The Inspector-General of Taxation (IGT), Mr Ali Noroozi, today announced terms of reference for his review into aspects of the Australian Taxation Office's (ATO) use of compliance risk assessment tools and called for stakeholder submissions.
"The ATO's tax risk assessment tools are an area of on-going concern to taxpayers and their advisers and it is these concerns that have led me to conduct this review," said Mr Noroozi.
Risk management is a generally accepted business approach that has been increasingly adopted by revenue authorities around the world. It is generally supported as a concept by stakeholders but concerns exist with its accuracy and application.
"Critically, the ATO uses tax risk assessment tools to risk rate taxpayers and identify who gets audited and how," Mr Noroozi said.
The ATO uses a wide range of risk assessment tools or processes that are specific to a given market segment or tax. For example, individual taxpayers may be affected by the 'tax refund integrity program' where refunds are withheld on triggering risk flags - it will be investigated as part of a separate IGT review to commence shortly. Another example is the ATO's 'Risk Differentiation Framework', a process applied to a range of taxpayers and advisers. Other tools include the ATO's small business benchmarks recently considered in the IGT report, Review into the ATO's use of benchmarking to target the cash economy.
"Importantly I want to know if the ATO risk tools are doing the job properly and not picking up too many compliant taxpayers in the net. We need to minimise unnecessary compliance costs which are a burden to both taxpayers and the tax system," Mr Noroozi said.
Other stakeholder concerns include:
- the accuracy, relevance, reliability and appropriateness of the inputs used;
- ATO compliance activities being commensurate with the identified level of risk and how ATO officers interact with taxpayers as a result of such risk rating; and
- the transparency of the process including limited ATO communication and taxpayer access to risk mitigation opportunities.
"I want to better understand your concerns so we can improve the tax system. I have set out guidelines to help you prepare your submissions. My aim is for balanced thinking on the issues and better outcomes for both taxpayers and the ATO," said Mr Noroozi.
Terms of reference and submission guidelines for the review are available on the IGT website: www.igt.gov.au. Submissions will be treated as confidential and due by 30 November 2012. SYDNEY 31 October 2012 Media contact: Ali Noroozi - (02) 8239 2107