The committee yesterday said its inquiry found that some disputes can go awry because of the ATO’s strong powers, the fact that the ATO does not engage with taxpayers, and because the ATO’s investigators and reviewers, for the great majority of disputes, are located in the compliance area of the ATO.
Committee chair Bert van Manen MP said poorly managed disputes have severe consequences for taxpayers.
“The committee received evidence that taxpayers suffer enormous emotional stress. Disputes can contribute to marriages breaking-up,” he said.
The report, which focuses on small taxpayers and individuals, acknowledges the improvements that the ATO has made over the past few years. However, the committee believes the ATO can build on these reforms with further action.
A key recommendation is that the government should create a new second commissioner role for the management of objections and litigation, independent of the ATO's compliance and legal areas. Further, the ATO should:
• have more robust protocols on communication between auditors and objections officers;
• have more robust processes for making allegations or findings of fraud or evasion;
• have the burden of proof in relation to fraud or evasion after the statutory recordkeeping period has expired;
• be more reasonable in terms of deadlines and volumes when making information requests of taxpayers; and
• consider having a direct discussion with taxpayers at the various stages of a dispute.
Mr van Manen said the committee does not want the report to be seen as lessening the ATO’s role in collecting revenue legally due.
“However, there is scope for improvement and full implementation of the committee’s recommendations will produce a fairer tax system, leading to better outcomes for taxpayers and also for the ATO,” he said.
Michael Croker, head of Tax Australia, Chartered Accountants Australia and New Zealand, said the committee's report reflects many concerns expressed by CAs in their day-to-day dealings with the ATO, “particularly for taxpayers in the SME sector”.
“The most interesting recommendation is that an additional ATO second commissioner position be created to manage objections and appeals and that there should be stricter controls on communications between auditors and objection officers.
“This particular recommendation acknowledges the importance of knowledge sharing and quality decision-making processes within the ATO. It is vital to confidence in our tax system that, to the maximum extent possible, the ATO applies well-considered and appropriate processes which accord similar treatment to different taxpayers in similar circumstances when dealing with tax disputes.”
However, Mr Croker said it will be interesting to see how the commissioner of taxation responds to this particular recommendation.
“He may feel that he has enough executive management support already, particularly with key appointments from the private sector such as Andrew Mills (second commissioner), Jeremy Hirschhorn (head of public groups and international) and Kirsten Fish (chief tax counsel)," Mr Croker said.
He also outlined three key recommendations of particular interest to accountants:
1. "The Committee believes that findings or allegations of fraud or evasion should only be made by an SES officer. The Committee would also like to see the burden of proof on these issues switch back to the ATO once the statutory record-keeping period for taxpayers has expired."
2. "The Committee would like the ATO to fully implement a prior recommendation of the Inspector-General of Taxation, namely that ATO staff should consider whether to conduct direct conferences with taxpayers at multiple points in a dispute. In its response to the IGT in 2012, the ATO stated that it agreed to this approach in its large and more complex compliance work. The Committee believes that the opportunity for engagement should be available to all taxpayers."
3. "The ATO can make unreasonable requests for information from taxpayers, both in terms of volume and deadlines. Taxpayers found this particularly frustrating because they saw it as an unnecessary abuse of power and it would turn a routine aspect of a dispute into a major one. The ATO should apply a minimum of 28 days for all information requests, it should permit some negotiation around them, and it should give reasons for them, typically based on a risk hypothesis."