Bell v TPB – TPB publicises its victory in the AAT (upholding their decision to deregister an agent, for want of compliance in his own affairs) but is the TPB independent enough to be doing this?

On 3 August 2020, the Tax Practitioners Board (TPB) posted an article pointing to it’s decision to terminate the registration of at tax agent: Mr Duncan Bell, for not complying with his own tax affairs (this decision was upheld in the AAT, in a decision made on 14 July 2020 and reported on 23 July 2020. Without expressing any view on whether Mr Bell deserved to lose his livelihood in this way, I make editorial comment on cases like this, in the light of the TPB’s deficiencies in ostensible ‘independence’.

See below for details.

[Tax Month – August 2020]

The Tax Practitioners Board ( TPB) has issued a reminder that tax practitioners have an obligation to manage their personal tax obligations and that a failure to do so raises serious doubts about a practitioner’s capacity to competently handle other people’s tax affairs. Case in point, Bell v TPB [2020] AATA 2424 where the AAT affirmed the TPB’s decision to terminate the tax agent registration of a Darwin based tax agent for not complying with his own personal tax affairs and owing a significant tax debt to the ATO, which at times was as large as $750k since 2012. In the case the tax agent argued that the TPB’s decision to terminate his registration was not a proportionate response to his conduct.

Speaking about the case Deputy President Bernard J McCabe said, “The behaviour (of Mr Bell) sets a poor example – for his clients, and for other tax agents. It also threatens the effective working relationship that must exist between each agent and the ATO”. “Mr Bell’s behaviour undermines the integrity of the system of self-assessment. That system depends on the expectation that individual taxpayers, shepherded by their tax agents, will comply with their basic obligations”, Mr McCabe continued.

(AAT Ref 2019/6934, a decision in the Taxation and Commercial Division, of Deputy President Bernard McCabe, on 14.7.20 made in Sydney – Bell v Tax Practitioners Board [2020] AATA 2424]

LTN 148, 3/8/20

AAT affirms the TPB decision to terminate tax agent owing a large tax debt

On 14 July 2020, the Administrative Appeals Tribunal (AAT) affirmed the Tax Practitioners Board’s (TPB) decision to terminate the tax agent registration of Darwin based tax agent, Mr Duncan Bell for not complying with his own personal tax affairs and owing a significant tax debt to the Australian Taxation Office (ATO), which at times was as large as $750k since 2012.

The case provides a warning to tax practitioners that it is important to deal effectively with the Australian Taxation Office (ATO) and engage with them if their own tax situation gets in arrears.

In his appeal, Mr Bell had argued that the TPB’s decision to terminate his registration was not a proportionate response to his conduct.

Speaking about the TPB’s decision to terminate Mr Bell’s registration however, Deputy President Bernard J McCabe observed, ‘The behaviour (of Mr Bell) sets a poor example – for his clients, and for other tax agents. It also threatens the effective working relationship that must exist between each agent and the ATO.

Deputy President McCabe continued, ‘Mr Bell’s behaviour undermines the integrity of the system of self-assessment. That system depends on the expectation that individual taxpayers, shepherded by their tax agents, will comply with their basic obligations.

‘Mr Bell has failed to comply with these obligations over a long period. He has not learned any lessons from the legal proceedings that have been brought against him. There is no reason to suppose he will learn anything or modify his behaviour in response to a written caution from the Board. More stringent action is required to bring home the lesson.’

The AAT decision gives a clear message that a tax practitioner has an obligation to manage their personal tax obligations and that a failure to do so raises serious doubts about a practitioner’s capacity to competently handle other people’s tax affairs.

[TPB website: Bell termination of registration article]

[EDITORIAL COMMENT – Equally, there is a widespread view amongst tax practitioners, and taxpayers, that the TPB ought to be as independent, from the ATO, as the Inspector-General of Taxation (IGT).

• Tax Practitioners and taxpayers pressed this point last year with the Keith James review of the TPB, and the tax agent’s legislation that it administers (see related TT article).
• Independence is important, and needs to be seen to be done as well as actually existing. The IGT does this better than the TPB in that it leases its own premises, rather than taking space in the ATO’s premises. The IGT hires its own staff, whereas the TPB takes, I understand, nearly 100% of its staff on secondment from the ATO.
• The TPB has every interest in sanctioning tax agents for failures on client matters, but the rationale is more tenuous if tax compliance is only wanting, in the tax agent’s own affairs.
• True it is that a lack of tax compliance, in an agent’s own affairs is no ornament to their professional standing, but tax compliance failures can arise for a great many reasons, and with varying degrees of culpability.
• In this author’s view, it should be a rare case, involving significant culpability, that leads to an agent having their registration as a tax agent suspended or terminated, and their livelihood taken away from them, for failures only in their own affairs. There are a range of lesser sanctions that could be more thoughtfully and effectively applied, in my opinion.
• In this author’s opinion, the ATO is too enthusiastic, to use another means, bolster it’s normal compliance actions, against tax agents, in way they can’t with taxpayers generally. This is by putting agents’ livelihoods at risk, by referring them to the TPB for potential sanction.
• Again, if the TPB had demonstrable independence, from the ATO, they could stand as a credible bulwark against any excesses of the ATO, by refusing to rubber stamp these referrals.
• But the TPB is staffed by ATO officers, who have temporarily changed hats, so there is less reason for confidence, that an inappropriate referral will be rejected.
• Further, the process of investigation can be fact and detail heavy, making it difficult for the Agent to have any practical opportunity to get justice.
• I have seen this from a matter on my own desk. The investigation took 5 months, with no contact back to the Agent, then a submission in excess of 200 pages, was made to the the Board’s compliance committee, mirroring the ATO material and recommending that the Agent’s registration be terminated. The Agent had 14 days to reply (c/f the 5 months to prepare the report) and the TPB ‘generously’ gave the Agent another 7 days. The Agent  made submissions, in reply, but the TPB moved to deregister the agent without saying anything about the submissions, save to endorse basically the same allegations made to their compliance committee.
• And the process has got this far, without the Agent’s protestations, that all the apparent ‘non-compliance’ was just the consequence of the ATO failing, over some years, to correct a mistake, that the Agent alerted them to, regarding his own affairs. In the TPB’s decision, it even observed that the Agent showed no contrition (because, his belief was that the culpability lay with the ATO, who he’d spent some years trying to get them to listen to him).
• This Agent has appealed this decision to the AAT, but the ATO is not cooperating in giving him the evidence he needs to defend himself. In my opinion, there is a grave risk that Agent would get no better result before the AAT, and the AAT member could make observations, equally damning of the Agent, and equally judgemental about the effect on the tax system, as Deputy President McCabe did about Mr Bell.
• I have resolved, that the place to go, to get the ATO and the TPB to consider the Agent’s central (and related) allegations, is to the Inspector-General in her Tax Ombudsman role. There, I hope this Agent will get traction, with his allegations, in his defence.
• It is for these reasons that I express no view on whether Mr Bell deserved to lose his livelihood.
• I’ve held the views I’ve expressed, about the TPB’s independence for a long time, and been part of the professional groups, who pressed this issue hard, before the the Keith James inquiry. But I must confess to have been motivated to write this ‘editorial’ piece, in part from the insight I’ve got, by the particular matter that is on my desk.
• In view of the question marks hanging over the TPB’s independence, it is dangerous, in my opinion, for the TPB to be crowing about the number of agents it has deregistered, for want of tax compliance, only in their own affairs.]

Posted 16.8.20