Following the initial round of consultation into the independent review of the Tax Practitioners Board, independent review chair Keith James has now released a discussion paper highlighting the key considerations that will be taken into account by the review.
In considering the current state of sanctions available to the TPB, the discussion paper notes how the current regime lacks the agility and responsiveness to target and change particular tax agent behaviours, with both the TPB and the ATO supporting a broader range of sanctions.
The paper notes that the TPB seeks an amendment of the Tax Agent Services Act (TASA) to allow it to impose a sanction without the need to commence a formal investigation.
“Often there is a great deal of sufficient information available to impose a sanction without an investigation,” the paper said.
“Currently the TPB is forced to add delay and time by instituting a formal investigation simply because this is what the current legislation requires.”
The paper also notes how the ATO believes that “part of the ‘individual’s tax gap’ is attributable to poor behaviour by some tax practitioners”, citing how the ATO’s analysis indicated that the error rate for agent-prepared returns is 78 per cent, which is considerably higher than self-preparer returns at 57 per cent.
As such, the preliminary view of the review is that “change is necessary” and has identified a number of possible additional sanction tools.
These include QA audits, enforceable undertakings, interim suspensions, external intervention, administrative sanctions and infringement notices, a register of identified unregistered agents, broadened sanctions for deregistered agents, and permanent disbarment from the tax profession.
In particular, the suggested permanent disbarment from the tax profession looks to close a loophole where some terminated or deregistered practitioners re-entering the profession as an employee.
The paper notes that a number of submissions have suggested that the TPB is too focused on registered tax practitioners rather than stopping unregistered practitioners.
It also notes the suggestion that Victorian barrister Chris Wallis put forward to Accountants Daily to implement a mechanism to foil a business model used by unregistered practitioners.
The TPB concedes that its existing regulation of unregistered practitioners has been limited due to restrictions in the TASA and funding limitations.
It notes that the only compliance action available to the TPB to deal with unregistered tax practitioner behaviour is to apply to the Federal Court – a time consuming and costly process.
Correspondingly, the review suggests publishing “names and associated entities of unregistered tax agents”, which would allow “registered tax agents to operate knowing there is a level playing field”.
“The Code of Professional Conduct could be strengthened to prohibit tax practitioners from employing, paid or otherwise, individuals who have been either suspended or permanently disbarred from the tax profession,” added the review.
All parties with an interest in the review are urged to make a submission on the discussion paper, found on the Treasury’s website.
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.