5.2.2 The role and functions of the additional Second Commissioners

The additional Second Commissioners should be full-time roles. They would be both members of the ATO management executive and be part of the day-to-day management team.

These Second Commissioners may serve the system best by having specific responsibility for particularly critical or contentious areas of tax administration. These areas may be those where the ATO’s approaches, views and actions may be enhanced by having informed business perspectives and taxpayer experiences.

One such area is the ATO’s objection and litigation sections. Stakeholders, by way of example, perceive that there is a lack of independent review where an ATO objection officer is located within the same business line as the original decision-maker, albeit a different section. The original decision-maker is perceived by taxpayers to have some kind of input or influence on the objection determination, either directly or indirectly, due to factors such as organisational, behavioural or social considerations.

The Joint Standing Committee of Public Accounts also reflected on this independence concern noting that it was difficult to characterise the objections process as an ‘independent review’ where objections officers were subject to the same culture, corporate goals and values as the rest of the ATO.

The IGT’s report into the Underlying Causes and Management of Objections to Tax Office Decisions found that in relatively simple matters, there was independent review but in larger, more complex, objections the line between the objections officer and original decision-maker was blurred. The IGT’s report into Large Business Audit and Risk reviews considered similar concerns regarding the ATO’s technical decision making review, where recommendation was made and accepted by the ATO for improvement.

An innovation, suggested by a wide range of stakeholders, is that the ATO should have a strong independent internal appeals or review area. The IGT sees considerable merit in this idea. While increasing the independence of review of original ATO decisions, the IGT believes that a separate appeals area would empower the ATO’s in-house legal section to independently assess the evidence and prospects of a case before progressing the matter to litigation. The ATO’s litigation arm would, like the Director of Public Prosecutions in criminal matters, have ultimate discretion as to which matters the ATO would litigate, which would be conceded and which should otherwise be settled. This would ensure that only genuine and fundamental disputes on interpretation or application of the law are litigated, resulting in cost savings for both government and taxpayers.

To achieve such an outcome, one of the additional Second Commissioners would head up this new appeals and review area, providing stakeholders with stronger assurance of independence.

The IGT notes that such a model currently exists in the IRS in the United States, with its Appeals area being empowered to separately and independently settle and pursue matters arising out of original IRS decisions.

It is appreciated that this approach may on occasions give rise to internal tensions within the ATO. The IGT considers that tensions of this nature are desirable in ensuring appropriate outcomes are achieved, thereby reducing the overall level of taxpayer disputes and the cost to the broader tax system.373


373 Inspector-General of Taxation, above n 341, pp 17-18.