The Inspector-General of Taxation’s (IGT) review into the Taxpayers’ Charter (Charter) and taxpayer protections was undertaken to examine concerns raised in relation to the Australian Taxation Office’s (ATO) adherence to the Charter, its currency and effectiveness. Specifically, stakeholders consider that there are limited avenues for enforcement of the Charter principles, diminishing its effectiveness in affording protection to taxpayers.
As part of the review, the IGT compared the Australian approach with those partner jurisdictions, such as the United States of America, the United Kingdom, Canada and New Zealand. Additionally, a significant body of academic and other research was considered, including those of the Organisation for Economic Cooperation and Development, the International Bureau of Fiscal Documentation and professional bodies (including the Asia-Oceania Tax Consultants’ Association, Society of Trust and Estate Practitioners and Confederation Fiscale Europeene) that collectively represented more than half a million tax practitioners worldwide. Moreover, the IGT also commissioned the University of New South Wales to research and report on existing taxpayer rights in Australia and, from that research, drew observations regarding the difficulties taxpayers may face in seeking to enforce their rights.
The IGT has acknowledged the calls from certain stakeholders for the enactment of additional legislative rights or for the Charter, or a similar document, to be enshrined in legislation. However, the IGT’s research of the legislative regimes of comparable jurisdictions indicated that none of these jurisdictions had a comprehensive legislated charter or taxpayer bill of rights and Australia compared favourably in terms of legislative protections. Moreover, the IGT noted that whilst legislated rights would provide the highest degree of protection, it is unlikely to be of significant assistance to taxpayers who are unable to enforce such rights due to the costs associated with doing so.
Having regard to the above, the IGT has formed the view that, before any further enforceable remedies are considered, there are administrative measures which the ATO could implement to realise significant improvements. Such improvements include ensuring that the Charter is at the forefront of the ATO’s interactions with the community and its performance against the Charter principles is appropriately measured and publicly reported. Such public reporting is the key to promoting the ATO’s adherence to the Charter as transparency and accountability better inform the community of an agency’s performance. It can be likened to IGT reviews of the ATO’s administration. Whilst the IGT and the Commissioner cannot direct each other to take any particular course of action, public scrutiny requires appropriate IGT recommendations and ATO responses.
The ATO is seeking to embed a better client experience in all its interactions with the community through its reinvention program. To the extent that such improvements are realised, the IGT believes they should be captured in an enduring document, such as the Charter. Accordingly, a recommendation has also been made for the ATO to undertake consultation with a view to updating the Charter with any such improvements as well as addressing other relevant matters such as the role of, and the ATO’s interaction with, tax practitioners and the increasing use of digital interactions.
In response to other concerns raised by stakeholders, the IGT has also examined two other areas relevant to taxpayer protection. The first area is taxpayer access to compensation where they have suffered a loss or detriment as a result of unreasonable ATO action. The focus was on the Scheme for Compensation for Detriment caused by Defective Administration (CDDA Scheme), a discretionary Commonwealth scheme through which agencies are able to pay compensation in circumstances where there is no legal requirement to do so. The second is the Model Litigant Obligation (MLO) which sets out standards of conduct for all Commonwealth agencies when conducting litigation.
The IGT has made recommendations to improve the ATO’s administrative approach to these areas to the extent possible, noting that responsibility for the policy framework rests with Department of Finance and the Attorney-General’s Department, respectively. In respect of the CDDA Scheme, the IGT has recommended that the ATO raise awareness of the availability of the scheme as well as to ensure that taxpayers are able to access internal review of decisions where there are sufficient grounds warranting reconsideration. As a related issue, the IGT has also recommended that the ATO ensure its staff are supported in providing effective apologies in appropriate circumstances. In relation to the MLO, the IGT has recommended, amongst other things, that the ATO work with the ATO Complaints Unit to enhance its investigation of allegations of MLO breaches to address perceptions of bias and lack of independence.
The IGT has also examined an emerging area of concern for stakeholders in relation to the ATO’s exchange of taxpayer information with foreign revenue authorities. While the ATO’s procedures in this regard align with international practices and appeared reasonable, there was minimal public information on which taxpayers and tax practitioners could rely. Accordingly, the IGT has made a recommendation for increased public guidance on the ATO’s approach in this regard, particularly with respect to data security, notification to taxpayers where their information is being exchanged with other revenue authorities and opportunities for them to consider that information.
Overall, the IGT has made four recommendations with which the ATO has either agreed in full, in part or in principle. However the ATO’s level of agreement and their accompanying commentary create a level of uncertainty as to how and to what extent the recommendations would be implemented. Accordingly, to the extent that stakeholder concerns persist, the IGT may undertake a follow-up review to assess the effectiveness of resulting ATO actions and, if necessary, make recommendations for government to consider mandatory reporting of the ATO’s compliance with the Charter and additional enforceable remedies.