A scathing assessment of the tax office has been tabled in Parliament, making 37 recommendations for reform as the agency tries to recover from a series of scandals.
The House Standing Committee on Tax and Revenue has advised more transparency about ATO conduct in small-business disputes, a restructure of appeal and compensation processes, and that the inspector general of taxation (IGT) conduct a broad outsourcing review of the body.
But it also wants the IGT to be renamed to the taxation ombudsman, a recommendation made by former IGT Ali Noorozi last year, to reflect “an expanded and fully operational complaints assistance role”.
Changes to the charter guiding the tax office’s operation and a recommendation for the government to consider establishing an advisory board to advise on the management of the organisation were also advised.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
An independent second commissioner should also head an “autonomous appeals group” focused solely on tax disputes, the committee recommended.
The standing committee reports annually on ATO affairs, monitoring the tax agency’s ongoing reinvention program and dubbing 2016-17 as an “annus horribilis” (Latin for ‘horrible year’) for the ATO.
This time around, the 2016-17 reporting period was noted as “challenging”, marred by controversy surrounding Operation Elbrus and online system outages enraging tax professionals.
“As the committee commenced its annual report review in March 2018, there was an acceleration of bad press as the ATO fought off allegations of systemic unfairness to small business, and performance-driven debt action, which were televised,” the committee said.
“These developments strengthened the committee’s resolve to conduct a more rigorous performance review of the ATO’s progress against reinvention values.”
In total, 30 submissions were received, 18 of which were from taxpayers in dispute with the ATO.
A spokesperson for the ATO said it was considering the report.
“The ATO is currently considering the recommendations recently made by the House of Representatives Standing Committee on Tax and Revenue, following its inquiry into the 2016-17 Annual Report,” the spokesperson said.
“In line with standard procedure, the Government is required to respond to the House of Representatives Committee recommendations within six months of their presentation.”
Dispute resolution spotlighted
Following a separate assessment of its small-business conduct penned by former IGT Ali Noorozi and legislative announcements from both major political parties, the ATO has been reforming its dispute resolution and appeals frameworks.
The committee expressed support for some of this work but advised a need to go further in a few areas, notably in relation to the taxation ombudsman and a second independent commissioner.
It wants the ATO to provide more clear and accurate advice on timelines, ATO obligations to taxpayers and contact details for the IGT and Australian Small and Family Enterprise Ombudsman (ASBFEO) for taxpayers subject to audits and assessments.
The ATO should provide data on the total number of appeal applications lodged to the Administrative Appeals Tribunal, the number of taxpayers using dispute resolution services and at which level of severity disputes are resolved, the committee said.
A new ATO charter?
To support better transparency and dispute resolution, the ATO has been advised to “reframe” its charter to provide “that taxpayers be fair, honest and timely in engagement with the ATO and the tax system but also sets equivalently high service obligations for ATO staff and policymakers in tax administration”.
This new version of the charter should include a “pledge” to provide “robust internal controls” in order to “ameliorate the impacts of conflicts of interest on the Australian tax system and on specific taxpayers” and ensure the tax office doesn’t impair independent decision-making.
Conflicts of interest were brought into question earlier this year when it emerged the ATO is administering the government’s free tax clinic program, handing out grants for a scheme designed to help taxpayers with tax disputes.
The committee wants the ATO to be more transparent with small businesses on a number of fronts.
It advised the ATO to separate out figures about its controversial use of garnishee notices for dispute resolution within its annual report.
It also wants the body to differentiate between large, small and micro-business debt and report on how much debt there is and its age.
A renamed taxation ombudsman should also be better resourced and do more reporting on procedural fairness in cases where the ombudsman disagrees with the ATO, the committee said.
In its last recommendation, the committee said the taxation ombudsman should support low-resourced taxpayers by offering them funding for appeals where it disagrees with the ATO, and that these cases should be reported on annually.
ATO review on the horizon
The current IGT has been advised to conduct a broad review into outsourcing at the ATO as the organisation transforms its performance and culture.
The committee wants the review to look at how effective outsourcing has been in the ATO’s ongoing reinvention program and assess the appropriate balance between in-house ATO staff and contractors.
Committee chair and Liberal MP Jason Falinski said the ATO’s digital reinvention is changing “every aspect” of the tax administration framework and it has “never been more important” for the ATO to “retain community confidence”.
“That it meets its core obligations to procedural fairness, and that it is seen to do so while ensuring its online platforms are as efficient and as easy to use as promised,” he said in a statement published on Thursday.
The full list of recommendations, as well as the committee’s report, can be accessed here.
This story was updated at 12:22PM February 22 to include comment from the ATO.