A report to the Assistant Treasurer
22 January 2008
Telephone: (02) 8239 2111
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Level 19, 50 Bridge Street
Sydney NSW 2000
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Sydney NSW 2001
22 January 2008
The Hon Chris Bowen MP
CANBERRA ACT 2600
Dear Assistant Treasurer
I am pleased to present to you my report on findings and recommendations in respect of the review of the Tax Office’s administration of Goods and Services Tax (GST) audits for large taxpayers. This report has been prepared under section 10 of the Inspector-General of Taxation Act 2003 (the Act).
I have provided the Commissioner of Taxation with the opportunity to respond to the report’s findings and recommendations. The Tax Office’s response, including the relevant covering letter, is in Appendix 2 to the report. In finalising the report, I have fully considered the Tax Office’s response.
The Tax Office agrees with 12 out of 14 recommendations. The Tax Office’s positive approach and response to this review should result in significant improvements to tax administration. The Tax Office has acknowledged the need for more detailed and transparent reporting of the nature of its GST audit results in the large market. It has also confirmed there is a need to improve its approaches to cases dealing with margin scheme valuation issues and has stated that my review has provided significant assistance on this issue.
The first of the two recommendations that the Tax Office has been unable to agree with relates to my view that the Tax Office should administer the general interest charge (GIC) so that full remission of this charge becomes the norm rather than the exception in cases of one-off revenue-neutral transactions which involve no net loss to the revenue and that any undesirable behaviour on the part of taxpayers in failing to account for GST on such transactions should be addressed via the penalty regime. The Tax Office considers that this course is not open to it under the present law. In view of this response I have made a recommendation to the Government that it should consult with the community on the need for a specific legislative penalty to replace the GIC in GST audit cases which result in adjustments involving no net loss to the revenue.
The other recommendation that the Tax Office has expressed disagreement with relates to my view that it should review all GST audit cases for large taxpayers which have arisen from an unprompted voluntary disclosure where GIC has been charged at the full rate, rather than the lesser rate which appears to represent Tax Office policy.
I offer my thanks for the support and contribution of the Tax Office, other government bodies, professional bodies, business groups and individuals to this review.
David Vos AM
Inspector-General of Taxation
© Commonwealth of Australia 2008
ISBN 0 642 74431 9
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