3.1 Stakeholders generally support the principles underpinning the Charter, noting that it is important for taxpayers to both understand their rights and have access to these when interacting with the ATO. The concerns raised include:

  • the lack of education or promotion of the Charter and the lack of clarity about its intended purpose and audience;
  • the nature of the ‘rights’ conferred by the Charter, including their level of enforceability — the questions that arise include whether they are contingent on taxpayers discharging their obligations under the Charter and whether there is protection for those taxpayers whose actions or positions are ultimately found to be justified but who have incurred disproportionate time and costs in challenging ATO actions;
  • the consistency of ATO officer compliance with the Charter and whether shortcomings are sufficiently addressed when brought to the ATO’s attention as well as how the ATO ensures its officers are complying with the Charter principles; and
  • whether the Charter reflects the current environment in tax administration, such as increased tax practitioner interactions, digital interactions (for example, myGov, data matching and pre-filled information) and use of external service providers.

Charter purpose, audience and education

Stakeholder concerns

Purpose and audience

3.2 Stakeholders have expressed some confusion regarding the nature and purpose of the Charter, noting that it appears to define the ATO’s duty of care to the public, yet the view shared by the courts and the ATO is that it does not:

… There is no identified duty of care specified as being owed by the defendants to the plaintiff. Such a duty is not established by reference to proclamations such as the Taxpayers Charter which express aims of treating citizens from whom tax is to be levied, fairly and reasonably…213

3.3 The conflicting perceptions regarding the status of the Charter between taxpayers and the ATO have given rise to a lack of stakeholder confidence in the Charter itself. In particular, it has been noted that on the one hand, the ATO has delivered a document purporting to set out ‘taxpayers’ rights’ whilst, on the other hand, argued in litigation specifically against the conferral of any rights under the very same document. Similar analogies have been drawn between the ATO’s approach to the Charter and its arguments against the standing and enforceability of other guidance, such as practice statements.214

3.4 Stakeholders have also observed different levels of relevance and reliance on the Charter depending on the market segment of the taxpayer. In particular, the consensus amongst submissions received was that the Charter is of more significance to smaller or more vulnerable taxpayers for whom the cost of tax litigation is disproportionately large, especially those who do not have professional representation as a ‘fall back for when things go wrong’.

3.5 The feedback in submissions from larger and more well-resourced taxpayers and their representatives has been that there is an awareness of the Charter but that it was limited or has no utility. This is due to the one-on-one relationships that can be, and in many cases are, fostered between those taxpayers, their representatives and the ATO. Moreover, it was contended that in larger tax disputes the issues tended to relate more to technical and substantive tax issues rather than procedural matters, such that objection and litigation were more appropriate avenues for resolution.

3.6 A growing concern amongst tax practitioners is that the Charter does not make reference to their role other than by accepting that taxpayers can be represented by a person of their choice.215 Submissions to this review have commented that the requirements imposed on tax practitioners have become unreasonable, for example the 85 per cent lodgment rule. In this respect, it has been noted that if such impositions can be made on tax practitioners, who are inherently acting for taxpayers, then they should be given the same treatment under the Charter that a taxpayer receives. Submissions to the IGT have suggested that the Charter should recognise the role of tax practitioners or that there should be a separate Tax Practitioners’ Charter for when things go wrong between the ATO and tax practitioners.

Education and promotion

3.7 Stakeholders have commented that taxpayers who do not regularly interact with the ATO or self-represented have no easy way of knowing their rights in dealing with the ATO, as details of the Charter are not brought to their attention in interactions with the ATO and are not easily located on the ATO’s website. Specifically, some stakeholders have observed that the Charter only appears in the footer of the ATO website which gives rise to the perception that the ATO does not place much importance on it.

3.8 It has been raised in submissions that there is a lack of education and promotion about the availability of the Charter to both taxpayers and tax practitioners. In this regard, stakeholders have commented that greater education about the aims and principles of the Charter was necessary to increase overall community awareness.

Relevant Materials

Purpose and audience

3.9 The ATO has stated that the Charter is its client service charter and is for everyone who deals with the ATO on tax, superannuation, excise and the other laws it administers.216 It was referred to by the previous Commissioner as one of the ATO’s three ‘communication pillars’ aimed at maintaining and improving community confidence in its administration.217 The ATO has also committed to following the Charter in all its dealings with taxpayers and their representatives.218

3.10 However, the ATO has advised the IGT that sole reliance upon the Charter itself to define its commitment to the community does not adequately capture its current client service ethic, cultural shift and the importance of the ‘client experience’,219 all of which are part of its ‘Reinvention Program’.220 The ATO believes that its stated expectation of the experience taxpayers and other stakeholders should have in their interactions goes well beyond the stated rights within the Charter.221

3.11 In focusing on the ‘client experience’, the ATO has advised the IGT its cultural shift in behaviours have been driven by an intention to:222

  • make it as easy as possible for taxpayers to get things right;
  • understand and consider taxpayers’ circumstances and offer a fair and differentiated service;
  • treat all people with respect and dignity;
  • build trusted relationships;
  • be pragmatic and fair in its decision making;
  • give the right answers, at the right time and in the right way; and
  • use its skills and expertise to assist taxpayers to do the right thing.

3.12 Accordingly, whilst it remains committed to the Charter and acknowledges that the Charter has a role to play, the ATO has stated to the IGT that its approach to administering the tax system seeks to build a relationship with taxpayers and their representatives based on mutual trust and respect rather than affording rights.223

Education and promotion

3.13 The Charter principles are set out in the main booklet Taxpayers’ charter – what you need to know which is accessible from the ATO’s website. The publication is available in a range of different languages.224

3.14 The ATO has acknowledged that:

The Charter sits at the heart of the client and staff experience. It details the expectations of both the taxpayer and our staff. By making the Charter more accessible and visible to staff and taxpayers alike, we will continue to shape a better experience for all.225

3.15 Beyond making the Charter available on its website, the ATO has not provided the IGT with any other materials setting out how it seeks to raise awareness and educate the community about the Charter.

IGT observations

Purpose and audience

3.16 Taxpayers’ charters or bills of rights are fundamental documents used by revenue authorities across the globe to set out taxpayer rights or expectations as well as their obligations. They provide a clear basis against which taxpayers and their representatives may anchor their expectations as well as playing a key role in fostering community confidence and voluntary compliance.

3.17 Consistent with international norms, the ATO has recognised the value of the Charter and has committed to following its principles in all of its dealings with the community.226 In recent years, the ATO has also embarked on its overarching ‘Reinvention Program’227 which aims to shift its focus to client experience in all its interactions with the community. The ATO also believes that ‘Reinvention’ goes beyond the Charter principles. To the extent that this is the case, the IGT believes that the Charter should be updated to reflect the higher standards of the ‘Reinvention Program’. The ATO cannot remain in a perpetual state of ‘Reinvention’ and such higher standards should be captured in an enduring and fundamental document such as the Charter.

3.18 In addition to the Charter, the ATO has also issued a number of other documents which cover similar territory although they are specifically aimed at certain market segments, namely, the large business and international and high wealth individual market segments.228 These additional more targeted documents provide an opportunity for the ATO to deliver a more tailored message to different group of taxpayers. However, they may also lead to perceptions of preferential treatment for different classes of taxpayers i.e. large businesses and high wealth individuals.

3.19 The IGT notes that, to an extent, Canada has sought to specifically address small business in its Taxpayer Bill of Rights. A commitment is given to small business in the form of five principles:

  • The CRA is committed to administering the tax system in a way that minimizes the costs of compliance for small businesses;
  • The CRA is committed to working with all governments to streamline service, minimize cost, and reduce the compliance burden;
  • The CRA is committed to providing service offerings that meet the needs of small businesses;
  • The CRA is committed to conducting outreach activities that help small businesses comply with the legislation we administer; and
  • The CRA is committed to explaining how we conduct our business with small businesses.

3.20 Whilst Australia does not have a similarly expressed commitment to small business in its Charter, it is arguable that such a commitment exists and has been implemented in a number of other ways, including through legislation that provides for small business concessions229 and a specific small business assistance webpage.230 The ATO could highlight this through a clearer statement together with appropriate links to resources and assistance options to small business and less well-resourced taxpayers acknowledging and addressing the challenges that these taxpayers face.

3.21 In other market segments, such as tax practitioners, the multitude of documents have understandably created a degree of uncertainty regarding whether the Charter is intended to apply to them and, if so, whether in a representative capacity or directly to them as participants within the tax system.

3.22 The Charter itself states that ‘it is for everyone who deals with us on tax, superannuation, excise and the other laws’ administered by the ATO.231 However, in the light of various documents, such a statement may not be sufficiently apparent to all stakeholders who have interactions with the ATO.

3.23 Having regard to the broad spectrum of ATO interactions and stakeholders, the IGT believes that the ATO should consider only having one generalist document or if tailored ones are required in addition to it or in its stead, no class of taxpayer should be excluded from such a tailored approach. In either case, the IGT considers that there would be benefits in the ATO clearly setting out the intended purpose and audience for the Charter, or other similar documents, and clarifying the extent to which these documents apply to its staff, taxpayers, tax practitioners and external service providers.

Education and promotion

3.24 The education and promotion of taxpayers’ rights has been highlighted in guidance provided by various international bodies, including the OECD,232 the International Monetary Fund (IMF)233 and the European Commission.234 In particular, the European Commission’s set of Fiscal Blueprints emphasised the need for tax administrators to ‘define and publicise taxpayers’ rights and obligations so that taxpayers have confidence in the fairness and equity of the tax system but are also aware of the implication of non-compliance.’235

3.25 In this respect, the ATO’s education approach is critical in ensuring that both taxpayers and tax officers are cognisant of their rights and obligations under the Charter and to have regard to them in all their interactions with each other. The IGT’s research indicated that beyond the website references to the Charter documents, there was little mention of it elsewhere. By way of example, the ATO’s annual reports over the past three years mentioned the ‘Taxpayers’ Charter’ only once in each report and only in the context of requiring the ATO’s external contractors to adhere to the Charter.236 It is also worthwhile noting that the ATO’s intranet, a primary source of information for ATO staff, does not actively promote the Charter either. Instead, searches for the Charter lead to pages about the APS Values and hyperlinks to the Charter are inactive. Relevant ATO staff training and guidance will be explored later in this chapter.

3.26 The IGT is aware that similar challenges have been faced in the UK with HMRC having only mentioned Your Charter a handful of times in 2014-15.237 However, it has been noted that in the most recent annual report, HMRC has consciously turned its focus to acknowledging Your Charter and its role with 30 mentions of the document being made in the 2015-16 Annual Report.238 As noted earlier, HMRC is now required to report its performance against the Your Charter principles annually.

3.27 The ATO has advised the IGT that it is seeking to move from directly promoting the Charter to ‘living’ the Charter with the goal of embedding the relevant principles into its ‘business as usual’ processes. Whilst this approach should be commended, cases brought to the IGT’s attention suggest that these goals have not been fully realised. The IGT considers that express communication of the Charter remains important as a means of ensuring taxpayers are made aware of it, particularly when things go wrong between themselves and the ATO.

3.28 As the ATO has previously indicated that the Charter is one of its three pillars of communication to instil confidence in the community, the IGT considers that the Charter needs to be at the forefront of all interactions between the ATO and the taxpayer. There are a number of avenues available which could assist the ATO in this regard.

3.29 Firstly, the ATO could make the Charter more visible on its website. At present, the ATO’s website only includes links to the Charter at the footer of the website. Greater visibility of the Charter on the ATO’s website would assist to highlight it as a key document for taxpayers to better understand their ‘rights’ and ‘obligations’ and generate greater accountability for ATO officers in adhering to its principles.

3.30 Secondly, the ATO could examine options to add messaging to its main call centre lines or through myGov as the two major channels of taxpayer interaction. These measures should have minimal impact on ATO resources.

3.31 Thirdly, the ATO could consider adding statements and references regarding the Charter to documents which are frequently issued to taxpayers, especially small business or individual taxpayers. For example, the IGT notes that no references to the Charter or taxpayers’ rights or the ability to lodge a complaint are contained on notices of assessment and there is scope to explore its use as a vehicle to inform and educate.

3.32 Fourthly, ensuring that the Charter is made available to taxpayers and their representatives at the outset of interactions which are likely to generate dispute or disagreement, such as reviews, audits, objections and litigation. This may be done through standardised statements in the relevant correspondence with links or references to more detailed material from the ATO’s website.

3.33 Fifthly, the ATO could use its existing consultation forums and committees as a means of promoting and seeking feedback on the Charter from its external stakeholders. Through such discussions, the ATO may be able to reiterate its commitment and reach a wider audience through professional and industry association delegates who would be able to disseminate the ATO’s messaging through their newsletters or other publications.

3.34 Finally, the ATO could use its social media platforms as a means of more broadly raising awareness of the Charter and the processes by which complaints or concerns may be raised, investigated and resolved. Such channels provide a cheap and easy alternative compared to standard modes of correspondence. At least one community member has queried why the ATO does not ‘tweet’ about the Charter with appropriate links. Currently, there is limited mention of the Charter on the ATO’s social media platforms.

Enforceability, adequacy, currency and compliance with the Charter

Stakeholder concerns

Enforceability of the Charter

3.35 Stakeholders have observed that while the Charter has helped to improve the relationship between taxpayers and the ATO, it has done little to redress the balance of power between the ATO and taxpayers, or articulate the legal rights of taxpayers and the avenues of redress when these rights are violated. The main concern arising in these submissions has been the lack of legal force behind the Charter which results in taxpayers having no substantive legal redress where ATO officers fail to follow it. Without a legislative basis, stakeholders are concerned that the Charter remains a purely ATO administered document which may be changed, set aside or not enforced with little or no warning or justification, particularly given that the Courts, and indeed the ATO on occasions, have highlighted its non-binding nature.

3.36 To illustrate the above, some stakeholders have conveyed experiences where ATO officers have been selective in applying Charter principles. In particular, they are more likely to respect rights rooted in legislation such as accepting that taxpayers can be represented and respecting the right to a review, whilst not rigorously adhering to or entirely disregarding expectations, such as conducting audits with minimal cost and inconvenience to the taxpayer or treating the taxpayer as being honest.

3.37 Some stakeholders have particularly raised the limited protections afforded to taxpayers whose actions or positions are ultimately found to be justified but who expend disproportionate time and costs to challenge ATO actions. In this regard, they note that penalties are imposed on taxpayers who make errors but there are no consequences for the ATO when it makes an incorrect assessment or decision.

3.38 As noted earlier, AOTCA, STEP and CFE have found that the lack of enforceability of the Charter principles has also resulted in it being largely ignored by taxpayers, tax advisers and the revenue authorities themselves.239 Developments in the UK on the doctrine of legitimate expectations may provide some options for the enforcement of administrative statements without the need for legislation. However, such an approach is likely to be of limited utility in Australia given the approach that the courts have adopted in relation to this doctrine thus far.

3.39 In line with the above research, some stakeholders have suggested that for the Charter to remain relevant and effective, it needs to be a legally binding document that will hold the ATO to account. These stakeholders argue in favour of the adoption of a legally binding charter or a bill of rights. Specifically, it has been suggested to the IGT that:

  • Australia should follow the USA’s approach of bringing all rights related to tax together into a Taxpayer Bill of Rights and ensure that each right, to the extent possible, is supported by a legal right in the Income Tax Assessment Act 1997 (ITAA 1997) or the TAA 1953; or
  • the Charter should receive legislative backing, for example by including its provisions within the framework of the TAA 1953, to provide better protection against prospective breaches of taxpayer rights.

3.40 In contrast, some stakeholders have noted the potential risk of some litigants seeking to use legally enforceable rights as a means of delaying or frustrating the ATO’s administration of the tax system. In response to these concerns, other stakeholders have asserted that the courts are already well-placed to deal with such issues expeditiously, including dismissing the claim, making orders for adverse costs and making vexatious litigant declarations.

3.41 Other arguments against enforceability of the Charter principles have suggested that it would do little, if anything, to make remedies more accessible for those who need it most. The most vulnerable taxpayers are just as unlikely to be able to fund a court case to enforce their rights under the Charter as they are to appeal a substantive tax decision.

3.42 Another issue that has divided stakeholders is whether or not the Charter principles should only be applicable to taxpayers that discharge their ‘obligations’ to the revenue authority. Some stakeholders are of the view that the interaction between the taxpayer and the ATO is a ‘two-way street’, with taxpayers being responsible for ensuring they are honest and cooperative. In contrast, some stakeholders consider that many of the rights articulated in the Charter are fundamental, such as the rights to representation, and must be available and respected regardless of whether the taxpayer has met their obligations.

3.43 Anecdotally, some stakeholders have indicated that in their experience, the ATO will depart from the Charter and its standard processes when fraud or evasion is suspected or when a covert audit is being undertaken. Whilst there is recognition that a departure from standard practice may be justified in these circumstances, greater clarity in this regard has been found to be lacking. It has also been suggested that in such cases, the ATO should be required to seek the approval of an independent panel.

3.44 The inter-mingling of expectations and enforceable rights in the Charter has also attracted some criticism. As stated earlier, most of the ‘rights’ stated in the Charter are in reality expectations but there are a number, such as the right to confidentiality, contained in statute and therefore enforceable. The concern is that the inclusion of enforceable rights within an otherwise administrative document, without any reference to its legislative basis, may potentially lead to the diminution of those rights. These concerns were raised as early as prior to the introduction of the Charter in 1997:

A range of stakeholders expressed concern that the rights and obligations in the Taxpayers’ Charter were expressed in the form of a service charter and this formulation would undermine the operation of existing legal rights. First, informal articulation of legal rights would water down taxpayers’ knowledge and understanding of the extent of their rights at law. Second, listing unenforceable rights was felt to be potentially meaningless.240

Adequacy

3.45 Stakeholders have also commented on the inadequacy of the rights and protections that are currently afforded to taxpayers more broadly. In particular, it has been noted that existing common law rights, such as the right to claim damages against the Commissioner under the tort of negligence or breach of statutory duty are, in practice, non-existent and no reference to them is made in the Charter.

3.46 In this respect, submissions made to the IGT have also highlighted certain enforceable rights which appear to exist in other jurisdictions, but which do not seem to be present in Australia. One such example is the USA’s ‘Right to Finality’, where taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. The recognition of a tort of negligent investigation in Canada, and the right to sue for damages for certain unauthorised IRS tax collection activities in the USA were also identified as key differences between Australia and comparable jurisdictions.

3.47 It should be noted that not all submissions made to the IGT sought additional enforceable rights for taxpayers. Some stakeholders believe that there are presently sufficient taxpayer rights in Australia. However, they consider that these rights are often not exercised due to the high evidentiary threshold and costs associated with taking legal action. These stakeholders consider that rather than creating more enforceable rights, action should be taken to make the existing rights more readily accessible and to assist low income and vulnerable taxpayers. In this regard the IGT’s attention was drawn to the low income taxpayer clinics in the USA that provide assistance to taxpayers through free or low cost advice and advocacy services.

Compliance with the Charter

3.48 There is a lack of confidence amongst taxpayers and tax practitioners that compliance with the Charter is adequately being monitored and allegations of breaches appropriately investigated or addressed. The experience relayed by stakeholders is varied with some noting that allegations of breaches of the Charter are investigated and escalated over a lengthy period of time whilst others note that no action is taken or redress provided as a result of Charter related complaints.

3.49 Stakeholders have observed that the ATO is not required to report on breaches of the Charter. They consider that more robust measurement and reporting are required in this regard to gain a better understanding of the scope of alleged problems with the operation of the Charter. Such reporting mechanisms would give taxpayers evidence that the ATO ‘walks the talk’ rather than just trusting that it complies with the Charter.

3.50 Two main suggestions were made in submissions to the IGT:

  • that an independent function within the ATO be established to undertake an annual quality review of Charter compliance and publicly disclose its findings in the ATO’s annual reports; or
  • that Australia introduces a legislative reporting requirement, similar to the UK’s Your Charter annual reports, which would require the ATO to set out the extent to which it is meeting its Charter commitments and the extent to which taxpayers and tax practitioners believe the ATO is doing so.

3.51 Whilst a number of stakeholders favour the introduction of an annual report covering the ATO’s delivery against the Charter, they consider that such reporting would only be meaningful if it is overseen by, or the responsibility of, a body external to the ATO.

ATO guidance and training

3.52 Stakeholders have also raised concerns that there appears to be a lack of training and guidance for ATO staff on the application of the Charter in their day-to-day work. These stakeholders have also observed that the extent of ATO officer training on the Charter is a 20-30 minute discussion on commencement of employment, with no mandatory refresher training following that initial introduction. Stakeholders have also noted that the ATO has not set out how it applies the Charter principles in practice for both its staff and taxpayers alike.

3.53 Furthermore, some stakeholders have observed that if the ATO is seeking to effect an attitudinal or cultural change, then increased influence and direction from the ATO’s most senior executives for staff to have regard to and comply with the Charter principles is required. Stakeholders have suggested that, at present, such high level direction is lacking.

Currency of the Charter

3.54 Stakeholders have questioned the currency of the Charter which is seen as not keeping pace with developments in tax administration both domestically and internationally as well as the evolution of the ATO itself.

3.55 Since the introduction of the Charter, the nature of interactions between taxpayers and the ATO has changed. The role of tax practitioners has grown significantly such that the vast majority of individual taxpayers and businesses now rely on tax practitioners to manage their compliance. Beyond recognition that taxpayers may be represented, the Charter says little else on what ‘rights’ and protections are afforded to both taxpayers and tax practitioners in this context.

3.56 Similarly, the ATO’s increased use of external service providers, e.g. external debt collectors, and digital interactions, such as myGov and pre-filled information, have reduced the degree of interactions that taxpayers have with officers of the ATO. This has in turn created uncertainty regarding the level of service they can expect to receive and the degree to which they would be protected where errors are made in digital interactions.

3.57 Examples cited of the Charter not keeping pace with legislative change include the recent amendments which limit the circumstances and timeframes where the Commissioner may retain Goods and Services Tax (GST) refunds.241

Relevant materials

Enforceability of the Charter

3.58 The ATO has asserted that the Charter ‘provides a further layer of protection and accountability to that afforded by law because it details how the ATO applies the law and delivers services and also because of the commitment to follow the charter in everything it does.’242 The Courts, however, have been reluctant to identify any duty of care which may be owed by the ATO to affected taxpayers where the Charter principles are breached by ATO officers:243

Even if there was a departure from some standard specified in such a document, it could not vest a private right to recover tort damages in a person affected by the departure. In recent times the determination of the existence of a duty of care has been directed to be established by recognition of novel areas of duty on an incremental or case by case basis.244

3.59 The ATO has also suggested that the Charter is one source of taxpayer ‘rights’ and protections within a sufficiently comprehensive system of checks and balances on the ATO’s administration of the tax systems which it notes comprises:245

  • 31 legislative protections;
  • 17 regulations;
  • 53 whole of government requirements, including mandatory and guidance material; and
  • 64 key ATO standards

3.60 However, many of the ‘rights’ and protections contained in the above documents, such as whole of government requirements and ATO standards, are not enforceable at law.

3.61 In his 2012-13 annual report, the IGT identified the Charter as a possible area for investigation, noting a theme in certain jurisdictions of moving towards a taxpayer bill of rights:

A current theme that is gaining momentum in a number of jurisdictions is a bill of rights for taxpayers. The issue before us is whether the current Taxpayers’ Charter, which is an ATO administrative document, is sufficient or whether we should seek a legislative bill of rights with enforceable remedies.246

3.62 Following the publication of that IGT annual report, the ATO undertook an internal review of the form and content of the Charter, and considered the potential need for change. The ATO concluded that it:

… is not seeing any evidence that suggests the current Charter needs to be strengthened to a bill of rights model.247

3.63 The ATO has also advised that the question of whether Australia should have an administrative or legislated charter of taxpayers’ rights was considered when the Charter was first developed.248 The ATO believes that it was rejected at that time due to direct language and formal presentation of service standards and expectations being considered to be preferable to the creation of enforceable rights.249 Similar sentiments were more recently expressed in respect of the HMRC Charter, with some commentators noting that the embedding of Charter principles within the tax legislation may reduce the level of accessibility due to many taxpayers being unable or unwilling to scrutinise the minutiae of tax legislation.250

3.64 On the ancillary issue of whether the ‘rights’ under the Charter are only available where taxpayers meet their ‘obligations’, the IGT has been unable to identify any relevant public material which sets out the ATO’s views on this point.

3.65 Other research on the issue has suggested a need to balance the ‘rights’ afforded to taxpayers and the ‘obligations’ imposed upon them. For example, the OECD has observed that there are certain basic rights and obligations present in all tax systems and ‘without this balance of taxpayers’ rights and obligations taxation systems could not function effectively and efficiently’.251

3.66 The importance of striking the right balance between taxpayer rights and responsibilities was also noted by AOTCA, CFE and STEP in the development of the Model Taxpayer Charter:

taxpayer rights are responsibilities of the tax administration and taxpayer responsibilities are rights of the tax administration. This mirror image of rights and responsibilities, laid out and acted upon in a balanced and constructive way, should enhance the relationships between all stakeholders.252

3.67 Similarly, the USA’s NTA has also observed:

… the tax system will work best if we provide transparency, not only about taxpayer rights but also about taxpayer responsibilities. The National Taxpayer Advocate views the relationship between the government and its taxpayers as a social contract of sorts – the U.S. government requires its tax collector to treat taxpayers with courtesy and respect and asks taxpayers to cooperate with the tax collector. In recognition of this two-way relationship, we recommend the Taxpayer Bill of Rights also contain a section outlining taxpayer responsibilities.253

Adequacy

3.68 The UNSW’s research and the research undertaken in developing the Model Taxpayer Charter shows that taxpayers in Australia have a number of other enforceable rights either in legislation or at common law. However, many of these rights largely relate to challenging ATO assessments or decisions. In this respect the research also identifies some room for improvement when compared to other comparable jurisdictions. Such research as well as submissions to the IGT have highlighted three areas where improvements may be required in the Australian context:

  • burden of proof;
  • legitimate expectations; and
  • certainty and finality.
Burden of proof

3.69 In Australia, the burden of proof in tax matters typically rests on taxpayers. However, in some other jurisdictions, such as the USA, the burden of proof is reversed in certain circumstances, such as where the taxpayer presents credible evidence on a factual issue relating to the assessment of liability.254 As noted above, the issue was identified as early as 1993 by the JCPA.255

3.70 Similar concerns have also been raised in previous IGT reviews. In his Review into improving the self-assessment system, the IGT highlighted stakeholder concerns that the operation of the burden of proof has the potential to lead ATO officers to make decisions which are not sufficiently supported by facts and evidence.256 The IGT had also previously made recommendations to reverse the onus of proof for no reasonable arguable position penalties, which was agreed in principle by the then Government.257

3.71 The House of Representatives Standing Committee on Tax and Revenue (SCTR) has also considered the issue as part of its Inquiry into Tax Disputes. The SCTR was particularly concerned with cases where the ATO forms a view that the taxpayer has engaged in fraud or evasion and extends its compliance activities beyond the period in which the taxpayer is required to maintain records thereby making rebuttal of the ATO’s opinion very difficult. The SCTR, therefore, made a recommendation to Government that in such circumstances the burden of proof should be reversed such that the ATO had to make a case for fraud and evasion.258

Legitimate expectations

3.72 The doctrine of ‘legitimate expectations’ has been raised with the IGT as a point of distinction between the current state of the law in Australia when compared with some other jurisdictions, such as the UK. As noted in Chapter 2, the law appears to be proceeding in the UK in a manner which delivers substantive outcomes to taxpayers who have relied upon the publication of HMRC in good faith.

3.73 In contrast, the Australian legal position is reticent to recognise the same degree of protection. As the research from the UNSW points out, the phrase legitimate expectation ‘no longer finds favour with the High Court.’259 The position in Australia appears to be that legitimate expectation would only go so far as to afford the taxpayer procedural fairness where such has been denied. However, the law is clear that the right to procedural fairness does not give rise to substantive rights.260

Certainty and finality

3.74 The USA’s ‘Right to Finality’ has been described by some stakeholders as a potential gap in Australia. The ‘right’ is described as:

Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.261

3.75 To an extent, it is arguable that such a right presently exists in the Australian tax law with the imposition of statutory periods of review and amendment. One specific element of the right to finality which does not appear to exist in Australia is set out in § 6502 of the IRC and has been described as follows:

The IRS generally has ten years from the assessment date to collect unpaid taxes from you. However, there are a number of circumstances where the ten year collection period may be suspended, such as during the period when the IRS cannot collect, for example, bankruptcy or a collection due process proceeding, or an offer in compromise is pending.262

3.76 By limiting the time in which the IRS can collect debt in legislation, taxpayers in the USA are provided with assurance against later recovery actions when documentary evidence may no longer have been kept making it harder for the taxpayer to properly dispute or challenge the revenue authority’s claims for debt. This approach differs to that in Australia, where the statute of limitations (usually six years) does not apply to the recovery of tax debts where an assessment has been raised within the appropriate timeframe.263

Compliance with the Charter

3.77 The ATO has publicly acknowledged the important role of the Charter principles in positively influencing the compliance behaviour of taxpayers as well as the consequences of it not adhering to the principles:

… if we fail to adhere to all of the charter principles, particularly as we apply our strategies, we may damage taxpayers' trust in us and this may lead to disengagement and future non-compliance - precisely the opposite outcome to the one we are seeking.264

3.78 Academic research on the issue has led to similar conclusions, notably:

… when people perceive the Tax Office adhering to the Charter, they also hold the view that the Tax Office can be trusted to meet its obligations to all Australians. Furthermore, those who perceive the Tax Office adhering to the Charter see the Tax Office as having legitimacy …265

3.79 At a broad level, the ATO uses public surveys such as its Single Corporate Perception Survey266 (SCPS) and Perceptions of Fairness in Disputes Survey267 (PFDS) to seek community feedback on its performance against certain Charter principles including fairness, professionalism, accountability and integrity. The surveys do not specifically make reference to the Charter268 and not all Charter principles are directly tested. The results of these surveys tend to suggest that the ATO was positive in relation to certain principles but not others. For example, the SCPS found that participants considered that the ATO acted with integrity but at the same time observed there was ‘a downward trend across the year in perceptions of the ATO being fair and professional.’269 The PFDS yielded similar results, though more moderate, with about half of the participants agreeing that the dispute process was fair and a decline in the perception that the ATO decision was fair.270

3.80 In the past, the ATO has also commissioned reports specifically on the Charter. The last of these was conducted in 2005.271

3.81 Internally, a primary form of assurance that ATO staff are adhering to their obligations under the Charter, amongst other obligations, is through quarterly Conformance Statements which are completed by the BSLs. An example of such a Conformance Statement indicates that Charter breaches are ‘collected through complaints processes and are recorded on Siebel [ATO’s case management system]’.272 These statements, however, are completed on an exceptions basis which assumes that there has been compliance unless a matter is raised to indicate otherwise.273 Furthermore, not all Charter principles are captured.

3.82 Set out below are the initial set of statistics, provided to the IGT based on keyword searches within Siebel, which yielded very low results:

Table 4: Initial ATO statistics of Charter breaches
Financial Year Complaint outcomes Total
Upheld Not upheld Partially upheld Outcome not recorded
2012-13 34 31 2 2 29
2013-14 9 8 3 3 39
2014-15 24 45 3 32 85*

Source: ATO.

Note: In the 2014-15 year, 2 complaints were recorded as having been withdrawn and 1 case with an undefined outcome.

3.83 Given the above low numbers and the likelihood of many complaints at least touching Charter principles, the IGT sought clarification. In response, the ATO provided a broader set of figures taken from an operational process whereby ATO complaints officers, including those in call centres, are required to identify breaches of certain Charter commitments. Under this process all complaints which are fully or partially upheld, that is, the ATO agreed in full or in part with the taxpayer’s allegation, are recorded against one ‘Charter commitment not met’.274 The statistics of this operational data, for the 2012-13, 2013-14 and 2014-15 financial years, are set out in Table 5.

Table 5: Follow up ATO complaints statistics
Charter Commitment Not Met Complaint Outcomes Total
Complaint Withdrawn Escalated to ATO Review Not Upheld Partially Upheld Upheld Not recorded as possible charter breach
2012-13 Financial Year
Access to our Services N/A N/A N/A 95 699   794
Access to their Information N/A N/A N/A 33 91   304
Correct Action Taken N/A N/A N/A 98 2049   2147
Courteous and Respectful N/A N/A N/A 21 317   338
Decisions Explained Clearly N/A N/A N/A 5 64   69
Fair and Reasonable N/A N/A N/A 30 87   97
Information and Advice N/A N/A N/A 308 574   682
Plain and Clear Language N/A N/A N/A 4 20   24
Privacy and/or Confidentiality N/A N/A N/A 3 27   28
Relevant Circumstances Considered N/A N/A N/A 5 28   33
Review Rights Respected N/A N/A N/A   35   35
Timely Response N/A N/A N/A 200 31580   31780
Complaints not recorded as possible charter breach N/A N/A N/A N/A N/A   3789
Charter not required to be recorded (that is, withdrawn, not upheld)             8731
TOTAL 327 23 8381 560 15351 1789 26431
2013-14 Financial Year
Access to our Services N/A N/A N/A 307 434   541
Access to their Information N/A N/A N/A 34 88   302
Correct Action Taken N/A N/A N/A 339 3986   2125
Courteous and Respectful N/A N/A N/A 38 316   334
Decisions Explained Clearly N/A N/A N/A 31 50   61
Fair and Reasonable N/A N/A N/A 23 307   330
Information and Advice N/A N/A N/A 331 582   713
Plain and Clear Language N/A N/A N/A 4 9   33
Privacy and/or Confidentiality N/A N/A N/A 2 36   38
Relevant Circumstances Considered N/A N/A N/A 4 25   29
Review Rights Respected N/A N/A N/A 3 31   34
Timely Response N/A N/A N/A 359 9564   9723
Complaints not recorded as possible charter breach N/A N/A N/A N/A N/A   3403
Charter not required to be recorded (that is, withdrawn, not upheld)             8923
TOTAL 342 14 8567 615 12988 1403 23929
2014-15 Financial Year
Access to our Services N/A N/A N/A 43 778   821
Access to their Information N/A N/A N/A 36 237   253
Correct Action Taken N/A N/A N/A 97 2033   2140
Courteous and Respectful N/A N/A N/A 34 344   358
Decisions Explained Clearly N/A N/A N/A 32 80   82
Fair and Reasonable N/A N/A N/A 6 60   66
Information and Advice N/A N/A N/A 97 603   700
Plain and Clear Language N/A N/A N/A 3 33   36
Privacy and/or Confidentiality N/A N/A N/A   38   38
Relevant Circumstances Considered N/A N/A N/A 4 41   45
Review Rights Respected N/A N/A N/A 3 5   6
Timely Response N/A N/A N/A 91 8609   8700
Complaints not recorded as possible charter breach N/A N/A N/A N/A N/A   2798
Charter not required to be recorded (that is, withdrawn, not upheld)             8841
TOTAL 374 20 8447 384 12621 2798 24644

Source: ATO

3.84 The above statistics in Table 5 differ markedly from those initially provided in Table 4. Table 5 suggests that in the last three years in over 50 per cent of complaints cases, a Charter principle may have been breached. However, this is misleading as a significant proportion of the captured breaches are not Charter related. For example, across all years, the ‘Timeliness’ measure, which is a service standard, accounts for the vast majority of these cases - 74 per cent in 2012-13, 71.4 per cent in 2013-14 and 66.8 per cent in 2014-15. This high proportion is likely due to complaints relating to delayed refunds and income tax return processing rather than breaching of a Charter principle.

3.85 The ATO has indicated that the above data, whilst referring to some Charter principles, is not used for Charter reporting. Rather, it is a real-time source of intelligence from complaints to enable early identification of potential systemic issues which may require remedial action.

3.86 The ATO has also advised that there is a low level of confidence in the Table 5 data. First, staff may not fully understand the nature of the commitments that they are selecting, particularly where the issues relate to more nuanced principles such as fairness and reasonableness. Secondly, ATO officers have to select one commitment for each complaint and, in more complex cases, there may be multiple issues and/or Charter principles in dispute. Lastly, not all Charter principles are available to select such that breaches of some principles may not be captured.

3.87 The ATO does not appear to have any other statistical data that directly measures its performance against the Charter principles. Given the differences in the two sets of data provided to the IGT and their respective limitations, it is not possible to accurately determine the extent of non-compliance with the Charter principles.

3.88 Following extensive discussions between the IGT and the ATO, the ATO has advised that whilst it does not directly and specifically measure against each and every Charter principle, indirect measurements are obtained through the abovementioned surveys and other corporate measures. These are reported in publications such as the ATO’s annual report, its Reinvention blueprint, the corporate plan, its website and internal executive and conformance reports.275 The ATO has provided the IGT with a table which illustrates how the Charter principles are aligned with its corporate measurement and reporting. This table is set out below.

Table 6: Taxpayers’ Charter alignment to ATO corporate measures and reporting
Charter element Corporate measure Reported in
Treat you fairly and reasonably Perceptions of fairness in disputes Annual report (annually, external)
Executive report (quarterly, internal)
Treat you as being honest unless you act otherwise Contemporary and tailored service is an established approach to how we engage based on risk Reinventing the ATO program blue print and corporate plan
Offer you professional service and assistance Community satisfaction with ATO performance Annual report (annually, external)
Executive report (quarterly, internal)
People surveyed agreed that the ATO is respectful and courteous Our commitments to service (monthly, external)
Annual report (annually, external)
Quality performance measures (customer service), including professionalism, have been met Our commitments to service (monthly, external)
Annual report (annually, external)
Accept you can be represented by a person of your choice and get advice It is well established taxpayers can be represented by an agent of their choice. This is through a range of services including the Tax Practitioners Lodgment Service (TPALS).
Respect your privacy Privacy and confidentiality form part of our conformance reporting framework Conformance reporting
(monthly)
Keep the information we hold about you confidential
Give you access to information we hold about you People surveyed agreed that the ATO provides information sufficient to meet their needs Our commitments to service (monthly, external)
Annual report (annually, external)
People surveyed agreed that the ATO lets them know of status or delays Our commitments to service (monthly, external)
Annual report (annually, external)
If we are unable to finalise your individual electronic tax return within 30 calendar days of receipt we will inform you Our commitments to service (monthly, external)
Annual report (annually, external)
Number of lost and ATO held superannuation accounts Annual report (annually, external)
Executive report (quarterly, internal)
Value of lost and ATO-held superannuation accounts Annual report (annually, external)
Executive report (quarterly, internal)
Help you to get things right People surveyed agree the ATO makes it easy to access services and information Annual report (annually, external)
Executive report (quarterly, internal)
Our commitments to service (monthly, external)
People surveyed agreed that the ATO provides information sufficient to meet their needs Our commitments to service (monthly, external)
Annual report (annually, external)
People surveyed agreed that the ATO informs them of what they need to do Our commitments to service (monthly, external)
Annual report (annually, external)
Quality performance measures (accuracy) have been met Our commitments to service (monthly, external)
Annual report (annually, external)
People surveyed agreed that the ATO is knowledgeable in dealing with me Our commitments to service (monthly, external)
Annual report (annually, external)
Number of interpretative guidance products, objections and rulings provided Annual report (annually, external)
Executive report (quarterly, internal)
Effectiveness of public advice issued Annual report (annually, external)
Executive report (quarterly, internal)
Explain the decisions we make about you People surveyed agreed that the ATO lets them know of status or delays Our commitments to service (monthly, external)
Annual report (annually, external)
If we are unable to finalise your individual electronic tax return within 30 calendar days of receipt we will inform you Our commitments to service (monthly, external)
Annual report (annually, external)
Private rulings – if we find that your request raises particularly complex matters that will take more than 28 calendar days to resolve after receiving all the necessary information, we will aim to contact you within 14 calendar days to negotiate a due date Our commitments to service (monthly, external)
Annual report (annually, external)
Respect you right to a review Proportion of objections which result in litigation Annual report (annually, external)
Executive report (quarterly, internal)
Respect your right to make a complaint Percentage of complaints received resolved in 15 business days Our commitments to service (monthly, external)
Annual report (annually, external)
Make it easier for you to comply People surveyed agree the ATO makes it easy to access services and information Annual report (annually, external)
Executive report (quarterly, internal)
Our commitments to service (monthly, external)
Reduction in the unintended administrative costs to business of complying with government regulation Annual report (annually, external)
Executive report (quarterly, internal)
People surveyed agreed that the ATO was easy to do business with Our commitments to service (monthly, external)
Annual report (annually, external)
People surveyed agreed that the ATO informs them of what they need to do Our commitments to service (monthly, external)
Annual report (annually, external)
Be accountable Reporting on specific legislation Annual report (annual, external)
An outline of structures and processes in place for the entity to implement principles and objectives of corporate governance Annual report (annual, external)

Source: ATO

ATO guidance and training

3.89 Training on the Charter is mandatory for all new staff in the ATO and is required to be completed within three months of commencement. Compliance with the requirement to complete the course is monitored by the individual officer’s manager.276

3.90 There is also a suite of guidance material that is available to assist ATO officers in understanding and applying the principles set out under the Charter, including, but not limited to, the following Chief Executive Instructions (CEI):

  • Information Disclosure CEI 2014/07/03;
  • Managing Complaints and Compliments CEI 2014/06/02;
  • Privacy and Taxpayer Confidentiality CEI 2014/06/06;
  • Respecting Clients’ Right of Review CEI 2014/06/04;
  • Employee Identification CEI 2014/06/03; and
  • Records Management CEI 2014/01/01.

3.91 All ATO staff are required to comply with CEIs. Each of the CEIs has a set of questions and answers or video to compliment the instructions and assist staff to better understand and apply them.

3.92 In addition to the above, the IGT’s research through the ATO’s online internal learning and development system identified some courses which included discussion on the nature of the Charter and its interactions with ATO compliance strategies, client service and decision making.277 These courses tended to discuss the Charter as part of a broader training topic, such as the conduct of audits, rather than on its own.

3.93 In order to gauge the level of awareness that staff had in relation to their responsibilities under the Charter, amongst other things, the ATO conducted a staff survey in 2014 that included the question: ‘Are you aware of the key messages and your responsibility in relation to Taxpayers’ Charter, complaints and compliments? (Y/N)’. The ATO advised that of the 1,396 participants, 95.7 per cent of respondents indicated that they were aware of the Charter.278 There did not appear to be any further follow up questions on the issue to determine the degree to which the respondents understood their responsibilities in that regard.

Currency of the Charter

3.94 The ATO has recognised that ‘in today’s rapidly changing global environment it needs to do more if it is to keep pace with technology and the evolving expectations to deliver the level of service that the community demands.’279 This includes keeping the Charter relevant and contemporary. The ATO has also acknowledged that any process of updating the Charter will necessarily consider whether it should include additional items which will require a significant level of consideration and consultation with key stakeholders, including government, the community and the tax profession.280

3.95 As noted earlier in Table 2, the ATO most recently reviewed the content of the Charter in 2010. That review took into account legislative and procedural changes, as well as input from ATO staff and a revised version of the Charter was released in July 2010.281 Whilst that review did not result in any of the Charter principles being changed, it did update the presentation of the Charter into a smaller and more concise document, reducing the number of explanatory booklets from nine to seven.282 A further explanatory booklet, Taxpayers’ charter – respecting your privacy and confidentiality, was withdrawn in 2014 following the publication of the ATO’s Privacy Policy.

3.96 In 2013 and 2015, the ATO also commenced preliminary work to consider further reviews of the Charter. However, those initiatives were not officially considered or endorsed by the ATO executive and therefore did not proceed.283

3.97 During discussions with the IGT, the ATO has also advised that the Charter formed part of the considerations in the ATO’s Reinvention Program and how it would interact with initiatives to improve ATO relationships with tax practitioners as well as its digital transformation. However, the ATO has advised that whilst there are ongoing internal discussions amongst ATO stakeholders, it has not yet formalised a view as to the Charter’s role in the reinvention program.284

IGT observations

Enforceability of the Charter

3.98 Submissions made to this IGT review, the research leading to the Model Taxpayer Charter as well as the examination of comparable jurisdictions seem to suggest that some improvements may be required in terms of taxpayer rights in Australia.

3.99 Whilst the status of taxpayer rights in Australia compares favourably with a broader range of countries, as set out in Appendix 3,285 and the Charter principles are largely aligned with comparable jurisdictions, it has been noted that taxpayers in those jurisdictions have access to additional layers of protection. For example, in the USA there are a series of statutory causes of action for damages as a result of certain inappropriate IRS action, there are common law remedies, such as the doctrine of legitimate expectation, in the UK as well as the overlay of EU law and the oversight of the CJEU and ECHR and, in Canada, common law seems to be expanding the tort of negligence to apply to certain actions of the CRA.

3.100 Whilst the IGT recognises that some changes are needed in the Australian context and that a legislated charter may provide the highest level of taxpayers’ protection and improve perceptions of fairness, there are a number of challenges with such an approach.

3.101 First, converting the existing Charter principles into legally enforceable rights is unlikely to address fundamental issues of access to justice and redress for the majority of affected taxpayers. As was noted earlier, stakeholders tended to agree that the Charter was a vehicle predominantly relied upon by individual and small business taxpayers, many of whom are unrepresented and unlikely to have the resources to pursue legal action to enforce their rights. Even those taxpayers with sufficient funds are likely to litigate the underlying substantive issue before taking action for lack of fair treatment or breach of Charter principles.

3.102 Secondly, the IGT has not been able to identify any comparable jurisdictions where a comprehensive set of taxpayer rights has been legislated including remedies for any breach. The IGT notes that the USA appears to be the most advanced in this space, having incorporated the principles of its Taxpayer Bill of Rights into the IRC. However, the IGT notes that the legislative mandate in the USA currently only requires the Commissioner of the IRS to ensure that his or her staff are aware of, and adhere to, the Taxpayer Bill of Rights. Admittedly elsewhere in the relevant US legislation there are more enforceable rights than in Australia, however, their application is limited. Similarly, the legislative provisions in the UK in relation to Your Charter currently only require the HMRC to monitor and annually report on its performance against Your Charter.

3.103 Thirdly, the creation of new legislation to embody taxpayer rights may give rise to unintended consequences such as frustrating the proper administration of the tax system. Whilst it may not be impossible to exclude or minimise such unintended consequences, it does present a significant challenge.

3.104 Fourthly, the ATO’s current monitoring of its compliance with the Charter is inadequate in measuring instances of breach of Charter principles. As a result, it is not possible to accurately determine the extent of non-compliance which would be helpful in formulating an appropriately tailored solution. It should also be noted that appropriate monitoring and public reporting may be at least part of the solution, in their own right. They can be as effective a deterrent as enforceable remedies, particularly where taxpayers are unlikely to seek relief in court, albeit lacking the entrenched nature of legislation.

3.105 Having regard to the above, the IGT is of the view that before considering enshrining a comprehensive set of taxpayer rights in legislation, it would be prudent to take other remedial actions (discussed below) and allow them some time to take effect. If such actions do not yield the desired outcome, legislative action may become necessary in the long term. All of these remedial actions, which are described in some detail below, can be implemented by the ATO without the need for legislative mandate. However, if the ATO does not agree to do so or does not implement them appropriately, legislative provisions such as those currently in force in the USA or the UK may become necessary in the short term.

Commitment to the Charter

3.106 It is imperative that the ATO is not only fully committed to the Charter principles but that it is seen to be so in all its interactions with taxpayers and tax practitioners. Instances where the ATO is seen to be challenging these very principles,286 as rare as they may be, undermine such commitment and its standing as a fair administrator in the eyes of the community.

3.107 The IGT acknowledges that when a taxpayer seeks to take legal action to enforce the Charter, the ATO must present the legally correct position which is that the Charter confers no rights and cannot be legally enforced. However, the ATO’s arguments along these lines are viewed as an attempt to resile from its commitments. Where this continues to occur, legislatively mandated provisions will be more keenly sought and the situation may become unworkable in the long term. The IGT considers that the ATO should make use of alternative dispute resolution to address matters relating to the Charter to the extent possible. In doing so, the ATO would limit the instances in which it finds itself in the invidious position of having to advance a legal argument which diminishes its standing in the eyes of the community.

3.108 In standing behind the Charter, the ATO must also treat allegations of
non-adherence seriously. The IGT considers that they should be treated with the same gravity as transgressions of the law. In fact, as the Charter is a formal direction of the Commissioner to his staff, any non-compliance with its principles is arguably a breach of the Australian Public Service Code of Conduct.

3.109 Concerns relating to breaches of the Charter should be examined on their own merits, as the ATO does with substantive or technical tax issues. Whilst the two may sometimes be aligned, a taxpayer who has obtained the outcome they seek may nonetheless hold valid complaints and concerns regarding the conduct of the ATO leading up to that outcome. By addressing the two issues independently, the ATO demonstrates that the conduct of staff is equally as important as the application of the law.

3.110 It should also be noted that dealing with Charter-related issues separately from the underlying substantive tax issues and reporting on how they are resolved has the added advantage of tempering taxpayer expectations. It would minimise instances in which taxpayers lodge a complaint believing that where it is upheld, it would result in a substantive tax outcome, such as an assessment being withdrawn or a debt being written off.

Education and support for ATO staff

3.111 The ATO could do more to educate and support its staff to ensure that they adhere to Charter principles in their day-to-day interactions with taxpayers.

3.112 At present, there is limited guidance and support for ATO staff seeking to apply the Charter other than the materials contained in CEIs. Whilst the CEIs provide some guidance to staff on how to comply with certain Charter principles, such as ‘respect your privacy’, ‘keeping information confidential’ and ‘respect your right to a review’, they are of limited practical assistance and do not canvass all of the ‘rights’ which appear in the Charter.

3.113 In addition to the CEIs, the ATO’s online training platform provides some courses which touch on the Charter principles. The IGT notes that each of these courses considers the Charter in the context of other actions or activities undertaken by the ATO. Moreover, they do not form a mandatory part of the ATO officer’s learning and development and, as self-paced modules, they do not appear to contain any specific post-completion assessments.

3.114 There does not appear to be any other periodic refresher courses or other initiatives to ensure that ATO staff remain engaged on Charter issues. The IGT notes that there is some precedent for such refresher courses with training on topics such as security, privacy and fraud being rolled out and made mandatory for all staff to complete on a periodic basis.287

3.115 As noted earlier, the ATO is seeking to transition the Charter into business-as-usual process, with ATO staff expected to be ‘living the Charter’. Whilst this is an aspirational goal, the IGT considers that such an approach would only be effective where ATO staff are consistently made aware of the relevant principles and support is made available to them in discharging their responsibilities. Such an approach would be similar to the mandatory and periodic fraud prevention training that the ATO implements to ensure that staff knowledge and awareness of the principles required for compliance are current and up-to-date. The ATO could use the intelligence gathered from Charter-related complaints, as discussed earlier, to develop and target training and refresher courses to focus on areas of the Charter which are causing the most complaint or concern.

3.116 The IGT also believes that improved access and guidance on the ATO’s intranet would assist staff to quickly and easily locate resources. As noted earlier, a current search of the ATO’s intranet for Charter-related guidance yielded only pages relating to the APS Values with the relevant link to the Charter being inactive.

3.117 The ATO could also draw upon the work and experiences of HMRC in promoting its relatively new Your Charter and the roles of Charter Champions and Charter Advocates as a source of advice and input on adherence to the Charter.

Monitoring, investigating and reporting on breaches of the Charter

3.118 It is clear from the earlier discussion that there is currently no direct and comprehensive measurement of the ATO’s compliance with the Charter although it does undertake a number of other assessments which may be indicative of its performance against certain Charter principles.

3.119 Comprehensive measurement of ATO’s performance against the Charter is critical in reinforcing its role, determining the extent of breaches and devising an appropriate solution. Measuring every breach arising out of the many interactions the ATO has with the community may be impractical, however, appropriate monitoring of its complaint handling function may hold the key.

3.120 The simplest way to gauge the ATO’s compliance with the Charter, at a base level, would be to use its complaints function to match the complaints received against the Charter principles. This would be a more accurate measure of the level of adherence to the Charter principles. It would also assist in pinpointing specific areas for improvement by identifying aspects of the ATO’s service delivery that are causing taxpayers the most concern. Where allegations of breach are upheld, the discrepancy between what had occurred and the actions that ought to have been taken could be used as a basis for further training and guidance of its staff. Where allegations are not upheld, the ATO could consider whether the Charter principles have been appropriately communicated and understood by the community at large and if any remedial action is necessary.

3.121 The measurement of ATO’s compliance with the Charter through the complaints function could also be used to augment its current reporting. For example, the accuracy of the Conformance Statements could be compared with the number of Charter breaches alleged in complaints cases. Similarly, complaints data could also be used to confirm the outcomes of the ATO’s surveys. Such comparisons may assist in explaining some of the seemingly contradictory survey results, for example, why respondents seem to believe the dispute resolution process was fair but that the outcome was not.

3.122 The above measurement and analysis should be publicly reported, similar to the approach adopted in the UK. In doing so, the ATO would achieve a number of objectives. First, it would address the lack of information currently available on the ATO’s process for dealing with Charter-related complaints. Secondly, it demonstrates publicly the weight and significance that the ATO places upon the Charter and its commitments made to the community. Thirdly, it communicates to staff that their performance against the Charter is of the utmost importance.

Updating the Charter

3.123 It is clear from the foregoing discussion, and as the ATO itself has acknowledged, that the Charter is in need of an update to reflect the changing nature of interactions between taxpayers, tax practitioners and the ATO. In doing so, the ATO needs address a number of issues including:

  • the service that taxpayers can expect to receive where the ATO engages external service providers, and taxpayers rights and remedies where that service falls short;
  • the level of protection that is afforded to taxpayers engaging in digital interactions;
  • any rights of tax practitioners and the extent to which they should be differentiated when they act as an agent or in their personal capacities;
  • recent law changes, such as those mentioned earlier in respect of GST refunds; and
  • whether any new ‘rights’, or existing ‘rights’ (such as the ‘right’ to seek a review from the IGT) which are not listed in the current Charter, need to be incorporated having regard to the change and evolution in tax administration and the ATO/taxpayer relationship in more recent years.

3.124 The IGT believes that there would be significant benefits in the ATO drawing on the work and insight of comparable jurisdictions as well as those of the Model Taxpayer Charter as part of this work. Moreover, it is important that the ATO consults widely with a range of stakeholders to ensure that any refreshed Charter reflects their concerns and addresses any potential gaps.

3.125 As part of its update, the ATO should also consider how best to present the new Charter. The current presentation of the Charter has a number of limitations as highlighted earlier. A single page summary, as is done in the USA, would be particularly helpful for individuals, small businesses and unrepresented taxpayers more generally, enabling them to quickly form an appreciation of their rights and obligations. Such a document could also provide appropriate links or references to the basis of the ‘rights’ and the course of action for redress. For example, it should make it clear whether the ‘right’ is at common law, in legislation or is merely an administrative ‘right’ or expectation. In the case of the latter, the reader should be directed to the complaint making mechanism within the ATO and/or the IGT, whilst in the other two instances, they should be informed that court action is an option in appropriate cases. Such an approach presents a useful summary but also makes more information easily available for those who require it as well as addressing the dangers of intermingling enforceable rights with mere expectations as outlined above.

Whether rights are contingent on meeting obligations

3.126 The IGT recognises that including ‘rights’ and ‘obligations’ in the same document suggests that they are interdependent and may give the community the impression that rights are only afforded to taxpayers to the extent that their responsibilities are fulfilled. The Charter, as it stands, and other publicly available documents do not make clear the ATO’s position on this matter.

3.127 As a fundamental principle, the IGT is of the view that rights should be afforded to all taxpayers who participate in the tax system, not just those who are compliant. To draw an analogy with criminal law, those who are accused of having committed criminal offences are afforded a range of inalienable rights such as those of representation, fair hearing and efficient administration of justice.

3.128 The IGT has not found any support in other research to suggest otherwise. The research of the OECD, Model Taxpayer Charter and the comments of the NTA supported the need to balance taxpayer ‘rights’ and ‘obligations’ but none indicated that ‘rights’ should be withheld where the taxpayer did not, or is perceived to have not, complied with their ‘obligations’.

3.129 The IGT believes that the ATO should clearly state its position as to whether the ‘rights’ contained in the Charter are available to all taxpayer in all circumstances. Where the ATO needs to depart from such a position, it should clearly explain and justify such a course of action.

Adequacy

3.130 The question of whether there are sufficient taxpayer rights in Australia, and whether the ‘right’ in the Charter should be expanded, is not simple or straightforward.

3.131 The research undertaken by the UNSW suggests that there are a range of other rights available to taxpayers but there are difficulties associated with exercising these rights in a practical sense. It is also evident that common law developments and legal regimes in other jurisdictions may offer taxpayer rights which may not be available in Australia. However, it is not clear to the IGT whether the improvement would result in tangible benefits to taxpayers.

3.132 For example, the IGT agrees that taxpayers should have a degree of finality in their dealings with the ATO and whilst the Charter does not specifically stipulate this right to finality (as in the USA’s Taxpayer Bill of Rights), statutory review and amendment periods provide a degree of certainty in their interactions.288

3.133 In respect of the limitation periods for debt recovery in the USA, it has become clear that the nature of the right is subject to some exceptions. The IGT understands that this statute of limitation only requires that the IRS collect the debt by a levy, or the filing of a levy or initiating proceedings in court before the expiry of ten years.289 In her 2015 annual report, the USA’s NTA conducted a study of IRS collection of debt and the debt cycle which found that a majority of debt is collected well before the ten year statutory period anyway. The total debt amount halves within the first two years and halves again over the next two years.290 At the same time, there is also evidence of some extreme cases where debts as old as 30 years have been recognised by US tax courts and determined to be recoverable by the IRS.291

3.134 Similarly, the doctrine of legitimate expectation has seemingly evolved in a manner which has afforded UK taxpayers a broader avenue for redress against the revenue authority. The IGT notes that this development has only recently emerged and has not been found in other jurisdictions considered in this review. It should be noted that all such cases brought before the UK courts may not succeed. As the doctrine is a creature of common law, whether it flourishes in the UK or finds favour within Australian law remains to be seen. In any event, to the extent that the ATO strictly honours its Charter commitment as stipulated above, taxpayers will have little need to rely on this doctrine.

3.135 The IGT continues to maintain an interest in areas of the law which can be improved in terms of taxpayer rights. One such area has been the onus of the burden of proof. As set out above, the issue has been identified on a number of occasions and in a number of different contexts. The IGT had previously made a recommendation to the Government in this regard as has the SCTR. Ultimately, the decision of whether the burden of proof should be reversed, and in what circumstances, remains a matter for the Government. The IGT acknowledges the ongoing concerns in this area and should these concerns manifest broadly amongst the complaints received or submissions made, the IGT may revisit the matter specifically in a more targeted manner.

Recommendation 1

The IGT recommends that the ATO:

  1. promote and educate taxpayers and tax practitioners about the Charter and in particular draw their attention to its principles at the outset of interactions which are likely to generate dispute or disagreement, such as reviews, audits, objections and litigation;
  2. treat allegations of any breaches transparently and address them independently of the substantive issues;
  3. enhance staff awareness and understanding of their obligations under the Charter through more practical training and guidance;
  4. improve its monitoring and reporting of the Charter by matching complaints cases against the Charter principles and publicly reporting on its annual performance; and
  5. consult with stakeholders on updating the Charter and in particular consider the following:
    1. the need to include any higher standards set by the ‘Reinvention Program’;
    2. its application to digital interactions, tax practitioners when acting as agents or in their personal capacities and the interaction between taxpayers and any external service providers engaged by the ATO;
    3. the impact of any recent law changes or evolution in tax administration and whether any additional or existing ‘rights’ should be incorporated;
    4. the need for a clear statement that Charter ‘rights’ are not contingent on taxpayers discharging their ‘obligations’; and
    5. the most effective way of presenting the Charter, such as a single page summary of all ‘rights’ and ‘obligations’ with links to further information.

ATO response

  1. Partially agree. Our approach is to provide clients with information about their relevant rights and obligations when we interact with them, and in the information we make publicly available – what they need to know, when they need to know it.

    We will improve visibility of the Taxpayers’ Charter principles to clients at the outset of interactions that are likely to generate dispute or disagreement.

  2. Partially agree. The ATO currently treats allegations of any breaches through the ATO's complaints process. This process provides taxpayers and their representatives with an independent, separate avenue to raise a complaint about breaches of the Taxpayers’ Charter.

    We will make our treatment of allegations of breaches more transparent in the appropriate circumstances.

  3. Partially agree. Mandatory induction training to all staff includes information about the Charter. There are also other ATO training packages to assist staff in applying the Charter depending on the type of interaction or situation: for example; in decision making, in client service, in explaining decisions or applying penalties.

    Most of the rights and obligations outlined in the Charter are at the heart of the ATO’s Vision, Mission, Values statement, the Corporate Plan and the Reinvention program blueprint, especially the five guiding principles we are using to drive our transformation:

    1. easy to get things right
    2. tailored experience
    3. excellent service
    4. fair and respectful treatment
    5. service delivered in the most effective way

    The ATO will explore ways to further enhance staff awareness and understanding to ensure staff are, and continue to be, aware of their obligations under the Charter, and also how they are to apply (‘live’) the Charter in their business as usual interactions and activities.

  4. Agree in principle. The ATO currently uses complaints data in real time to ensure we understand the current issues and impacts on the client experience. We use this data to prioritise our activities and focus areas.

    A number of charter principles are also reflected in our corporate measures and reported in our annual report.

    In order to improve our monitoring and reporting of the Charter, we will:

    • on an annual basis, report against themes, how they link to the Charter principles and what we have done against these;
    • include questions in our client experience surveys with the results to be reported on an annual basis
    • streamline and improve the data collected through the complaints process.
  5. Agree. The ATO considers the Charter is robust and comprehensive. Our aim is to achieve mutual trust and respect in our relationships with all those who deal with us.

    We will undertake consultation with stakeholders, taking into account the considerations raised in paragraphs i) to v), in order to examine if there is a need to update the Charter given the transformation underway in relation to culture and services. Where required following consultation, we will update the Charter to ensure it remains contemporary and reflects what our clients and all stakeholders can expect when dealing with us.


213 Harris v Deputy Commissioner of Taxation [2001] NSWSC 550.

214 Macquarie Bank Ltd v Commissioner of Taxation [2013] FCAFC 119; Macquarie Bank Ltd v Commissioner of Taxation [2013] FCA 887.

215 ATO, Your rights (5 January 2016) <www.ato.gov.au>.

216 ATO, Your rights and obligations (5 January 2016) <www.ato.gov.au>.

217 Michael D’Ascenzo, ‘Letter to Auditor-General in Response to Charter Audit’ (27 May 2008).

218 Above n 26.

219 ATO, Communication to the IGT, 15 September 2016.

220 ATO, ‘Program Blueprint’ (19 August 2016) <www.ato.gov.au>.

221 Above n 219.

222 Ibid.

223 Ibid.

224 Above n 216.

225 ATO, ‘Taxpayers’ charter – Questions and answers’, p 2 (internal ATO material).

226 Above n 26; ATO, Annual Report 2015-16 (2016) p 14.

227 Above n 220.

228 ATO, Large Business and Tax Compliance (2014); ATO, Tax Compliance for Small to Medium Enterprises and Wealthy Individuals (2012).

229 ATO, ‘Small business entity concessions’ <www.ato.gov.au>.

230 ATO, ‘Small Business Assist’ <www.sba.ato.gov.au>

231 Above n 216.

232 OECD, ‘Tax Administration 2015: Comparative information on OECD and other advanced and emerging economies’ (2015) p 284-285.

233 International Monetary Fund, ‘Manual on Fiscal Transparency’ (2007), p 32.

234 European Commission, Fiscal Blueprints – A path to a robust, modern and efficient tax administration (2007) pp 47, 63.

235 Ibid, p 47.

236 See for example: Commissioner of Taxation, Annual Report 2014-15 (2015), p 116; Commissioner of Taxation, Annual Report 2013-14 (2014), p 126; Commissioner of Taxation, Annual Report 2012-13 (2013), p 115.

237 Institute of Charted Accountants of England and Wales, ‘Charter Annual Report 2015-16’ <http://www.ion.icaew.com/TaxFaculty/post/Charter-Annual-Report-2015-16>.

238 Ibid.

239 Above n 201.

240 The debate is described and analysed in Duncan Bentley, ‘A Taxpayers’ Charter: Opportunity or Token Gesture?’ (1995) 12 Australian Tax Forum 1; Duncan Bentley, ‘Formulating a Taxpayers’ Charter of Rights: Setting the Ground Rules’ (1996) 25 Australian Tax Review 97; and Duncan Bentley, ‘The Taxpayers’ Charter: More than a Mission Statement’ (1996) 4 Taxation in Australia - Red Edition 259.

241 Multiflex Pty Ltd v Commissioner of Taxation [2011] FCA 1112; Taxation Administration Act 1953, s 8AAZLGA; ATO, Exercise of Commissioner’s discretion to retain a refund, PSLA 2012/6, 9 July 2015.

242 ATO, ‘ATO Response to the Model Taxpayer Charter’, (Briefing Paper December 2013), p 2.

243 Ibid.

244 Harris v Deputy Commissioner of Taxation [2001] NSWSC 550.

245 ATO, ‘Library of Taxpayer Rights and Protections’ (February 2016), pp 12-13.

246 IGT, Annual Report 2012-13 (2013), p 7.

247 ATO, ‘Briefing for the Commissioner and Second Commissioner – Taxpayers’ Charter’, (Briefing Paper, February 2014), p 1.

248 Above n 242, p 3.

249 Ibid, pp 3-4.

250 See for example: Ian Young, ‘Protecting Taxpayers Rights,’ Taxline (November 2015) p 10.

251 Above n 23, p 3.

252 Taxpayer Charter, Objectives of a Model Taxpayer Charter, <www.taxpayercharter.com> last accessed 24 May 2016.

253 NTA, 2013 Annual Report to Congress – Volume One, p 6.

254 Internal Revenue Code (USA), Title XIV, Rule 142.

255 Above n 33, p 307.

256 IGT, Review into the Australian Taxation Office’s administration of penalties (February 2014), p 42.

257 Above n 42, p 115.

258 Above n 11, p 36.

259 Above n 50, p 70.

260 Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1 [148].

261 IRS, Your Rights as a Taxpayer, (December 2014) <www.irs.gov>.

262 TAS, The Right to Finality (undated) <www.taxpayeradvocate.irs.gov>.

263 See for example: Limitation Act 1969, s 10 (NSW); Limitation of Actions Act 1958, s 32 (Victoria).

264 ATO, Guiding principles and models (13 January 2015) <www.ato.gov.au>.

265 Valerie Braithwaite and Monika Reinhart, ‘The Taxpayers’ Charter – Does the Australian Taxation Office Comply and Who Benefits?’ (Working Paper No 1, Centre for Tax System Integrity, Australian National University, 2000).

266 Millward Brown, ATO Single Corporate Perception Survey 2014-15 (2015).

267 Millward Brown, Perceptions of Fairness in Disputes (2015).

268 Ibid.

269 Above n 266, p 3.

270 Millward Brown, Perceptions of Fairness in Disputes Wave 3 (2015).

271 TNS Social Research, Review of the Taxpayers’ Charter 2005 (2006).

272 ATO communication to the IGT, 25 February 2016.

273 ATO communication to the IGT, 23 December 2015.

274 ATO communication to the IGT, 6 May 2016.

275 ATO communication to the IGT, 27 October 2016 (Taxpayers’ Charter alignment to corporate measurement and reporting).

276 Above n 274.

277 ATO, Compliance Strategies for taxpayers; ATO, Client service: Introduction; ATO, Decision-Making in the ATO.

278 Above n 64.

279 Above n 242, p 4.

280 Ibid.

281 Above n 76.

282 Ibid.

283 Above n 242, p 4; ATO, ‘Review of Taxpayers’ charter’, (Executive summary, 9 September 2015), p 1.

284 IGT meeting with the ATO, 11 May 2016.

285 See also: International Fiscal Association 2015 Basel Congress, Cahiers de droit fiscal international Vol 100b – The practical protection of taxpayers fundamental rights (2015).

286 Harris v Deputy Commissioner of Taxation [2001] NSWSC 550; Macquarie Bank Limited v Commissioner of Taxation [2013] FCAFC 119.

287 ATO, ‘Mandatory training in the ATO’, 2 June 2016 (internal ATO document).

288 Income Tax Assessment Act 1936, s 170.

289 Internal Revenue Code (USA), § 6502(a).

290 NTA, 2015 Annual Report to Congress, Volume 2 ’IRS Collectability Curve’, p 39.

291 Beeler v Commissioner of Internal Revenue, T. C. Memo. 2013-130.