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Tuesday, 23 August 1994
Page: 52


The ACTING DEPUTY PRESIDENT —Pursuant to the resolution of the Senate of 13 February 1991, I present government responses to committee reports presented to the President since the last sitting of the Senate. In accordance with the terms of the resolution, the documents were authorised for publication. With the concurrence of the Senate I ask that the documents be incorporated in Hansard in accordance with the usual practice.

  Leave granted.

  The documents read as follows

REPORT OF THE SENATE STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS—"Employment of Visitors to Australia in the Shearing Industry"

Recommendations Action/Comments

That the Minister for PI&E convene a Minister met with the parties 3

meeting of the AWU, SCAA, NFF and other May 1994 and was advised of the

farmer organisations to address progress farmer organisations to

problems in the industry, in the light address constructive solutions on

of the findings in the report. other issues.

That the Minister for PI&E urgently Discussions between DPIE, C'wealth

establish a shearing industry task Depts, NFF, WCA, AWU and SCAA

force, consisting of relevant held during April 1994. State

Commonwealth and State Government Govt Departments not involved

departments and industry represen- at this stage given that the

tatives, to develop strategies Federal Pastoral Award has

and co-ordinate programs for: primacy and State Awards mirror

restructuring of the Federal the Commonwealth Award, except

Pastoral Industry Award; in Queensland, which is moving

compliance activities in relation to amend its Award in line with

to award pay and conditions; and the Federal Award.

compliance activities in relation

to taxation and superannuation.

In view of the action that is

underway to address the issues,

particularly the moves towards re-

writing the Pastoral Award, it is

not considered necessary at this

stage to establish a formal `Task

Force'. The Government will keep

the issues under review and the

Minister for Primary Industries

and Energy will play a facilita-

tive role in the reform process

should this become necessary at

the request of the industry

parties. The Department of

Primary Industries and Energy

will also provide assistance to

the parties involved if requested

to do so.

Number of NZ shearers in Australia

3.47

The Committee accepts the evidence of Most of those consulted accepted

the Australian Bureau of Statistics the findings, but the AWU and the

that New Zealand born workers comprise SCAA felt the Committee had given

6.6% of the shearing industry workforce insufficient weight to their views.

and therefore rejects the fundamental

proposition of the AWU and others that

there has been a significant influx of

New Zealanders into the Australian

shearing industry.

Economic and social Implications for The comment above in relation to

Rural Communities 3.47 also applies to the

conclusions in paras 4.96—4.98.

4.96

The Committee considers that several

factors have contributed to the recent

decline in job opportunities for

Australian shearers. These include a

substantial decrease in the size of the

national flock, the effects of recession,

recent severe droughts, and increased

"cocky shearing".

4.97

Given its acceptance of evidence from the

ABS that New Zealanders comprise 6.6% of

the shearing workforce, the Committee

rejects the view that their presence in

the industry is the primary cause of this

decline.

4.98

The Committee also considers that many

New Zealand shearers are residents of

Australia and, as a consequence, rejects

the assertion that they are "fly-by-

nighters". It follows that the social

and economic profile of New Zealand

shearers in Australia is more complex

than the simple picture of a transient

population presented by several

witnesses. The Committee formed the

view that New Zealand shearers who are

resident in Australia take their place

in, and contribute to, communities in

the same way as other citizens or

residents.

4.99

The Committee considers that new Under the savings provisions of

strategies for shearer training and the wool industry legislation

especially shedhand training need to passed in 1993, the shearer

be developed. The Committee understands training function remains with

that these matters will be addressed by AWRAP until 1 Jan 1996, unless

the Australian Wool Corporation and the prior arrangements are made

newly established Australian Wool to transfer the function to other

Research and Promotion Organisation. bodies. Industry parties,

The Committee considers including WCA are actively involved

that this review should look in developing new arrangements for

closely at increasing the training in discussion with ANTA

involvement of TAFEs in shearer and and RTC. Competencies are being

shedhand training and integrating developed and curricula will be

training programs with quality assurance established so that the delivery of

systems. The Committee also considers training can be provided in a

that a system of certification should deregulated environment. It is

be developed in conjunction with these expected that TAFE's will

programs. provide some of the training, but

not necessarily all of it. The

SCAA noted that many shearers and

shedhands live and work at a

considerable distance from

available TAFEs and supports

hands-on instruction by travelling

instructors within such sheds.

WCA is aiming to issue its

proposals for discussion by ANTA

and the wider industry in the

August/September 1994 period,

with a view to implementation

during 1995.

Industrial Relations

5.190

The Committee was told that many In regard to the conclusions in

New Zealanders do not observe award paras 5.190—5.193, discussions

provisions and also that "a glut of are being held between the NFF and

labour in the industry", caused by New the AWU with a view to preparing a

Zealanders has resulted in a general proposal for the restructuring of

decline in the observance of award the Pastoral Award. The SCAA

provisions. A significant proportion supports the need for re-writing

of this evidence was anecdotal and the Award and has requested to be

generalised. included in all discussions with

the parties. The Department of

Industrial Relations will be asked

to assign an officer to examine the

complaints received in DIR's State

Offices.

5.191

The Committee is of the view that The NFF and the AWU have reached

there are employers, contractors and `an agreement to seek agreement'

shearing workers, including New on the outstanding issues between

Zealanders, who breach award the two parties, to try wherever

provisions. However, based on the possible to reduce or eliminate

evidence presented during the enquiry, litigation between them in respect

the Committee is not convinced that of the Pastoral Award.

the incidence of award breaches amongst

New Zealanders is higher than amongst The parties intend to apply for

Australians, or that the presence of a grant under the Workplace

New Zealanders is the sole cause of a Bargaining Program (WBP), admini-

breakdown in award conditions in the stered by DIR, to assist in

industry. restructuring the Award. Any

application will need to meet the

5.192 revised guidelines for WBP

Furthermore, the Committee does not funding, provided to the parties

consider that there is a systematic in mid-May 1994. Other aspects

disregard of award provisions by of the discussions cover the last

New Zealanders working in the industry. National Wage case, and arrange-

ments for pay rises in future

years, and the implications for

the NFF's `incapacity-to-pay'

case. The parties hope to resolve

outstanding claims without

litigation.

The agreement is to be as

comprehensive as possible and

could take all of 1994 to

negotiate.

The discussions between the AWU

and NFF cover the development of

model enterprise agreements and

an industry consultative council.

The SCAA has also requested to be

admitted to discussions between

the parties.

5.193

The Committee notes that inspection The intention is to modernise the

work undertaken by the Department of Award so that there is less scope

Industrial Relations found that for technical breaches. Any such

although there were some technical project would need to include an

breaches of the Federal Award by both education program to publicise

Australian and New Zealand shearers, the details of the new Award.

there was no evidence of systematic

breaching of award provisions by

New Zealanders.

Taxation

6.77

It is apparent from the evidence The ATO advised that from its

presented during the inquiry that the audit activities it has found

AWU and others have misinterpreted that NZ shearers are often

taxation provisions relating to the long-term residents of Australia

Double Taxation Agreement and, in with affiliations in Australia.

particular, those applying to visiting They are NZ born residents of

New Zealand shearers. The Committee's Australia for income tax purposes.

review of the evidence on these matters It found no evidence that tax

makes it clear that it is only in avoidace or compliance among NZ

exceptional circumstances that the shearers was significantly

income of a New Zealand shearer working different to the rest of the

in Australia will not be subject to tax population.

in Australia. The NFF has made a submission to

the ATO proposing a flat rate of

tax for itinerant workers

6.78 (similar to the arrangements

Unless all of the four tests under that have been introduced

Subarticle 11(2) of the Double Taxation for fruit pickers).

Agreement are satisfied, a New Zealand

shearer or contractor working in Australia

is under the same legal obligation to pay

tax as an Australian shearer or contractor.

If the New Zealander is a resident of

Australia, the rate of tax will be the

same as for other residents. A New Zealander

who is a non-resident of Australia will

pay a higher rate of tax.

6.79

The Committee notes that a review by the

Australian Taxation Office of the shearing

industry indicates that tax evasion is not

as widespread as anecdotal evidence suggests

and, where it does occur, it is just as

likely to be practiced by Australian shearers

as New Zealand shearers. In any case, the ATO

advised that use of the term `New Zealand

shearer' is misleading, as the majority of

shearers or contractors so described are

in fact residents of Australia for tax

purposes.

Social Security

7.15

The Committee notes the evidence of the Most of those consulted supported

Department of Social Security that, the findings by the Committee,

in general, a visitor to Australia is though as previously mentioned,

not able to access DSS benefits, as the AWU and the SCAA have

these are available only to Australian reservations about the findings.

residents. Claimants for benefits are

required to provide proof of resident

status. In the case of New Zealand

citizens, this is determined on the

basis of evidence that the claimant has

severed ties with New Zealand. It is

apparent to the Committee that comments

from sections of the shearing industry

on the entitlement of New Zealanders to

social security are misinformed.

International Commitments

8.47 The TTTA is of major importance

The Committee received evidence from and there is no intention, or

several Government Departments, farmer reason, to amend it on account

organisations and the New Zealand High of NZ shearers working in

Commissioner emphasising the special Australia.

relationship that exists between

Australia and New Zealand. This special

relationship is manifest in bilateral

arrangements, including the Trans-

Tasman Travel Arrangements (TTTA) and

the Australia-New Zealand Closer

Economic Relations Trade Agreement.

The Committee was advised that any

changes to these arrangements would

have serious implications for relations

between the two countries. The New

Zealand High Commissioner confirmed

that "any initiative to introduce

limits or conditions on TTTA would

raise issues of the gravest

importance".

8.48

On the other hand, the Committee was

told that TTTA has allowed an influx

of shearers from New Zealand that is

seriously affecting the employment

opportunities of Australian contractors

and shearers. According to the AWU,

these problems would be alleviated,

and Australian jobs protected, if

TTTA were amended or cancelled.

8.49

Given the Committee's findings on the

number of New Zealand shearers in

Australia and their impact on the

shearing industry, the Committee is

not convinced that existing migration

and travel arrangements with New Zealand

should be changed. In this regard, the

Committee notes the conclusion of the

Department of Immigration and Ethnic

Affairs that imposing a visa regime on

New Zealanders would be out of all

proportion to the perceived problem and

would not necessarily address concerns

within the shearing industry.

8.50

The Committee emphasises that this

conclusion is based on an examination

of one industry in which New Zealanders

participate. The conclusion does not

indicate unconditional support for the

TTTA if circumstances in other industries

and professions, or the Australian labour

market as a whole, were to be substantially

and adversely affected by the operation of

this bilateral agreement.

8.51

There are, however, problems in the The proposal to address problems

shearing industry that need to be `within the industry' is strongly

addressed. The Committee is of the supported. The initiative

view that primarily this must be done undertaken by the NFF and AWU is

by those within the industry, in a a demonstration of this. The SCAA

rational and co-operative manner. The has requested to be admitted to

problems will not be solved by a discussions between the parties.

continuation of the `them and us'

approach so prevalent during the

inquiry.

8.52

The Committee recommends that the See comments provided in the

Minister for Primary Industries and section on Recommendations on

Energy convene a meeting of the page 1.

Australian Workers Union, the Shearing

Contractors Association of Australia,

the National Farmers Federation and

other farmer organisations in order to

address problems within the industry,

in the light of the findings of this

report.

8.53

In addition, the Committee notes advice

from the Department of Foreign Affairs

and Trade and the Department of Immigra-

tion and Ethnic Affairs that concerns

within the shearing industry should be

addressed through a package of measures

involving the monitoring of the shearing

industry, enforcing award pay and

conditions, and ensuring that superannua-

tion and taxation obligations are met and

social security provisions are not abused.

The Committee accepts this advice.

8.54

Accordingly, the Committee recommends that

the Minister for Primary Industries and

Energy urgently establish a shearing

industry task-force, consisting of relevant

Commonwealth and State Government departments

and industry representatives, to develop

strategies and co-ordinate programs

for:

restructuring of the Federal Pastoral

Industry Award;

compliance activities in relation to

award pay and conditions;

compliance activities in relation to

taxation and superannuation.

See comments provided in the section on Recommendations on page 1.

GOVERNMENT RESPONSE TO REPORT OF THE INQUIRY INTO THE ORGANISATION AND FUNDING OF RESEARCH IN HIGHER EDUCATION BY THE SENATE STANDING COMMITTEE ON EMPLOYMENT, EDUCATION AND TRAINING INTRODUCTION

On 27 May 1993 the Senate referred the above inquiry to the Senate Standing Committee for their action.

The inquiry's terms of reference focused on changes in the pattern of research activity across the higher education sector, research infrastructure, concentration of university research effort, the maintenance of plurality in research operations and the adequacy of existing initiatives for the establishment of links between higher education institutions and industry. The Committee also explored the issues of balance between different types of research and the allocation of research funding and infrastructure support to each type of research, practices and processes employed by the Australian Research Council (ARC) in research funding, and the relationship of the ARC to government and higher education institutions.

The Committee received over 170 submissions. Issues most commonly raised were insufficient funding for research infrastructure, the number of high quality research proposals unable to be funded by the ARC, and the nature of Department of Employment, Education and Training (DEET) support for the administration of the Large Grants program.

Many of the issues raised are already under consideration by the Government. In particular a number of recommendations concerned matters of detail in connection with the ARC Large Grants program. These and broader issues such as program administration structure and resourcing of the ARC selection processes were considered by a tripartite consultative committee involving DEET, ARC and the National Board of Employment, Education and Training (NBEET). Changes arising from the first stage of this review process are being implemented and a Joint Consultative Group has been established to discuss further proposed changes and support arrangements.

RECOMMENDATIONS PRESENTED AND THE GOVERNMENT'S RESPONSE

1.  The Committee recommends that, for the purpose of allocation of Australian Postgraduate Awards (APAs) to institutions, the Australian Research Council (ARC) develop an explicit statement setting out the detailed criteria against which "a quality research environment" should be assessed. (Page 18) 1

Response: Supported

The 1993 Higher Education Budget Statement, announcing the new APA scheme, indicated that APAs would be allocated to institutions according to a formula taking into account the quality of each institution's postgraduate education environment. The NBEET Report, Postgraduate Support and Student Mobility, tabled in 1993, included in its recommendations the retention of a formula-driven block allocation of awards giving consideration to the quality of the research environment, higher degree research load and higher degree research completions. DEET is currently considering possible allocation formulas taking into account advice received from the ARC, the Higher Education Council (HEC) and peak bodies such as the Australian Vice-Chancellors' Committee (AVCC).

2.  The Committee recommends that Mechanism B infrastructure funding be retained for the triennium 1994-96, and then be reviewed. (Page 43)

Response: Not supported

Mechanism B funds were provided for five years to assist former colleges of advanced education and institutes of technology to develop their research infrastructure. Given this period of five years of special funding plus the fact that all institutions now receive funding for student places at the same level (allowing for discipline mix and level), it is reasonable that the former advanced education institutions compete for infrastructure funding on the same terms as all other institutions.

In addition many former advanced education institutions have merged with pre-1987 universities and in these cases it has become difficult to separate the advanced education element from the former university element.

As previously announced by the Government, Research Infrastructure Block Grants for 1995 will include funding for the former Mechanisms A and B and be allocated on the basis of research performance.

1 The recommendation number and the page in which it appears in The Organisation and Funding of Research in Higher Education are identified to facilitate reference to the Report.

3.  The Committee recommends a review of the grants eligible for inclusion in the national competitive grants index (the Composite Research Index) to overcome existing anomalies and omissions and to reflect more fairly the breadth and diversity of Australia's research effort. (Page 47)

Response: Supported

The composite research index, to be used to reallocate the research quantum within operating grants, has been reviewed by a high level working party under the aegis of the AVCC. Membership of the Working Party included representatives of the AVCC, DEET, ARC and HEC. The Working Party has recommended the composite index include:

nationally competitive research grants, including Co-operative Research Centres (CRCs);

other public funding, including State and local government funding; and

industry and other funding.

In addition, the Working Party has recommended the inclusion of research outputs, initially research publications and higher degree research completions, but with relatively small weights in the first instance.

The Working Party recommendations are currently being considered by the Government.

4.  The Committee recommends that any ARC competitively-funded research project, as well as all CRC grants, identify an appropriate proportion of project funds to be allocated specifically for library support. (Page 54)

Response: Not supported

Funding for institutions to build up their research infrastructure, including libraries, is available through research infrastructure funds and through operating grants.

CRCs negotiate agreements voluntarily in terms of known variables including the resourcing of libraries.

Allocating a proportion of research project and other funds to library support is a matter for institutions to decide in relation to overall priorities and competing needs. It should be examined at a broader level than at the level of an individual research grant. The efficient development and use of library resources should recognise that teaching/learning and research functions are served in common by library infrastructure.

5.  The Committee recommends that the Government provide an establishment fund of $10m over a three year period administered by the AVCC Standing Committee on Information Resources to help set in place the appropriate structures for a distributed national library collection within the Unified National System, with links into the broader national library system. (Page 60)

Response: Supported in principle

The Government endorses the development of structures to support a distributed national library system collection within the Unified National System (UNS) and with links to the broader national library system. Such an important development would necessarily involve widespread consultation with all relevant bodies and take into account the advice of the AVCC. It is not possible at this stage to be prescriptive as to the nature, size and administration of any such program. Any additional funding for library resources within the UNS will be judged by the Government as part of its overall approach to the framing of future Budgets. However within existing levels of funding for higher education, the Government has earmarked $5m from the National Priority (Reserve) Fund over the period 1994 to 1996 for system-wide library infrastructure.

6.  The Committee recommends that the Government consider favourably requests for financial assistance for the upgrading and extension of AARNet and for associated training of researchers in its use. (Page 63)

Response: To be examined in the context of the ASTEC study on research data networks

Acting on ARC advice the Government has allocated a total of $4.2m to AARNet over the five year period 1990 to 1994 largely directed to equipment and training costs on the basis of formal applications under the Research Infrastructure program. For example, $1.0m was provided in 1992 for training and equipment, $0.5m in 1993 and $0.7m in 1994 for the upgrading of equipment. In addition, a sum of $3.4 million over five years, commencing in 1994, is being made available as part of the Research Data Networks CRC.

AARNet operates under an access and usage policy which admits not only AVCC member institutions and CSIRO but other organisations with compatible interests. AARNet has proposed the introduction of volume charging of institutions from 1 January 1995. Such a system is intended to place AARNet on a self funding basis. Ongoing financial assistance to assist with AARNet's recurrent costs is not seen as an appropriate function of Government funding programs.

It is important to consider AARNet in the broader context of research data networks in general. An Australian Science and Technology Council (ASTEC) study is currently examining the question of research data networks and has issued a draft report. The questions of the appropriate roles for AARNet, a private company, and the wider issue of the Government's role in supporting data networks, will be examined in this context.

7.  The Committee recommends that the Government implement the main recommendations of the NBEET report which was that:

research infrastructure should be increased by $120m per annum in order to:

restore parity between infrastructure support and Commonwealth direct research funding to pre-unification levels ($56m);

provide incentives for universities to form closer ties with industry in line with Government policy ($20m); and

provide infrastructure support for the university funded portion of CRCs ($46m). (Page 68)

Response: Not supported

Recommendation 1 in the 1993 NBEET Report Higher Education Research Infrastructure pressed for an increase in funding under the Infrastructure program. The Government did not accept the NBEET recommendation: it was based on the arbitrary benchmark of 1987 funding levels, and on universities' own reporting of their infrastructure needs. There is no current, objective inventory of institutions' infrastructure that indicates its condition and use. However, DEET agrees that the widespread concern about deficiencies in research infrastructure needs to be addressed and is exploring options in this regard.

8.  The Committee recommends that, because of the widespread concern about the cost-benefits of further concentration of research resources, no further research centres should be established until a thorough and independent analysis has been undertaken of the effectiveness of existing centres. (Page 81)

Response: Not supported

The Government agrees that there should be a balance between concentration and plurality in university resource operations but sees no reason for a moratorium on the establishment of Centres funded by the Commonwealth. In this context it should be noted that there are Centres other than those established by the Commonwealth. The recommendation may be directed more towards higher education institutions which have established a large number of `centres of excellence' (over 800 according to a 1992 report by the Centre for Research Policy at the University of Wollongong), rather than the twenty competitively selected Special Research Centres currently funded by the Government.

A study of research concentration was commissioned by the ARC and the outcomes of this study were released as the NBEET report The Effects of Resource Concentration on Research Performance, quoted by the Committee (pp 76-77). The initiative for the study arose in part from the findings of the Review of the Centres Programs (the Lazenby Review) which found deficiencies in data on which to assess policy implications in this area. The Lazenby Review nevertheless found that the Centres Programs had produced a group of highly effective centres which had concentrated research and research training to produce very good results both in terms of quantity and quality. The Resource Concentration study finds that concentration should not be a policy objective in itself but might be appropriate in certain circumstances or for other objectives, such as achieving top international recognition for particular fields of research in Australia.

Renewal of funding for existing Special Research Centres and Key Centres of Teaching and Research is dependent on independent reviews every three years, with a maximum funding period of nine years. The Centres Program itself was reviewed in 1991 (the Lazenby Review referred to above) and will be reviewed again in 1996 as part of the cycle of evaluation activities agreed between DEET and the ARC.

There is no new selection round for Special Research Centres planned, although proposals for a new round of Key Centres of Teaching and Research will be sought in late 1994. In addressing whether to fund further Special Research Centres DEET and the ARC will consider the issues of research concentration and productivity, available studies and reports, and other research initiatives.

9.  The Committee recommends that the ARC reaffirm its recognition of "relief from teaching" as a legitimate and valuable component of research support, and that this provision should be more readily exercised than appears to have been the case to date. (Page 85)

Response: Supported in principle

There is provision for `relief from teaching' in ARC programs. The Large Grants program, for example, includes in the guidelines:

Advisory panels are prepared to consider requests for support to relieve a staff member of teaching and other duties where a panel is convinced that this is essential for the research and successful outcome of the project. Requests should be shown in number of months required and must be prioritised carefully in respect of the other needs of the project. Requests should be endorsed by the relevant head of department.

Guidelines for the Collaborative Research Grants state:

The ARC is prepared to consider requests for support to relieve a staff member of teaching and other duties where this is essential for the successful execution of the project. The institution [will be] recompensed up to a fixed rate . . . irrespective of the level of appointment of the staff member.

The ARC recognises that relief from other duties is a legitimate and valuable part of research support. This is especially so where research involves an industry partner requiring expeditious outcomes or where projects involve a significant `write-up' phase. While relief from teaching is not essential in all cases, the ARC panels view each request for support on its merits. Institutions can provide support of this kind from general institutional funds.

10.  The Committee recommends that research funding practices continue to allocate resources on the basis of merit. There should be no attempt to reallocate general university research funding on the basis of assumptions, whether justified or not, about a particular institution's intrinsic quality. (Page 96)

Response: Supported

Scarce research resources should continue to be allocated on the basis of merit in the light of the selection criteria for the respective funding programs. The allocation of funds under current DEET/ARC programs is consistent with this principle.

11.  The Committee recommends that, in its funding decisions, the ARC meet its special responsibility for basic research. It must ensure that basic research expenditure constitutes no less than 65% of total higher education research and development funding. (Page 111)

Response: The need to support basic research is recognised but this specific recommendation is not supported

Basic research is an important element of the research effort of higher education institutions, which also includes strategic, experimental-developmental and applied research.

In its Science and Technology Budget Statement 1993-94, the Government described a vision of Australia `which has captured the benefits of a strong scientific. . . base to provide economic prosperity, social equity, ecologically sustainable industries and a high quality, fulfilling lifestyle'. The Statement affirms basic research as a vital element in achieving this agenda and funding for basic research in the higher education sector is described as a legitimate function of Government.

Given that there are competing funding requirements and difficulties in defining the different types of research, and that the ARC cannot control higher education research expenditure overall, the ARC should not be required to maintain a certain percentage. The ARC has made a strong commitment to appropriate levels of basic research across the full spectrum of DEET/ARC research programs and will endeavour to ensure that its funding recommendations maintain a balance among its primary objectives, of which maintaining the research base is one.

The Government affirms the critical role of higher education institutions in undertaking basic research and research training and will aim to ensure that these roles continue to be supported.

12.  The Committee recommends that the present social sciences/humanities panel be replaced by two panels, one focusing on social sciences and the other on humanities/arts. (Page 115)

Response: Not supported

The Government notes the Committee's concern that the research funding needs of the humanities and social sciences be addressed through suitable structures. It is normal practice for the ARC Social Sciences/Humanities Panel to break up into sub-panels focused on individual grant and fellowship applications within the ambit of panel members' expertise.

Sub-panels then jointly consider proposals across the disciplines to achieve balanced outcomes on the basis of merit while having regard to the resources available. This year there are expanded panels covering both grants and fellowships and this has provided additional expertise. These approaches flexibly address the important matter of the relative proportions of funding going to the social sciences and humanities.

13.  The Committee recommends that the Commonwealth provide a special allocation to a consortium comprising the Australian Academy of the Humanities and the Australian Academy of the Social Sciences to commission a pilot series for radio focusing on research in humanities and the social sciences. It suggests a pilot series budget of $100,000. (Page 125)

Response: Supported in principle

An ASTEC report, Bridging the Gap: The Social Sciences and the Humanities in Australia (May 1993), notes that the humanities and social sciences have been relatively ineffective in disseminating their knowledge through the general media. This failure in communication has possibly contributed to a view that research in these disciplines seems unrelated to contemporary national concerns and needs to be more closely aligned to economic and social imperatives.

A more effective communication of research outcomes, including but not restricted to the humanities and the social sciences, may be warranted. However, any new expenditure proposals would be subject to formal consideration by the Government in a budgetary context.

ASTEC recommended that the Australian Academy of the Humanities, the Academy of Social Sciences in Australia and the Federation of Australian Social Science Organisations should develop programs of activity increasing their effectiveness in advocating the role and interests of the social sciences. Recommendation 13 reflects this view.

The Academies might wish to explore this idea, without necessarily limiting the communication to the medium of radio.

14.  The Committee recommends that, in its assessment of research grant applications, the ARC should regard favourably any commitment by applicants to disseminate to the wider public information about research projects and their outcomes. (Page 126)

Response: Not supported

If commitment to disseminate information were to become an essential criterion in the assessment process this could result in some loss of emphasis on academic excellence.

As indicated under Recommendation 13, disseminating information to the wider public concerning research projects and their outcomes is a desirable goal which is strongly endorsed by DEET and the ARC.

DEET and the ARC have agreed to give higher priority to the promotion of the outcomes of higher education research. In that context successful applicants will be encouraged to put greater emphasis on disseminating the findings widely.

15.  The Committee recommends that the Commonwealth provide additional funds to the Large Grants Program. (Page 140)

Response: Not supported

The Committee's recommendation draws on the `unacceptably high failure rate' of the program where `many high quality projects are rejected' for funding. While it is true that a considerable number of proposals do miss out on funding, this should not be seen in isolation from other factors in assessing the health of the program. Funds available for the Research Grants program, of which Large Grants is one component, have increased significantly over recent years. In addition the Government has provided an extra $12m in 1994 for research grants (Large, Small and Collaborative). This demonstrates a strong commitment to the maintenance of the Large Grants program.

It could not be assumed that funding for Large Grants would be the highest priority if additional funds did become available. Infrastructure requirements and the need to strengthen collaboration between higher education researchers and industry through programs such as the Collaborative Research Grants and Australian Postgraduate Awards (Industry) would appear to have claims which are at least as strong.

Within the existing envelope of the higher education research program it is a matter for the ARC to recommend the allocation of funds between the different program elements.

16.  The Committee recommends that each Large Grant specify a proportion of its funds to be allocated specifically to meet infrastructure costs. (Page 141)

Response: Not supported

In supporting applications for Large Grants, institutions undertake to provide adequate and appropriate infrastructure to accommodate and sustain research; that is, to provide a suitable `research environment'. The Government's position is that institutions should take such undertakings seriously. The allocation of infrastructure funds, from any source, is entirely a matter for institutional administrators.

As indicated in relation to Recommendation 4, it is considered that allocating infrastructure separately enhances institutional capacity to manage resources flexibly and effectively.

17.  The Committee recommends that the ARC allocate Small Grants funds at the departmental (or school) level rather than the institutional level. Small Grants allocations by the ARC should be made according to a formula based upon the total staff and postgraduate student numbers in each department, and the funds should be distributed locally by the department concerned on the basis of merit. (Page 146)

Response: Not supported

The Small Grants Scheme provides funds to institutions, providing them with the discretion to operate the Scheme within the guidelines set by DEET and the ARC. The latter notes the importance of institutions continuing to have the discretion to allocate at the departmental level.

It is agreed that the current method of allocation could be improved but the use of postgraduate and staff numbers as relevant measures is not appropriate as they reflect potential demand rather than quality or productivity, which is the underlying intention of the allocation formula.

The ARC is continuing to investigate the use of research performance indicators and places a high priority on developing measures for determining the allocation of Small Grants funds. The next review of the Small Grants Scheme, scheduled for 1996, will examine alternative measures for allocating Small Grants funds.

18.  The committee recommends, with respect to ARC Fellowships, that:

  (a)the ARC abandon the current requirement that academics in tenured positions relinquish tenure upon appointment as Fellows;

  (b)the decision to prevent Fellowships from being tenable at the Institute of Advanced Studies be revoked; and

  (c)the current requirement that Fellowships be restricted to researchers who have completed their doctorates within the previous fifteen years be revoked.

(Page 159)

Response: To be examined

Australian Research Fellowships (ARFs) and Senior Research Fellowships (SRFs) are high profile research awards. On the advice of the ARC, the former Minister for Higher Education and Employment Services, the Hon. Peter Baldwin MP, agreed that ARFs and SRFs should not be tenable at the Institute of Advanced Studies (IAS) of the Australian National University or at other Commonwealth organisations specifically funded for research. An estimated $129m is being provided to the IAS for research and research training in 1994.

At the same time, Australian Post-Doctoral Research Fellowships and Queen Elizabeth II Fellowships, which focus strongly on training in addition to pure research, are tenable at all institutions. That is, two of the four Fellowship categories are tenable at the IAS. The essential element is to provide the best training environment. This policy approach is consistent with the position adopted for Large Research Grants.

The Research Training and Careers Committee of the ARC is proposing a review of the Fellowships Scheme which will include eligibility criteria.

19.  The Committee recommends that the ARC reinstate site visits as an integral part of its peer review process for the assessment of Large Grants applications, and that a provision of $300,000 be made in the ARC budget for this purpose. (Page 180)

Response: Not supported

The interview tour:

was inequitable: not every applicant was interviewed nor every institution visited;

required a large number of DEET staff to be absent from the office for one month, thereby disrupting the flow of other work, and at the same time used a disproportionate amount of travel funds;

has been replaced by a system where applicants have the opportunity to provide the panel with a one page `rejoinder' to their assessors' reports, and by a proposed cycle of biennial visits to all institutions which should enable a systematic overview of research outcomes and contact with a wider cross-section of the research community.

To implement an interview tour in which all applicants are treated on an equitable basis would cost upwards of $600,000. In a time of economic constraint this is clearly not a sensible use of resources. Research councils in other countries such as the United States and the United Kingdom have never had such a process as part of their research grants administration.

20.  The Committee recommends that, in order to address concerns about the representativeness of discipline panels, the ARC seek an independent assessment of its appointment procedures for members of these panels. (Page 187)

Response: Supported

The Committee noted broad research community support for the principle of peer review in deciding resource allocation across the higher education sector. It also noted various concerns, for example, that there be more transparent appraisal procedures and a panel structure more representative of the range of institutions in the Unified National System. There are reasons to believe that an independent assessment of the ARC's panel appointment process will enhance the research community's acceptance of the expertise of panel members as well as the transparency and fairness of the process.

21.  The Committee recommends that:

  (a)the ARC remain within the NBEET framework, but that it control its own administrative budget;

  (b)the administrative resources and personnel currently supporting the ARC, but located within DEET and NBEET be brought together as a dedicated secretariat under the ARC's direct control; and

  (c)at times of peak grant-processing activity, the ARC be able to call upon additional support from DEET as needed. (Page 200)

Response: Not supported; action under way

The intent of the Committee is to achieve a radical realignment of the way major parties in the administration of the higher education research program interact to improve the efficiency and effectiveness of program delivery. The intention, but not the means of achieving it, is supported. DEET has reached agreement with the NBEET and the ARC on the formation of an ongoing joint consultative group to manage ongoing discussion of resources and other issues of concern to all parties. Earlier, a tripartite consultative committee comprising DEET, NBEET and ARC representatives, was established to undertake a joint review of support arrangements for the ARC

Stage One of the joint review concluded in November 1993 with positive outcomes. The Research Branch in DEET has been restructured to facilitate servicing the ARC at peak processing times and a Research Evaluation Committee has been established and has developed a workplan of activities for evaluating the research program as a whole, as well as its component parts.

While it will take some time to implement the package of reforms arising from the review, indications to date are that the relationship between the ARC, the Research Branch and the NBEET has been strengthened and research program administration processes significantly improved. It would be costly and inefficient to disrupt the implementation of these changes by introducing a completely new structure.

By keeping the support arrangements within the existing Departmental structure, the Research Branch can access the resources it requires to implement Government policy and the processes associated with higher education research.

The Wiltshire Report (Review of NBEET) recommended that the ARC should continue to function as at present and that the servicing of the ARC grants programs should continue under the agreed protocol.

22.  The Committee recommends that the Department of Industry, Technology and Regional Development examine the feasibility of establishing a national "innovation incubator" program to provide support and advice for university research projects with commercial potential but for which no identifiable Australian industry partner exists. (Page 224)

Response: Not supported

The Department of Industry, Science and Technology (DIST) does not support the Recommendation. Mechanisms already exist to assist in the commercialisation of research. For example, within the higher education framework, universities have established companies as commercialisation bodies and have established technology parks which contain incubators. At the Commonwealth level it is expected that the Australian Technology Group will assist in bringing a number of discoveries to the marketplace. In virtually all cases, however, the role of one or more industry partners is crucial to the commercialisation process.

23.  The Committee recommends that the Prime Minister's Science Council commission an independent, formative evaluation of the CRC program to date in order to:

  (a)determine the relative contributions of industry and universities to the program thus far; and

  (b)assess the impact upon, and benefits to, the university and industry partners in those CRCs which have been operating for two years.

The report of this formative evaluation should be presented at the end of 1994. (Page 237)

Response: Supported in principle

The need to review the CRC Program is accepted.

Administration of the CRC Program was transferred to DIST on 25 March 1994. Before this transfer an evaluation of the Program was programmed in the Department of the Prime Minister and Cabinet Portfolio Evaluation Plan for late 1995. This evaluation is now included within DIST's planned program activities for 1995.

GOVERNMENT RESPONSE TO JOINT COMMITTEE OF PUBLIC ACCOUNTS REPORT 326

"AN ASSESSMENT OF TAX"

The recommendations in the Committee's Report and the Government's responses have been grouped into categories under the following headings:

  Taxation Ombudsman

  Small Taxation Claims Tribunal

  Taxpayers' Charter

  Costs of compliance with the tax laws

  Australian Tax Commission and related issues

  Other issues

2. The Government has responded to 60 of the JCPA's recommendations as set out below. The other 88 recommendations are being dealt with by the Australian Taxation Office, and other Departments, as they relate solely to matters of administration within their control.

GOVERNMENT RESPONSE

Taxation Ombudsman (Recommendations 132, 133, 135, and 136). See page 317 of the Report

  R132 A statutory position of Commonwealth Taxation Ombudsman be created within the current Commonwealth Ombudsman's Office.

  R133 Resources be provided to the Commonwealth Taxation Ombudsman to allow the Ombudsman to adequately investigate all complaints.

  R134 The role of the Problem Resolution Units in the Australian Taxation Office be amended such that the staff of those units work directly to a Commonwealth Taxation Ombudsman

  R135 Reports by the Commonwealth Taxation Ombudsman on taxpayer complaints be provided both to the taxpayer and the Commissioner of Taxation.

  R136 A report on the activities of the Commonwealth Ombudsman be incorporated in the Annual Report to Parliament of the Commonwealth Ombudsman.

Response: Substantially supported

3. The Government supports the Committee's recommendation that a Taxation Ombudsman position be created within the Commonwealth Ombudsman's Office but not as a statutory position.

4. Additional funding will be provided to the Commonwealth Ombudsman to allow complex issues to be investigated quickly and independently. The reporting arrangements are also supported.

5. However, the Government does not agree with recommendation 134 that staff in the ATO's Problem Resolution Unit work directly to the proposed Taxation Ombudsman. The Ombudsman's role is to investigate only those matters which have not been capable of satisfactory resolution by the relevant agency. To adopt this specific recommendation would conflict with the Ombudsman's role as an investigator of last resort.

Small Taxation Claims Tribunal (Recommendations 140-145). See page 331 of the Report

  R140 The current taxation law of Australia be amended to allow the establishment of a Small Taxation Claims Tribunal within the registry of the Administrative Appeals Tribunal.

  R141 The relevant taxation laws of Australia be amended as to allow the establishment of a procedure to permit taxpayers to lodge objections against, or seek review of, decisions of the Australian Taxation Office before a Small Taxation Claims Tribunal.

  R142 Where the amount of tax in dispute with the Australian Taxation Office is less than $5,000, a taxpayer be able to elect to have their objections or review of decisions heard by the Small Claims Tribunal.

  R143 A $50 non-refundable fee be required to be lodged by taxpayer seeking review of decisions of the Australian Taxation Office in the Small Taxation Claims Tribunal.

  R144 Any decision of a Small Taxation Claims Tribunal be final and non-appealable.

Response: Substantially supported

6. The Government accepts the Committee's recommendations for the establishment of a Small Taxation Claims Tribunal. The Government has decided that the Tribunal (which will deal with disputes involving less than $5,000) will be a new Division of the Administrative Appeals Tribunal. This new review body will provide for an emphasis on mediation and streamlined procedures rather than formal hearings. In relation to this new body, the Government has been advised that it would be unconstitutional for its decisions to be final and non-appealable. Accordingly, a right of appeal to the Federal Court on questions of law will be available. However, this will not detract from the efficacy of the basic proposal.

7. Recommendation 145 is considered together with recommendations 119, 120 and 148, below.

Taxpayers' Charter (Recommendation 131). See page 314 of the Report

  R131 The Government consider establishing a Taxpayers' Charter based on a review of the various models available.

Response: Supported

8. The Government accepts the notion of a Taxpayers' Charter. The Commissioner of Taxation will draw up a draft Charter in consultation with taxpayers' representatives and professional bodies, community groups and relevant Government bodies such as the Ombudsman and the Privacy Commissioner. The Charter will be subject to final approval by the Government.

Cost of compliance (Recommendations 22, 23, 25 and 26). See pages 84, 89 and 91 of the Report.

  R22 The government establish a broadly based task force to redraft the Income Tax Assessment Act 1936.

  R23 The Government commit sufficient resources to the task force as will allow it to complete a priority simplification redraft within two years and the full simplification of the Act within five years.

  R25 A Taxation Administration Brief prepared by the Australian Taxation Office be submitted by the Treasurer to the Cabinet setting out the administration implications of each policy proposal involving amendments to any Act under the administration of the Commissioner of Taxation.

  R26 All future taxation legislation be supported by a Taxation Impact Statement which details the impact on taxpayers of the legislation, including the total compliance cost and the extent to which simplification objectives have been achieved.

Response: Supported

9. The Government responded to the law simplification proposal by establishing a representative Tax Law Improvement Project as announced by the then Treasurer in his Statement of 17 December 1993. The aim of the project, which is expected to take 2-3 years, is to improve the logical structure and expression of the income tax laws. This will result in a significant reduction in compliance costs.

10. The Government has also decided to accept recommendations 25 and 26. The Government believes that a more formal consideration of compliance costs will help ensure the development of tax laws which are easy to comply with.

11. There are acknowledged difficulties in preparing sound estimates of the costs of complying with changes to the tax laws. It will be a case of learning from experience and seeking to develop greater expertise in this area. A start will be made by providing a descriptive statement which will cover such issues as record keeping requirements, whether these are consistent with existing accounting practices, and the likely complexity of legislation and the resulting need for the ATO and/or external advisors to help taxpayers understand and comply with the law.

12. The impact statements will be published as part of the explanatory material accompanying tax legislation.

Australian Taxation Commission and related issues (Recommendations 1-13; 15-18). See pages 39, 41, 48, 50, 54, 61 and 62 of the Report.

  R1 The Australian Taxation Office be established by statute under its own Charter as the Australian Taxation Commission.

  R2 The general power of administration of taxation Acts be vested in the Commission's Chief Executive Officer who shall be known as the Chief Commissioner of Taxation.

  R3 The Australian Taxation Commission be established with a one line budget appropriation.

  R4 The Chief Commissioner of Taxation be able to recruit and employ staff on terms and conditions determined by the Chief Commissioner with the agreement of the Treasurer.

  R5 The Australian Taxation Commission report on its resources to the Parliament in accordance with the current practice of the Australian Taxation Office and be fully available for on-going scrutiny by the Parliament.

  R6 In order to reinforce the independence of the Chief Commissioner, so much of the taxation laws of Australia be amended as would allow the Minister responsible for taxation matters to issue directions to the Chief Commissioner of Taxation concerning the manner in which the Chief Commissioner exercises the general powers of administration conferred on the Chief Commissioner by the various taxation laws.

  R7 The relevant Minister responsible for taxation matters be required to table before both Houses of the Parliament within five sitting days of having issued a direction to the Chief Commissioner of Taxation in respect of the exercise of the general powers of administration, a copy of the relevant direction.

  R8 Until the relevant Minister has satisfied the requirement to table the issued direction, the said direction shall have no effect and the Chief Commissioner of Taxation shall not be required to comply with the said direction.

  R9 The power to issue directions not apply in respect of the application of taxation laws to individual taxpayers.

  R10 The Public Service Act 1922 be amended to require the Chief Commissioner of Taxation to report annually to the Minister on the operations of the Australian Taxation Commission.

  R11 The Chief Commissioner be required to comply with so much of the guidelines for annual departmental reports as would not involve breaches of Section 16 of the Income Tax Assessment Act 1936.

  R12 The functions of the current Deputy Commissioners of Taxation be couched in terms of branch or regional establishment management.

  R13 The title of the current Deputy Commissioners of Taxation be amended to more accurately reflect their revised role.

  R15 The role of advisory committees be formalised and strengthened within an Australian Taxation Commission.

  R16 Advisory committees be structured so as to play a positive role in the context of a revised administrative framework.

  R17 Specific advisory committees be established as necessary, to interact with Commissioners of the Australian Taxation Commission on identifiable projects.

  R18 The names of members of advisory bodies be published together with the names of the organisations they represent in the Annual Report of the Australian Taxation Commission.

Response: Not supported

13. These recommendations deal with the establishment of an Australian Tax Commission and, in that context, the roles of advisory committees, and other organisational arrangements.

14. The Government does not accept these recommendations.

15. The Government is of the view that the underlying concerns of the Committee can be and are being addressed under existing administrative arrangements. For example, the ATO has already recruited, on the basis of merit, people from the private sector to fill senior positions. Other initiatives to improve the commercial understanding and business acumen of ATO staff include external placements for its technical officers. The organisation has also enhanced its consultative processes by establishing new advisory bodies to address a range of issues.

16. The Government notes that the Commissioner of Taxation, and the ATO, are accountable to Parliament and subject to Parliamentary scrutiny on an ongoing basis. In addition, the Commissioner already has a reasonable degree of discretion in budgeting for operational activities. Accordingly, the Government does not consider that any of the recommended changes are necessary.

17. The creation of an Australian Tax Commission may also compromise the fundamental independence of the Commissioner of Taxation. At present the Commissioner and Second Commissioners are statutory officers appointed by the Governor-General. The Commissioner has the general administration of the tax laws and as such is entirely independent and not subject to ministerial direction. The Government considers that this independence is crucial in the administration of the Australian taxation system.

18. Therefore the Government will not pursue the recommendations for the establishment of an Australian Tax Commission and the related recommendations. However, the Government has informed the Commissioner of Taxation of its view that the ATO should, to the extent possible, seek to accommodate the concerns identified by the Committee about the way that it conducts its business.

Other issues

Publication of Rulings in Commonwealth Gazette (Recommendation 32 & 33). See page 105 of the Report.

  R32 For the purposes of Section 14ZAAJ of the Taxation Administration Act 1953, a public Ruling be defined to have been published only when notice of the Ruling is published in the Commonwealth Gazette.

  R33 A notice of publication for the purposes of the gazettal of public Rulings include the reference number and subject heading of the Ruling, together with a brief general description of the Ruling's effect, along the lines of the current head note to public Rulings.

Response: Supported

19. The Government will adopt these recommendations.

Tabling of Rulings in Parliament (Recommendation 35). See page 113 of the Report.

  R35 Full versions of all public Rulings issued by the Commissioner of Taxation be tabled in the Parliament within five sitting days of notice of their publication being included in the Commonwealth Gazette.

Response: Supported

20. The Government will adopt this recommendation. While the Rulings will be tabled they will not be subject to disallowance by the Parliament.

Legislative support of modernisation and self assessment initiatives (Recommendation 45). See page 131 of the Report.

  R45 The Australian Taxation Office review the legislative framework supporting all initiatives arising out of both modernisation and self assessment.

Response: Supported

21. The Government supports this recommendation.

Conduct and Reporting of AAT Cases (Recommendations 146-147). See page 333 of the Report.

  R146 Section 14ZZE and 14ZZJ of the Taxation Administration Act 1953 be amended so as to establish the presumption that hearing before the Administrative Appeals Tribunal in taxation matters are held in public unless the taxpayer elects to hold the hearing in private.

  R147 The Government encourages the reporting of taxation cases from the Administrative Appeals Tribunal under a single reporting series.

Response: Supported

22. The Committee recommended that hearings of taxation matters in the AAT be held in public unless the taxpayer elects to hold the hearing in private. The Government accepts this recommendation.

23. The committee considered that decisions of the AAT in tax cases should be reported in a single series. While the use of two reporting services can be confusing, this is essentially a matter for the commercial publishing houses. However, the Government will draw the Committee's views to the attention of the publishers.

Culpability Penalties (Recommendation R130). See page 303 of the Report

  R130 Sub-section 8Z E(2) of the Taxation Administration Act 1953 be amended to remove the right of the Commissioner of Taxation to re-impose a culpability penalty in the circumstances where a prosecution is withdrawn.

Response: Supported

24. The Government has decided to accept the recommendation to remove the right to re-impose administrative penalties where a prosecution is withdrawn.

Technical Corrections Bill (Recommendation 41). See page 117 of the Report.

  R41 There be an annual Taxation Clarification and Technical Corrections Bill to facilitate the simplification and technical correction of the Income Tax Assessment Act 1936 and associated legislation.

Response: Partially supported

25. The Committee recommended that an annual Taxation Clarification and Technical Corrections Bill be introduced into Parliament to facilitate simplification of the law. Apart from minor technical amendments, the proposed bill would include the substance of Taxation Rulings issued by the Commissioner and which are considered to have clarified the law.

26. The Government supports the recommendation for a Technical Corrections Bill subject to the workloads of the Office of Parliamentary Counsel and the Parliament. However, the recommendation as it relates to a Taxation Clarification Bill is not supported. It is inappropriate for the law to be amended when the Commissioner issues a Taxation Ruling. Rulings only reflect the Commissioner's view of the law.

Self assessment (Recommendation 19). See page 74 of the Report.

  R19 The further extension of the self assessment system be delayed pending the development of a comprehensive supporting legislative framework.

Response: Supported in principle

27. The Committee recommended that any further extension of the full self assessment system be delayed pending the development of a comprehensive supporting legislative framework.

28. The Government does not, at this stage, propose to extend the self assessment system.

Timing of foreshadowed legislation (Recommendation 24). See page 88 of the Report.

  R24 Where legislation is foreshadowed in an administrative announcement, the Commissioner of Taxation be required to release significant details of the proposed legislation and the Government commit itself to the introduction of enabling legislation within six months of the announcement or before the end of the relevant taxation year, which ever is the sooner.

Response: Supported in principle

29. The Committee recommended that any announcement of foreshadowed legislation be accompanied by significant detail of the proposed legislation and that enabling legislation be introduced within six months of the announcement or before the end of the relevant taxation year.

30. While the Government generally accepts this recommendation, no immutable time frame should be adopted. For example, there will be times when the extent of consultation will require a longer timeframe than six months.

Taxation Litigation (Recommendation 119, 120 and 148). See pages 281 and 337 of the Report.

  R119 The group made responsible for determining audit cases in the Australian Taxation Office establish a priority program for litigating cases where the application of provisions of the Income Tax Assessment Act 1936 is unclear.

  R120 Such a litigation program be conducted at no cost and with no penalty to the test case taxpayer.

  R145 Where a taxpayer intends to take a matter before the Small Taxation Claims Tribunal, the Australian Taxation Office have the option to refer the matter to the Federal Court of Australian provided all the taxpayer's costs, including legal representation, are met by the Australian Taxation Office.

  R148 In all cases where the Australian Taxation Office is unsuccessful at any stage of litigation and a decision is made to appeal the relevant decision, the Office fully fund the taxpayer's expenses in defending the case.

Response: Supported in principle

31. The JCPA recommended that the ATO fully fund "test cases" and appeals to higher Courts, including where a taxpayer had been successful in the Court or tribunal below. Given the benefit to the taxation system in having the law clarified, the Government will develop a public interest test case litigation program, after further considering how such a program might operate in practice.

Deficiency Notices (Recommendation 114). See page 277 of the Report.

  R114 So much of the law be amended as would allow a system of deficiency notices to be introduced for taxpayers who would be made technically insolvent by the issue of an amended taxation assessment.

Response: Supported in principle

32. While the Government supports this recommendation, a number of issues relating to its practical application will need to be examined. These issues include considerations about how deficiency notices might be handled by the Federal Court and whether there would be implications for other agencies.

Interest withholding tax exemption (Recommendation 21). See page 74 of the Report.

  R21 The Government introduce legislation to amend Section 128F of the Income Tax Assessment Act 1936 to clarify its meaning and application.

Response: Not supported

33. The Committee recommended that section 128F of the Income Tax Assessment Act be amended to clarify its meaning and application. The Government does not propose to accept this recommendation at this time.

Penalties (Recommendations 37 & 40). See pages 114 and 116 of the report.

  R37 The Income Tax Assessment Act 1936 be amended to remove the imposition of an administrative penalty for a taxpayer who assesses their taxation liability in a manner which is not consistent with a private Ruling that has been issued to them, provided the taxpayer indicates in their annual tax return that their private Ruling has not been followed.

  R40 Culpability penalties not apply to taxpayers who fail in their assessment to follow a Determination issued by the Australian Taxation Office.

Response: Not supported

34. The Committee recommended that there be no administrative penalty for failure to comply with a private ruling provided a taxpayer indicated this in the relevant tax return and that there be no culpability penalty for failure to follow a Tax Determination issued by the ATO.

35.  Recommendation 40 is unnecessary because under the existing law there is no penalty for failure to follow a Taxation Determination. Recommendation 37 is not supported as a taxpayer who does not follow a private ruling may contest it before the AAT or courts. The existing penalty arrangements are a deterrent to taxpayers ignoring a private ruling and complement the Rulings review regime.

36. The proposed flagging arrangements are seen as unnecessarily cumbersome and costly. Under these arrangements a taxpayer who is not satisfied with a ruling would, rather than seeking a review of the ruling, flag the fact that he or she had not followed the ruling when lodging a return, at which point it would be necessary for the ATO to raise an assessment based on the ruling and for the taxpayer to then appeal the assessment.

Agency Bargaining (Recommendation 62). See page 165 of the Report.

  R62 The Government amend its guidelines on the payment of productivity based wage increases to remove any possibility of revenue returns being used as a measure of productivity.

Response: Not supported

37. In relation to Agency Bargaining the JCPA has recommended the removal of the revenue option being used as a measure of productivity (R62). The Government is unable to support this recommendation as the revenue option is contained in the APS Agreement "Improving Productivity, Jobs and Pay in the APS 1992-1994". However, it should be noted that the ATO Agency Agreement, recently executed, has not used a revenue measure.

Revenue Collection (Recommendation 76 and 77). See page 208 of the Report.

  R76 Where an assessment or notice is issued which contains an error produced by either human or computer failure and the taxpayer draws the existence of this error to the attention of the Australian Taxation Office, the taxpayer receive either a discount on the issued debt notice or a bonus on the tax refund

  R77 The Government institute amendments to the operation of the Provisional Tax System for the purposes of establishing a simplified administrative system for the calculation of provisional tax.

Response: Not supported

38. The JCPA recommended that a taxpayer who draws the attention of the ATO to errors in notices or assessments be rewarded with discounts on amounts payable or bonuses on refunds. The Government does not support this recommendation as there is already an adequate mechanism in the tax law to provide for interest on overpayments.

39. The Committee also recommended that simpler administrative arrangements for the operation of provisional tax be implemented. The Government considers that it is appropriate for the ATO to further examine these matters to determine whether improved administrative arrangements can be developed. In addition, the Tax Law Improvement Project will be examining these in its review of the law.

ATO access powers (Recommendation 103). See page 264 of the Report.

  R103 Section 263 of the Income Tax Assessment Act 1936 be amended to require that the Australian Taxation Office show just cause before being granted a warrant by an appropriate judicial official to access or enter the private property of a taxpayer without permission.

Response: Not supported

40. The Government does not accept this recommendation. However, it is appropriate given the scope of the power that the ATO settle comprehensive guidelines on the exercise of the power with professional and other representative bodies to ensure that they provide a guarantee against unwarranted access.

Power of amendment (Recommendation 113). See page 272 of the Report.

  R113 Section 170 of the Income Tax Assessment Act 1936 be amended to allow adjustments to the assessment of a taxpayer's tax liability that involve a year of income four years prior to the year in which the audit commences, provided the taxpayer was notified of the review of that assessment within four years of the assessment having been originally made.

Response: Not supported

41. The Government does not accept the proposal that the four year amendment period for assessments should run from the year in which an audit commences.

Culpability Penalties (Recommendation 127 & 130). See pages 300 and 303 of the Report.

  R127 The Income Tax Assessment Act 1936 be amended to remove the capacity of officers of the Australian Taxation Office to impose administrative culpability penalties.

Response: Not supported

42. The Government considers that in an environment where a limited number of cases are suitable for prosecution action a regime of administrative penalties is appropriate. The current penalty arrangements were developed in consultation with the tax professional bodies and accordingly the Government does not accept recommendation 127.

Double Taxation Treaties (Recommendation 124). See page 285 of the Report.

  R124 As a matter of priority, the Australian Taxation Office seek to obtain double taxation treaties with those countries which are significant destinations for distributions from Australian trusts.

Response: Recommendation noted

43. This recommendation, which suggested the execution of double taxation treaties with countries to which distributions from Australian trusts are made, cannot be considered in isolation. Issues such as foreign policy, investment and trade relationships need to be considered. In addition it should be noted that both parties must be prepared to negotiate. The Government has decided that the Treasurer will consider options for dealing with countries with significant distributions from Australian trusts.

Legal Professional Privilege (Recommendations 137-139). See pages 320 and 321 of the Report.

  R137 The Attorney-General refer the question of the operation and impact of the doctrine of legal professional privilege, as it applies to the administration of the taxation system, to the Australian Law Reform Commission for evaluation, review and report.

  R138 The Australian Law Reform Commission in evaluating the operation of the doctrine of legal professional privilege give consideration to the impact of the doctrine on the treatment of advice on taxation matters passing between taxpayers, lawyers and other professional advisers, vis a vis, the Australian Taxation Office.

  R139 The Australian Law Reform Commission, as part of a reference into legal professional privilege, investigate and make recommendations on the administrative mechanisms for handling claims for privilege and the need to provide a sanction for persons who make unreasonable claims.

Response: Recommendation noted

44. These recommendations will be given further consideration by the Government.