Australian Government - Australian Taxation Office crest

COMMISSIONER OF TAXATION

Mr David Vos AM
Inspector-General of Taxation
GPO Box 551
SYDNEY NSW 2001

Dear David

DRAFT REPORT: ADMINISTRATION OF PENALTIES AND INTEREST ARISING FROM ACTIVE COMPLIANCE ACTIVITIES

Thank you for the opportunity to comment on your draft report to the government on the above subject.

We appreciate the recognition given in the report of the internal review that the Tax Office had already initiated to identify improvements to our administration in this area. We agree that it is appropriate that you defer more substantive consideration of this topic until after the Tax Office has considered the findings of its internal review and implemented any identified improvements. We note that, for this reason, a number of the submissions reproduced in the report are, at this stage, largely untested and unconfirmed by your office.

In respect to the four key recommendations in the report, our response is as follows:

The Tax Office promptly acts to ensure that the agreed ANAO recommendations are fully implemented and addresses the findings identified in the ANAO report.

We agree with this recommendation. The Tax Office has progressively implemented the ANAO's recommendations in this report. Implementation of a small number of the recommendations was deferred during the implementation of the new tax system due to the application of transitional penalty concessions.

The Tax Office develops a uniform set of processes, procedures, corporate management information systems and guidance to staff for cross-business line application.

We agree with this recommendation. While we have developed comprehensive policy and procedural guidelines for our staff, it is recognised that much of this material is at a specific business line level which, in part, reflects the different characteristics of the markets in which we operate. We agree that more can be done to draw together the common elements to ensure a greater level of consistency of approach across business lines. Our internal review is focusing on this issue and one of the deliverables under our Change Program is improved management information systems.

The Tax Office includes an examination of the tax shortfall interest regime from the same perspective as its internal review into the penalty regime.

We agree with this recommendation. This issue has been canvassed in detail as part of the recent review of certain aspects of the income tax self assessment system (ROSA). Our internal review will take into account the findings of that review.

The Tax Office considers, as part of its internal review, further improvements to the administration of the penalties and interest regimes as set out in Chapter 4.

We agree with this recommendation.

Yours sincerely

[Signed]

Michael Carmody
COMMISSIONER OF TAXATION

11 May 2005