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Published 25 October 2013 12:07, Updated 28 October 2013 07:32
‘A current theme that is gaining momentum in a number of jurisdictions is a bill of rights for taxpayers,’ Ali Noroozi says in his annual report. Photo: Nic Walker
Australian taxpayers could be given a bill of rights, with Inspector-General of Taxation Ali Noroozi identifying it as one of the key issues being consistently raised with his office.
In his 2012-13 annual report, tabled on late Friday morning, the man who is the watchdog over the Australian Taxation Office identifies “emerging themes” for the year ahead.
Noroozi also mentions creating a more cooperative relationship between his office and the ATO. The office was at one stage considered too political by Labor.
Lindsay Tanner, Labor’s finance spokesman at the time, had – as part of a “wasted spending” review in 2007 before the election of Kevin Rudd – publicly declared an intention to sack the Inspector-General of Taxation, David Vos, who had been highly critical of the ATO.
Noroozi says that since then, he has improved the “ATO’s perceptions of the IGT and increasingly the ATO is appreciating that”.
“In addition to being a scrutineer, my office can also play a role as an independent consultant,” he says in the report.
Noroozi’s “emerging issues” also include previously-raised concerns about the ATO’s “timeliness of delivery, staff capability and certainty of outcomes and compliance costs”.
He says taxpayers, who have long had issues with the ATO, have argued for a taxpayer bill of rights that is legally enforceable. Countries like the United States have it in some state jurisdictions, and Canada has also considered introducing one.
“A current theme that is gaining momentum in a number of jurisdictions is a bill of rights for taxpayers,” Noroozi says in the report, marking 10 years of the office of the Inspector-General of Taxation.
“The issue before us is whether the current Taxpayers’ Charter, which is an ATO administrative document, is sufficient or whether we should seek a legislative bill of rights with enforceable remedies.”
The Taxpayer Charter is not enforceable in a court of law. The Abbott government would have to pass legislation to introduce a new taxpayer bill of rights. With the federal budget under pressure, there’s questions about whether that would happen.
Treasurer Joe Hockey may be making public noises about having a less aggressive ATO, but ultimately, when it comes to the top end of town, our new political leaders are just as hungry as the former Labor government was in the need to collect greater revenue. Whether Tony Abbott and Joe Hockey think that a taxpayer bill of rights is a good idea remains to be seen, but in countries such as the US, where it’s been introduced in states like Colorado, opponents have argued that it’s created difficulty for the government to collect revenue.
Noroozi says a related issue is “whether the current compensation schemes for aggrieved taxpayers are adequate and administered appropriately”.
Anti-avoidance measures are another topic that has been a focus for global revenue authorities and Noroozi has already announced a review of them.
The ATO has stepped up its pursuit of multinationals, sparking concerns that Australia may go down the French path of slapping multi-million tax bills on companies. Companies including Apple, Google and Starbucks have been accused of avoiding paying tax on their big profits.
Noroozi has previously warned against moving ahead of global trade partners. He told a parliamentary hearing that while nobody wants to see anti-avoidance and profit shifting, change needs to happen at a global level.
He says issues of base erosion and profit shifting will be covered in his transfer pricing review.
One of the biggest headaches for Australian companies is complex tax valuation methods. This issue may be explored as part of Noroozi’s announced but not yet commenced reviews.
The law frequently refers to market value, but does not define market value in any general provision. There’s also an “arm’s length” value for transfer pricing, thin capitalisation and consolidation – all areas that have caused major disputes between companies and the ATO.
The former Labor government in the May budget asked the Board of Taxation to examine the “arm’s length test” that applies to the thin capitalisation rules and clarify when the test applies.
Noroozi says taxpayers have raised the need for “significant valuation work” as a major issue, and says in his report that while “market value and arm’s length price may be sound economic concepts, their use in tax legislation has necessitated much valuation work for both taxpayers and revenue authorities alike”.
Noroozi says he’s able to fill his job of being “an independent check on the ATO” thanks to greater cooperation. The Tax Commissioner, Chris Jordan, recently consulted with him on his proposal to implement an independent review function for tax disputes.
Jordan has flagged a separate unit for dispute resolution to change the perception that the ATO appeals process lacks independence. He has left his comments sufficiently vague to make it unclear whether he will go so far as establishing a separate appeals unit as advised by Noroozi.
The Inspector-General says the shift in the relationship between his office and the ATO “more clearly recognises that my office is able to engage with external stakeholders and the ATO in an unbiased, candid and evidentiary-based dialogue to identify improvement opportunities”.
“The ATO has begun to harness the consultative aspect of my role,” Noroozi says in the report.
Other recent examples where the IGT has raised specific issues with the ATO for “formal response” include “taxpayers being inadvertently led to use commercial services as opposed to the free ATO service for lodging income tax returns electronically” and ATO call centres not being open outside of business hours.
In both cases, the ATO is responding.