The Inspector-General of Taxation’s long-awaited Future of the Tax Profession review has made nine recommendations, composed of 28 parts, to the government, the ATO and the Tax Practitioners Board.
Of the 19 parts of the recommendations directed to the ATO, eight have been disagreed with, notably including the recommendation aimed at “ensuring that the fragile relationship between tax practitioners and the ATO is carefully managed”.
The review considered the impact that the commissioner’s statements regarding tax practitioners and work-related expenses deductions, and how many practitioners felt “unjustly attacked” in the absence of robust and detailed underlying data to accompany the commissioner’s claims.
It also examined the $8.7 billion individuals not in business tax gap report, where the ATO indicated that it made adjustments to 78 per cent of a sample of 618 tax returns prepared by tax agents.
“It is also concerning that there is significant difference between the information that the ATO has provided, as part of this review to the IGT, and the information that the ATO has since published as part of its tax gap analysis. Some commentators have also suggested that the sample size used in the gap analysis may be too small,” the IGT review said.
“The IGT can appreciate such a view and believes the ATO should also justify the use of such a small sample to bring into question the expertise and ethics of tax practitioners who feel unjustly attacked and their profession brought into disrepute.”
It added: “The relationship between tax practitioners and the ATO is important and needs to be fostered through mutual trust and respect. In doing so, the ATO’s messaging about concerns it may have needs to be appropriately considered to ensure that the delivery achieves the desired effect.
“Moreover, where such concerns need to be raised, the ATO needs to assure itself and the profession that they are accompanied by robust and properly tested data.”
In response, the ATO has disagreed with the recommendation that any future messaging regarding concerns it may have with the tax profession is appropriately considered and accompanied by robust and properly tested data.
“The ATO only raises concerns when we have robust and properly tested data,” the agency said.
“The ATO will continue to consult (within legal boundaries) with the tax professional associations and the profession on matters of concern and how to communicate them. It is not always appropriate to hold raising concerns which will alert the community until we are able to release the data.”
More to come.