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Thursday, 12 December 2002
Page: 8103


Senator WATSON (5:01 AM) —The Inspector-General of Taxation Bill 2002 provides an opportunity to set up an independent statutory office for a fixed term of five years to review and report to the government on recommendations for bettering the tax system for all taxpayers, both businesses and individuals alike. This bill has received widespread support from taxation professionals, businesses and the wider community. For example, the Institute of Chartered Accountants in Australia gives its full approval to the new office of the inspector-general and believes it is an initiative that will deliver real improvements to tax administration.

The bill provides for the inspector-general to undertake reviews of tax administration on his own initiative and not solely at ministerial direction. The inspector-general would also act as an advocate for taxpayers, with the aim of improving the administration of the taxation system from the taxpayer perspective. It is intended that the inspector-general would also be clearly separated from both the Ombudsman and the Auditor-General.

Although we always see the need to be cautious about inserting another layer of bureaucracy, the mandate of the inspector-general has clear differences to that of the Ombudsman. For example, the Institute of Chartered Accountants believes that a properly resourced inspector-general could be empowered to investigate systemic tax administration problems before they reach crisis point and suggest both short- and long-term solutions.

Although warming to the initiative, I think it is disappointing that the ALP and the minor parties are not more supportive of the inspector-general bill. The accountability arrangements of the inspector-general will ensure the public's confidence in the office. For example, as I said earlier, the inspector-general needs to remain independent of the Australian Taxation Office. The focus of the inspector-general will be on identifying and recommending solutions to systemic problems in tax administration. The bill also provides statutory powers to the inspector-general to be utilised to obtain information about tax administration from taxation officials. This is so that the office of the inspector-general is not solely reliant on cooperation from tax officials in conducting such reviews.

The Commissioner of Taxation has until now been the only source of formal advice available to the government and Treasury on tax administration issues. In more recent times drafting issues have been central to Treasury. In contrast, the office of the inspector-general will give the government the opportunity to source important alternatives and independent advice. This will enable an improved response of the tax administration system to meet the requirements of taxpayers, although the taxation system already has various avenues by which decisions relating to taxation administration can be reviewed— for example, appeals to the courts, external reviews by tribunals, internal reviews by the Australian Taxation Office and complaints to the Commonwealth Ombudsman.

The inspector-general's role will not overlap with or overtake the functions of the Ombudsman, the Auditor-General or the Board of Taxation, but will complement their roles. The inspector-general will bridge the gap in the current review arrangements of tax administration. The inspector-general's main focus will be on broad systemic tax administration issues, as opposed to individual taxpayer queries. The Ombudsman will continue to handle individual taxpayer concerns and investigate tax administration matters under their own initiative. Both the Auditor-General and the Ombudsman will maintain various responsibilities in relation to a range of public administration functions. The inspector-general, however, will target systemic tax administration matters and will develop specialist expertise as well as consultation networks, with the aim of improving tax administration systems. This will also create a formal avenue for taxpayers to provide their views on tax administration policy, knowing that on vital issues the inspector-general advocates on behalf of taxpayers to the Treasury ministers. There is no effect on the Auditor-General's role in reporting to the parliament on administrative actions.

The bill does require the inspector-general to consult with the Ombudsman and the Auditor-General to set work priorities at least annually, yet the independence of the three agencies is not affected in any way. The role of the Board of Taxation is such that the role of the inspector-general should not encompass providing advice to the government on the construction of laws to implement policy initiatives, and should avoid repeating taxpayers' perspectives in policy.

This bill provides that the inspector-general will not review tax policy, only issues of taxation administration. Were the inspector-general an ex-officio member of the Board of Taxation participating in policy development, it would obstruct the independent review of that same policy down the track. It is therefore anticipated that the board and the inspector-general will only liaise informally. The inspector-general will be able to conduct reviews by their own initiative, as well as by a direct result of communications with taxpayers and their advisers. A Treasury minister may also request that the inspector-general undertake reviews at their direction, as may either house or both houses of parliament, a resolution of a committee of either house or both houses of parliament, or the Commissioner of Taxation. If the minister issues a formal direction, then the inspector-general must comply with that direction, yet the inspector-general retains discretion as to the resources allocated to the relevant review.

To enhance the transparency of the office of the inspector-general, the annual report to the parliament must include a schedule of directions given by the minister. Where the minister requests the inspector-general to undertake reviews, the inspector-general has the discretion to include a review undertaken in the work program. Of course, in considering the ministers' requests, the inspector-general will also have to consider other requests from either the parliament or the commissioner.

This bill gives strong protection to any taxpayer information that the inspector-general may obtain, and the inspector-general may not report any information that would enable identification of an individual taxpayer. Naturally, the inspector-general and the staff of the inspector-general's office would be under strict confidentiality arrangements regarding information about individual taxpayers. The bill also provides statutory information-gathering powers to secure the independence of the inspector-general and to ensure that the office of the inspector-general is not reliant solely on the cooperation of tax officials. The inspector-general cannot compel the provision of information by taxpayers. The inspector-general will not be investigating the affairs of individual or business taxpayers but systemic tax administration issues overall. However, the inspector-general will maintain an `open door' policy in relation to the participation of taxpayers and their advisers in consultation on taxation administration matters.

To preserve the autonomy of the Commissioner of Taxation in administering the law, the inspector-general will not be able to direct the commissioner, other than to require the commissioner to disclose information for a review. There are notable differences between the roles of the inspector-general and the commissioner. The inspector-general can only review, as I said earlier, systemic tax administration issues, not other issues such as individual decisions, amended assessments, particular rulings or waivers, or charges as determined by the Commissioner of Taxation. The inspector-general can only deal with the broader based administration issues such as the self-assessment system as a whole, or the operation of the rulings system. I believe this is a great bill, and I commend it to the Senate.