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The office has responded to feedback and made the document more accessible, but a key failing remains.
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Why the revised ATO charter comes up short on accountability
30 June 2023
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12 minute read
On Monday this week, the ATO released the latest version of what was formerly called the Taxpayers’ Charter and is now known simply as the ATO Charter or Our Charter.
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This document has undergone major changes in that it is now only three pages (with links to some other information) compared with the former version at 65 pages. Assistant Commissioner Katherine Philp said: “The previous 65-page charter was inaccessible, dense, and did not reference the ATO support for people with vulnerabilities or those impacted by difficult times.”
To its credit, the ATO has listened to feedback from the community and has made a determined effort to make what is said in the charter more accessible to taxpayers.
However, it is fair to say that the vast majority of the taxpaying population would have no knowledge of the charter’s existence. It is not prominent on the ATO website; it is obscurely referenced in a link, among many others, at the foot of the ATO website home page.
Here I briefly explore the charter’s usefulness and shortcomings.
Why is there a charter?
The charter was first published in 1997 and arose from a concern within federal government that the balance of power in tax administration was heavily weighted in favour of the ATO. Accordingly, among other changes at the time, methods were sought to make things more even.
The Joint Committee of Parliamentary Accounts (JCPA) instigated the charter, but its recommendations stopped short of adopting taxpayer protection enshrined in law, such as in the US under its Taxpayer Bill of Rights. Apparently, the JCPA considered that enshrining taxpayers’ rights in legislation might overly complicate the tax administration process.
Accordingly, it was left up to the ATO to draft the charter and to have the sole responsibility for administering it. This has left the charter with a major source of criticism, which I refer to below.
What is its purpose?
The charter sets out standards that the ATO said its officers will adhere to. Further, it sets out expectations of the taxpaying community in relation to their responsibilities under the tax system.
It is good that Australia has a document like the charter. It is beneficial for the ATO, which is a very powerful government organisation, to set out the rights of taxpayers and the service standards that the taxpaying community can expect.
Has the charter worked?
After 25 years can we say that the charter has dealt with the concerns expressed by the JCPA in the early 1990s? Has it been worthwhile?
This is very difficult to say because there is insufficient empirical evidence to make a decision. The ATO is the sole arbiter on the charter and whether it has been complied with.
In December 2016, the Inspector-General of Taxation (IGOT) released a report entitled Review into the Taxpayers’ Charter and Taxpayer Protections. The IGOT reported a lack of stakeholder confidence in the charter. Among other things, it was difficult for the IGOT to obtain data about the performance of the ATO in relation to the charter. The ATO is the only organisation that can keep data in relation to this issue. It seemed that the ATO did not keep such data and had no internal mechanism to review its performance against the standards set out in the charter.
The key issue
The big problem with the charter is that there is no method of accountability in relation to whether the ATO is adhering to what it says. The ATO, as you would expect, said that it is complying with what the charter requires and that all officers of the ATO are expected to follow the requirements of the charter. Also, the ATO considers itself to be ultimately accountable to the Australian public.
All that is fine, but there is still no formal accountability mechanism and this is the major failing of the current charter. The charter does not have any legal status and is not enforceable. Whether the ATO has adhered to the requirements of the charter is largely an ethereal undertaking and is almost solely based on “feel-good” factors.
For the charter to be taken as a serious document in balancing the rights between taxpayers and the ATO, this must change.
I would prefer that there is a Taxpayers Bill of Rights enshrined in legislation. This would give the legal system (that is, courts) the ability to enforce its requirements. However, I consider that there is almost zero prospect of this occurring.
Without legislative force to the charter, it would be appropriate for an independent board appointed by the Treasurer to overview its operation and for the ATO to be required to report on its adherence to the document. This would include the collection of statistics regarding complaints about contraventions of the charter and how those complaints were resolved.
This responsibility could also be given to the IGOT, however, the office would need to be adequately resourced for the role. In many ways, the IGOT is best placed to undertake a constant review of the ATO’s adherence to the charter because it understands the office’s personnel and how they operate. The IGOT also operates in the role of the Taxation Ombudsman.
Conclusion
I commend the ATO for revising the charter to make it more accessible to the public. I would strongly encourage the ATO to promote more strongly the existence of the charter and overcome the dearth of knowledge about this important document.
However, I do not think that the charter will ever be truly taken seriously until there is a proper accountability mechanism that requires a review of the operation of the charter by an entity that is independent of the ATO.
John Jeffreys is director of John Jeffreys Tax Pty Ltd.
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