The Government [on Fri 27.2.2015] released the Inspector-General of Taxation’s report on the ATO’s management of tax disputes.

The report was prepared at the request of the House of Representatives Standing Committee on Tax and Revenue to assist with the large business and high wealth individual themes of its Inquiry into Tax Disputes. The Inspector-General’s report will now be considered by the Committee as part of the Inquiry. In releasing the 149-page report, the Government said the “recommendations by the Committee, as well as those of the Inspector-General, will be considered by the Government on conclusion of the Inquiry”.

The Inspector-General observed that a key concern of taxpayers “appears to be a lack of separation between the ATO’s original decision makers and its officers who review such decisions” and that this gives “rise to a lack, or perceived lack, of independence leading taxpayers to believing their cases were not reconsidered afresh and they were denied a fair hearing”. This in turn would lead some taxpayers to believe that they cannot have their matter objectively considered until they reach the AAT or the Federal Court.

The Inspector-General noted that while the ATO’s recent initiatives represent a positive step in relation to its management and resolution of tax disputes, “there is a need for further improvements which was sustainable over time and made available to all taxpayers including small business and individual taxpayers”.

In this regard, the Inspector-General recommended the “creation of a separate and dedicated Appeals Group, led by a new Second Commissioner, to embed the improvements within the ATO structure and provide a framework that is less dependent on the views and ideals of the ATO leadership of the day”. The proposed new Appeals Group would manage and resolve tax disputes for all taxpayers including the conduct of pre-assessment reviews, objections and litigation as well as championing the use of ADR throughout the dispute cycle.

The Inspector-General said this move would also bring the ATO more in line with comparable international revenue authorities.

[LTN 39, 27/2/15] [IT 27/2/15]