On 16 April 2016, the Inspector General of Taxation (IGT) lodged a further Submission to to the House of Representatives Standing Committee on Tax and Revenue’s (Committee) Inquiry into the External Scrutiny of the Australian Taxation Office (Inquiry). This was to supplement its initial Submission made in March 2016 after having the benefit of seeing the other submissions mentioned in the extract below.

The following extracts will give some sense of the thrust of these submissions.

In particular, there are some pointed observations made by the IGT at the conclusion of his further Submission (see heading 6, ‘The way forward’ – at bottom of second extract below). In broad terms he says that the ATO seems to misunderstand how the Government intends that the ATO be scrutinised and the role of the IGT. He also says that it is difficult to get the Commissioner (himself) and the Second Commissioners to engage formally and meaningfully on the ATO’s big issues.

[TT Summary] [LTN 74, 20/4/16]

Extract of IGT’s initial submission

Executive Summary

The IGT welcomes the opportunity to make submission to the House of Representatives Standing Committee on Tax and Revenue (the Committee) to assist in its Inquiry into the External Scrutiny of the Australian Taxation Office (ATO).

As the Committee has previously found, an examination of the Australian Government scrutiny landscape shows that the ATO is not subject to any more scrutiny than the vast majority of public sector agencies, which are generally scrutinised by Parliament and its committees, the Australian National Audit Office and the Commonwealth Ombudsman (Ombudsman). The Committee has noted that the level of scrutiny was appropriate, given the importance of the ATO’s role. It is ‘too big to fail’ and appropriate levels of governance and independent scrutiny must be available to guard against system failures whilst also ensuring that due processes are followed and taxpayers are afforded procedural fairness.

Whilst the Inspector-General of Taxation (IGT) supports the removal of duplication, inefficiencies and unnecessary costs, any major policy change to reduce external scrutineer functions needs to be informed by a comprehensive analysis that weighs costs against the benefits and risks to arrive at the net benefit. A cursory look at the ATO’s key risks, including systemic and serious system failures (such as those giving rise to the establishment of the IGT) demonstrates the need to exercise extreme care in relation to any change to external scrutineering arrangements.

In respect of the IGT, specifically, the Government’s recent policy decision to transfer the Ombudsman’s tax complaint handling function to the IGT has already created significant efficiencies and minimised duplication. It has provided a single-port-of-call for investigating and reviewing taxation and superannuation administrative matters. The IGT is now essentially performing the functions of a tax specialist ombudsman in respect of the ATO and the Tax Practitioners Board, streamlining the number of agencies with oversight of the ATO on tax administration matters. The specialist nature of the IGT office has, for example, resulted in over 35 per cent of complaints being resolved without needing ATO intervention and, when the ATO’s input is required, the majority of the remaining matters have been resolved with 15 business days.

The Government’s decision has also consolidated the complementary functions of complaints handling and broader reviews. These two aspects of the IGT’s core work go hand-in-hand. The former provides real-time insight into emerging issues which, together with the latter, enables the IGT to move quickly to address problems before they escalate into major causes of taxpayer discontent or serious system failures. Moving forward, the IGT may undertake more targeted reviews in an expedited manner to address particular areas where significant complaints have been received.

The IGT believes that there are opportunities for the ATO to further manage its interactions with external scrutineers, including the IGT, to realise greater efficiencies and cost reductions. Such opportunities include improved engagement and collaboration based on full, frank and expeditious information sharing.


Extract from the IGT’s further submission

1. Introduction

1.1 This is a supplementary submission of the Inspector-General of Taxation (IGT) to the House of Representatives Standing Committee on Tax and Revenue’s (Committee) Inquiry into the External Scrutiny of the Australian Taxation Office (Inquiry). The IGT has previously provided the Committee with a submission that details the response to the Committee’s terms of reference (the Primary Submission), and accordingly, will not reiterate the points made therein in this supplementary submission except where it is necessary to provide context.

1.2 The IGT has now had the benefit of considering the published submissions made to the Inquiry, including those of the Australian Taxation Office’s (ATO) dated 11 March 2016 (ATO Submission) as well as the transcript of the ATO’s testimony provided to the Committee on 16 March 2016 (the Hearing). It appears that there are misunderstandings as to how the system of scrutineering operates within Government and in particular with respect to the ATO.

1.3 By way of assisting the Committee in its Inquiry and to promote greater understanding of the Australian Government’s system of scrutineering, the IGT believes that it would be helpful to clarify a number of misconceptions in the following key areas:

  • the scrutineering arrangements;
  • the IGT work program and review topic selection;
  • report recommendations; and
  • complaints handling.

1.4 These areas are discussed in turn followed by a general observation on the way forward, the need for clearer and more focused communications on processes and interactions between the ATO and its scrutineers as a means of improving awareness, efficiency and effectiveness.

[After dealing with all of these matters in turn, the IGT looks ahead with the following.]

6. The way forward

6.1 The ATO’s public comments, its written submission and statements at the Hearing reveal that there appears to be a misunderstanding of the Australian Governmental scrutineering system and the role of the IGT, particularly since the May 2015 Legislative Amendments. Furthermore, there needs to be better engagement and improved dialogue between the two agencies which would, in turn, also facilitate a better understanding of scrutineering and the role of the IGT.

6.2 As set out in the Primary Submission and earlier in this Supplementary Submission, there are multiple opportunities throughout the IGT’s review and complaints handling processes for the ATO to engage with the IGT to discuss relevant issues and potential solutions. Furthermore, the IGT has always welcomed ATO briefings on upcoming events and initiatives, potential outages or any other issues with respect to which the IGT can assist the ATO manage community expectations and any adverse impacts. At an operational level, the IGT believes this is functioning effectively with IGT review and complaints officers engaging effectively and efficiently with their ATO counterparts as outlined in the Primary Submission.

6.3 The IGT believes that at a higher level, the ATO and IGT senior executives need to engage periodically to discuss strategic developments, emerging issues and opportunities for improvement in both agencies. Historically, such engagement was scheduled and took place periodically as key commitments for the leadership of both agencies. However, more recently, it has been a challenge to engage the Commissioner and Second Commissioners in dialogue of this kind.

6.4 The IGT believes that full and frank discussion on a periodic basis between the IGT and the ATO leadership would provide a structured forum through which concerns may be raised and addressed promptly. It would be useful to formalise such an arrangement in a similar manner to the agreement reached by the ANAO, Ombudsman and the IGT following the JCPAA recommendation noted earlier.