Draft legislation includes changes to promoter penalty and secrecy laws as well as stronger sanctions and a more powerful TPB.
Canberra unveils sweeping reforms in wake of PwC scandal
The government has followed through on its August promise to crack down on misconduct by tax practitioners in the wake of the PwC scandal with draft legislation that would massively increase regulatory powers and penalties.
The draft legislation factsheet said the promoter penalty laws had failed to keep pace with the growth of sophisticated and complex tax exploitation schemes that operated across jurisdictional boundaries.
The government proposed sweeping revisions that include measures to:
- Broaden the definition of “promoter” and “tax exploitation scheme”.
- Significantly increase maximum penalties (to $782.5 million) and extend the regime to cover large global entities, such as multidisciplinary firms and accounting partnerships.
- Extend the window for the ATO to commence civil proceedings over tax exploitation schemes from four years to six years.
- Expand the ATO rulings covered by misrepresentation rules.
- Strengthen the ATO’s ability to address the promotion of tax exploitation schemes to multinationals.
The government said reforms to the promoter penalty laws “will not prevent tax advice on minimising tax within the bounds of the law”.
The proposed laws would also increase the power of regulators by amending the secrecy provisions that apply to the ATO and TPB so that they can share information about suspected breaches in confidence.
“The PwC matter has highlighted that the ATO and TPB secrecy laws can prevent the regulators from disclosing serious misconduct even where it would be in the public interest to do so,” the factsheet said. “The reforms will enable any similar misconduct to be reported and acted on in a timely way.”
Also in the revisions are greater protection for whistleblowers who disclose tax practitioner misconduct to the TPB, an extension to the time limit on TPB investigations from six months to 24 months, and more detailed disclosures in the TPB register.
“The TPB will also be empowered to publish information on the TPB Register related to findings of misconduct in connection to current or former PwC partners, as a result of the TPB’s further inquiries, even where their registration as a tax practitioner has expired,” the factsheet said.
“The government has tasked Treasury to undertake a review of the sanctions available to the TPB to discipline tax practitioners who have engaged in misconduct.
“The PwC matter has highlighted the need for the TPB to have access to a range of disciplinary powers to address contemporary forms of misconduct which match the circumstances and magnitude of breaches.”
Treasury would also:
- Review the TPB’s registration requirements for tax practitioners, with a particular focus on the education, qualification and experience requirements for new entrants and existing practitioners.
- Review the potential for further changes to the promoter penalty laws.
- Review the ATO’s information gathering powers to ensure they remain fit for purpose.
- Develop reforms that would improve the ATO’s ability to detect, prevent and address fraud.
- Review the secrecy provisions that apply to the ATO and TPB.
- Jointly with the Attorney-General’s Department review the use of legal professional privilege in Commonwealth investigations.
- Examine the legal, policy and governance frameworks of large accounting, assurance and consultancy firms to identify gaps and potential improvements.