The final report of the royal commission saw 76 recommendations laid out by Commissioner Kenneth Hayne, 14 of which were addressed to the regulators.
“Too often, financial services entities that broke the law were not properly held to account. Misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished,” said the report.
Speaking to Accountants Daily, Institute of Public Accountants general manager of technical policy, Tony Greco said there were lessons to be drawn from the defunding of regulators, which ultimately led to the “deficiencies” laid out in the report.
Mr Greco believes that if the government does not act on funding regulators, including the Tax Practitioners Board, then it would have failed to learn from the royal commission.
“It is important to understand that the underfunding of the past has contributed to the regulators falling short and that is something that is coming to roost and the fact that they’ve all received a boost in funding is recognition of that issue that has plagued the regulators,” said Mr Greco.
“The Tax Practitioners Board is a good case in point where they’ve been screaming for resources to do the job and they’ve gone back to Treasury and they’ve been basically cut at the knees on previous attempts until they got a lifeline this year.
“It gives you an example of how hamstrung some regulators are and I think the same can be said about ASIC. Part of the issues that are unravelling or have unravelled has got to do with resourcing and it won’t answer for all the deficiencies that are happening in relation to the findings but certainly part of the problem has been the resourcing.”
The TPB case for funding
In 2017–18, the ATO allocated an operating budget of $16.84 million to the TPB for its direct costs, a similar amount to its 2010–11 budget of $16.83 million, despite a three-fold jump in registered agents over the corresponding period.
In the 2017–18 federal budget, the government announced the TPB would receive a $20.1 million boost over four years, although the amount would be funded from a user-pays model through a fee hike for tax practitioner registration fees.
“They’ve knocked on every door possible and the fact that they’ve got extra money this year was due recognition that they weren’t doing enough in the compliance space ,” said Mr Greco.
“In the case of the TPB, more resourcing translates to more compliance because there were limited resources to do compliance.
“Being able to do more of that type of work will eventually translate to less bad practices and the bad apples of the profession being taken out.”
Too little, too late?
“You can argue it is catch up time for the regulators but you have to start somewhere and I think the regulatory space is now being looked at as part of the solution going forward and it’s better now than never,” said Mr Greco.
A recommendation from the commission report called for the establishment of a new oversight authority for APRA and ASIC, independent of government, to assess the effectiveness of each regulator in discharging its functions and meeting its statutory objects.
Mr Greco believes it wouldn’t hurt to introduce extra scrutiny to the regulators to ensure they are performing as they should.
“If the regulators were accountable for what they were responsible for, you’d think it would be necessary but I suppose at the end of the day, every regulator needs a bit of scrutineering,” he said.
“Once upon the time the ATO was complaining about too many scrutineers and now the regulators should also be subject to some layer of scrutiny to ensure they are meeting their own objectives.
“It seems a bit heavy handed but if who they report to can’t fulfil that scrutineering role, there is a need for someone to undertake that responsibility.”
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Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.