The Government Tue 8.7.2014, released the Inspector-General of Taxation’s report into the ATO’s administration of penalties. According to the IGT, “the objective of the penalties regime to foster ‘voluntary compliance’ may be hindered by a lack of sufficient differentiation between a range of taxpayer behaviours, the inability to receive interest on money paid for unsustained penalties and the broad application of false or misleading statement penalties where no tax shortfall arises.”
The report made 1 recommendation for the Government to consider specific opportunities to improve the current tax penalty regime and encourage greater voluntary compliance. The recommendation suggested that the Government consider whether:
- the current penalties regime could benefit from more categories to treat taxpayers according to their behaviour;
- penalties are appropriately aligned to factors that influence taxpayer behaviours; and
- taxpayers should be compensated for the time-value of money paid on unsustained penalties.
Given the interaction between the penalties regime and the broader system of taxation administration, the Government said it will consider the above issues “once the Tax White Paper process has been finalised”. (Source: Acting Assistant Treasurer’s media release, 8 July 2014.)
The report also made 9 recommendations for the ATO’s consideration. The recommendations were aimed at improving the ATO’s penalty decisions, guidance material and identification, collection and analysis of penalty information, as well as taxpayer perceptions that penalties may be used as leverage to influence primary tax disputes. The ATO agreed, in full, in part or in principle, with all of the recommendations. Where the ATO disagreed, the IGT noted the ATO had sought to address the underlying issue to the extent that it believed its resources could allow.
[LTN 129, 8/7/14]