ATO, 'TPRP List' (June 2012) Internal ATO Document.

334 ATO, 'Communication 2 (15 March 2013)', above n 104.

335 ATO, 'Communication (18 April 2013)' above n 154.

336 ATO, 'TPRR Procedural Manual', above n 145; ATO, 'Audit Manual', above n 148; ATO, 'PS LA 2004/13', above n 167.

337 ATO, 'PS LA 2004/13', above n 167, para [5].

338 ibid.

339 ATO, 'TPRR Procedural Manual', above n 145.

340 ATO, 'Risk Assessment Guide', above n 175.

341 ATO, 'TPRR Procedural Manual', above n 145.

342 ATO, 'Communication 2 (13 March 2013)', above n 200.

343 ATO, 'PS LA 2004/13', above n 167, para [20].

344 ATO, Communication (17 June 2013).

345 ibid.

346 ibid.

347 ATO, 'PS LA 2004/13', above n 167, para [25].

348 ATO, 'Communication 2 (15 March 2013)', above n 104; ATO, 'Communication (19 March 2013)', above n 265; ATO, Communication (14 June 2013); ATO, Communication 2 (1 July 2013).

349 ATO, 'Communication 1 (19 March 2013)', above n 200; ATO, 'Communication 1 (14 March 2013)', above n 149.

350 ATO, 'Communication 2 (1 July 2013)', above n 347.

351 PWC Legal, above n 109, p 26.

352 ibid p 3, 48.

353 ATO, 'Communication (17 June 2013)', above n 343.

354 ATO, Communication: Level 4 Report (14 December 2012) Internal ATO Document.

355 ibid.

356 ATO, 'Communication 2 (13 March 2013)', above n 200.

357 Note: the IGT could also estimate the number, but would require better quality data from the ATO.

358 ATO, 'Communication 1 (19 March 2013)', above n 200.

359 ATO, 'Internationals Leadership Team Meeting Minutes' (17 April 2012) Internal ATO Document.

360 ATO, Communication: Internationals Budget History (12 April 2013).

361 ATO, 'Communication (19 March 2013)', above n 265; ATO, 'Communication (24 October 2013)', above n 101; ATO, 'Communication (31 October 2013)', above n 139.

362 ATO, 'Communication (19 March 2013)', above n 265.

363 ATO, 'Communication (17 June 2013)', above n 343; ATO, 'TPRP List', above n 332.

364 ATO, 'Internationals Leadership Team Meeting Minutes' (12 November 2012) Internal ATO Document.

365 ATO, 'Case Callover Summary', above n 316; ATO, 'LB&I AC Case Callover Summary: Perth 24 August 2012' (29 October 2012) Internal ATO Document; ATO, LB&I AC Case Callover Summary Parramatta 31 August 2012 (29 October 2012) Internal ATO Document.

366 ATO, 'Internationals Leadership Team Meeting Minutes' (31 March 2011) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (2 May 2011) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (21 June 2011) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (25 August 2011) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (28 November 2011) Internal ATO Document; ATO, 'ILT Minutes (17 April 2012)', above n 358; ATO, 'Internationals Leadership Team Meeting Minutes' (25 October 2012) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (20 November 2012) Internal ATO Document; ATO, 'Internationals Leadership Team Meeting Minutes' (18 December 2012) Internal ATO Document.

367 ATO, 'Economics Capability Strategy', above n 320; ATO, 'Communication 1 (14 March 2013)', above n 149.

368 ATO, Communication (25 February 2013).

369 IGT, Review into the Income Tax Refund Integrity Program (transmitted to the Minister on 18 September 2013); IGT, Review into Aspects of the ATO's use of Compliance Risk Assessment Tools (transmitted to the Minister on 21 October 2013) in relation to the importance of the ATO adopting a project-management approach to compliance strategies.