Breaking news is that the Australian Labor Party will, if they win government at the next election, restructure the ATO so that it is forced to use fairer processes in its handling of tax disputes. The ALP media release is here.
We are delighted with this first step by the ALP, but it doesn’t go far enough.
We have made it clear (and very public) that our faith in the ATO to operate fairly, even legally, has totally collapsed. We explained this in evidence to a Senate Inquiry in late June. We also provided a detailed submission.
We made reference to one judge who, late last year, said in relation to the ATO:
“…Departures from model litigant behaviour can, in particular circumstances, constitute professional misconduct, a contempt of court or an attempt, contrary to s 43 of the Crimes Act 1914 (Cth), to pervert the course of justice.”
The ALP Policy
At least the ALP recognises the problem in a tangible way. Its policy is to:
“…legislate to establish a new position of Second Commissioner – Appeals within the Tax Office, reporting to the Commissioner of Taxation, to head up a new Appeals area within the Australian Taxation Office.”
This would be an improvement on the shoddy, incompetent, bullying processes the ATO currently applies.
But the problem with the ALP policy, however well-intentioned and even though it marks an improvement on the status quo, is that it leaves the process inside the ATO.
The Needed Reform
The only solution that can restore trust in Australia’s tax administration is to take appeals and prosecutions outside of the ATO.
In other words, the principles of good policing should apply, namely:
- The ATO should only be a collection and auditing body.
- A totally separate body, under the Attorney-General’s Department, should handle disputes and prosecutions. We suggest that it might be called the Department of Tax Prosecutions (DTP).
In line with good policing practices elsewhere, the ATO would recommend cases to the DTP. If the ATO conducted a bad or illegal assessment, the DTP would tell the ATO to do its job again. We’ve summarized the needed reform here. And we’ve detailed the reform in our position paper, The Power to Audit is the Power to Destroy.
Fundamental ATO reform also requires the creation of a Small Business Tax Tribunal, external to the ATO, with no lawyers allowed to participate.
Nonetheless, the ALP is at least taking a first step in the right direction.