The review was conducted at the request of the House of Representatives Standing Committee on Tax and Revenue to assist with the large business and high wealth individual themes of its inquiry into tax disputes.
Ali Noroozi, inspector-general of taxation, said the underlying cause of concerns raised about the ATO’s management of tax disputes is the lack of the original decision makers' independence of the officers reviewing such decisions on the taxpayer’s request.
“Arguably, the ATO has had the least amount of separation between these functions when assessed against revenue authorities of comparable jurisdictions,” Mr Noroozi said.
“It is, therefore, not surprising that many taxpayers felt that their cases were not being independently reviewed and that the system was not treating them fairly and equitably.”
The inspector-general’s report recommends the creation of a separate and dedicated appeals group led by a new second commissioner.
Commenting on the report, Aldrin De Zilva, partner, national leader, Deloitte Lawyers said he welcomes and supports the inspector-general’s recommendation as providing a constructive framework for independent and objective review and decision making.
“Although Deloitte Lawyers considers a complete separation of the functions, in line with the US model, would be preferable, we view the inspector-general’s recommendation to establish the appeals group as being a step in the right direction.
“The recommendation would ensure matters are dealt with by officers having the relevant commercial and legal expertise and remedy any taxpayer concerns about the independence and objectivity of the review process.”
Deloitte Lawyers said it has acted for many large business clients in Administrative Appeals Tribunal (AAT) and Federal Court proceedings against the commissioner.
“Our experience is consistent with the positive litigation outcomes for taxpayers highlighted in the inspector-general’s report over the last seven years,” Mr De Zilva said.
“The report notes that 83.5 per cent of AAT cases and 77.1 per cent of Federal Court cases have resulted in a variance to the ATO’s original decision in favour of the taxpayer. These results support the need for the creation of a separate and independent agency that could serve to circumvent the need for costly litigation.”
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