A3.1 The Commissioner of Taxation's response to the review is reproduced below.

Australian Government - Australian Taxation Office crest


Mr David R Vos AM
Inspector-General of Taxation
GPO Box 551

Dear David,

Response to the Review of Tax Office Administration of GST refunds resulting from the lodgment of credit BAS

The report provides valuable assistance to us in ensuring we achieve the best possible balance between paying GST refunds in a timely manner and preventing fraudulent or incorrect refunds issuing.

As acknowledged in your report we have recently introduced revised arrangements to substantially refine the criteria for identification of refunds requiring review. These have been phased in over the last 6 months and include recognition of the risk profile of individual businesses based on experience in the new tax system. The new arrangements are the result of reviews initiated in 2003 to learn from experience gained in the first three years of operation of the system.

As a result of these revised arrangements it is estimated that a further 8,000 taxpayers will have refunds by-passing the verification process. The value of these refunds is estimated to be $11 billion in a full year, compared to the $20 billion stopped for verification in 2003-2004. In other words, the changes will result in the Tax Office only stopping around 50 per cent of refunds (by value) for verification compared with the previous arrangements. To date, this year, approximately $2.5 billion of refunds have been released which would have previously been stopped for verification. I am happy that we are making progress here.

I have also agreed to increase staffing for verification checks.

Combined these initiatives should make substantial improvements to the turnaround time for refunds subject to checking.

Implementation of the recommendations resulting from your review will see further enhancements to our operations.

Detailed comments on the recommendations are enclosed.

By way of final comment, I note the report refers to the relatively low value of fraudulent refunds detected. It does, however, need to be remembered that the publicised existence of pre-issue refund verifications is, in itself, designed as a deterrent to attempted fraud. While this does not detract from the need to further refine with experience our risk identification approaches, it does add weight to the need for continuing, robust checks.

Yours sincerely


Michael Carmody
24 December 2004