COMMISSIONER OF TAXATION
Mr David Vos AM
Inspector-General of Taxation
GPO Box 551
SYDNEY NSW 2001
DRAFT REPORT: REVIEW INTO TAX OFFICE AUDIT TIMEFRAMES
Thank you for the opportunity to comment on your draft report to the government on the above subject.
We have, in recent years, sought to rebalance our compliance program to increase our focus on audit. As part of this rebalancing, we have invested significantly in improving our internal governance processes that support our audit program and have implemented a range of new issues management processes designed to ensure that we reach timely well reasoned positions, and that we minimise audit cycle times. At the same time, we have improved our communication to the community and the transparency of our operations through initiatives such as the publication of the annual Tax Office Compliance Program. The Compliance Program lets people know what they can expect from us in the current year and provides a report back on how we have performed against our commitments in the previous year.
It is this commitment to transparency and public accountability, and our consistent delivery of the government's revenue outcomes, that has led comparable OECD member tax administrators to regard us a world leader in improving compliance levels. We appreciate your acknowledgement of this achievement in your report.
We also acknowledge that there is always room for improvement in our performance and, in this context, we see this report as assisting us in our drive to improve our internal governance processes and to increase the effectiveness and transparency of our audit processes.
In respect to the four key recommendations in the report, our response is as follows:
The Tax Office:
(a) continues to expeditiously resolve those audits experiencing significant delays; and
(b) fully implements appropriate governance processes to ensure that, in future, the resolution of technical and strategic issues encountered during audits is expeditiously resolved in a manner that provides all parties with adequate opportunity to understand the relative merits of the other's view.
We agree with this recommendation. As reflected in your report, The Tax Office has significantly increased its focus on reducing audit timeframes including the deployment of our most senior and experienced officers to resolve complex cases and the implementation of issue management processes.
Before the intensive information gathering begins in an audit, the Tax Office ensures that appropriate technical input is brought to bear to develop the correct focus of the audit.
We agree with this recommendation. While our scoping processes are effective in most cases, your report has highlighted some areas in which we could improve the effectiveness of these processes. We are also taking on board lessons from the successful implementation of new approaches to the timely management of complex private rulings requests under which all players are brought together early to identify key issues requiring examination.
The Tax Office fully implements appropriate governance processes to ensure that the general interest charge attributable to significant periods of Tax Office-caused audit delay is remitted.
We agree with this recommendation. Our GIC remission guidelines specifically deal with this circumstance and must be considered in all cases where delays are attributable to the Tax Office. We will review our governance processes to ensure these guidelines are uniformly applied.
The Tax Office:
(a) clearly articulates to the taxpayer the expected timeframes of the audit at its outset;
(b) ensures that Tax Office auditors comply with procedures requiring taxpayer notification of commencement and finalisation of audit activities;
(c) notifies taxpayers of the progress of audits where those audits involve periods of Tax Office-caused delay; and
(d) in complex matters, allays taxpayer concerns by ensuring that the relevant technical specialist will take account of the taxpayer's full commercial circumstances in determining the Tax Office view.
We agree with this recommendation. In most cases the Tax Office applies these processes, but your report has highlighted areas where more rigour in our management of audit cases will improve the effectiveness of our communication with taxpayers and the transparency of our audit processes.
COMMISSIONER OF TAXATION
18 July 2005