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Thursday, 12 December 2002
Page: 8108


Senator COONAN (Minister for Revenue and Assistant Treasurer) (5:25 AM) —I wish to make a few comments by way of summing up on the Inspector-General of Taxation Bill 2002. I thank honourable senators for their contributions, however disparaging, to the debate on this bill. I particularly want to comment on some issues that have been raised also in the Senate Economics Legislation Committee report and during the debate on the measure.

As had been discovered in the extensive consultation process conducted by the Board of Taxation earlier this year, overwhelming community support for the appointment of an Inspector-General of Taxation was revealed by the economics committee. Whilst I acknowledge that some concerns have been expressed about certain aspects of the bill that I am about to address, we should not lose sight of the community's desire to see the office of inspector-general up and running as a matter of urgency. Some concerns that have surfaced in the two consultation processes are the product of uncertainty about how the office will operate in practice within the broad legislative framework set out in the bill. In that regard, I do believe that most concerns will dissipate once the office is operational.

In relation to the role of the inspector-general, the government's commitment was to establish an inspector-general who would act as an advocate for all taxpayers. The bill delivers on this commitment. Clause 3 of the bill states that the object is to improve tax administration for the benefit of all taxpayers. The explanatory memorandum recognises this will involve protecting the integrity of the revenue system, which in turn funds government programs for the benefit of all Australians. The inspector-general will advocate the broad interests of taxpayers in improving tax administration systems and will advocate taxpayers' views direct to the government, independent of the Treasury and the tax office, thus enabling rapid policy responses to the concerns of taxpayers. The inspector-general will not be acting as an advocate for individual taxpayers who are in dispute with the Commissioner of Taxation. Existing avenues of appeal against the commissioner's decisions will continue to operate, and the Ombudsman will continue to handle individual complaints about administrative action taken by the commissioner.

All Australians would be welcome to suggest matters of tax administration that the inspector-general could review. The legislation provides for the inspector-general to initiate reviews on his or her own motion, including in response to issues raised by taxpayers or the tax advising professions. The bill is designed to encourage and protect those who may suggest improvements to tax administration or provide information to the inspector-general in the following ways. The bill does not impose obligations on taxpayers or tax professionals. There are no compliance costs. The compulsory investigative powers do not extend to taxpayers. The inspector-general could not review the tax affairs of individuals or businesses. The inspector-general cannot report information that would allow the identification of individual taxpayers. Members of the public have the same protection under clause 17 where they participate in reviews in good faith. Finally, members of the public can claim confidentiality for voluntary submissions, with that confidentiality protected in clause 26. All of the above provisions promote participation in the work of the Inspector-General of Taxation and promote the role of the inspector-general as an advocate to government of the concerns of taxpayers.

The inspector-general will have discretion to act on suggestions made by members of the public and to allocate resources amongst the various proposals put forward, including those whereby the minister directs or requests that a review be undertaken. The inspector-general would ultimately determine the best value reviews for taxpayers. There has been a suggestion that the bill should require the inspector-general to consult with stakeholders in setting his or her work program. In fact, the extended definition of `review' in clause 12 makes it clear that the inspector-general can consult with members of the public for the purpose of deciding whether a review should be conducted in the first place.

The issue has been raised as to whether the inspector-general's office should report to the government, publish its own reports or report to the parliament. It is an important point. The government is keen that the operations of the inspector-general be open and transparent. Nonetheless, it has been clear in all the government's public statements on the inspector-general proposal, including the consultation paper released in May this year, that the inspector-general is being established for the purpose of providing independent advice to the government on tax administration. The inspector-general is not being established to duplicate the roles of the Auditor-General and the Ombudsman, who report directly to the parliament on reviews of administrative actions and procedures of the Australian tax office.

The Commonwealth does not require enhanced public reporting about tax administration. In 1997, the government founded a robust public accountability regime when it re-established the Auditor-General as an officer of the parliament. Parliament can now request the Auditor-General to conduct performance audits into areas within the Australian Taxation Office. Through the Joint Committee of Public Accounts and Audit, parliament itself is responsible for ensuring that the Auditor-General is properly resourced to undertake all audit functions. The parliament also receives, and will continue to receive, independent advice from the Ombudsman on tax administration issues of concern to individual taxpayers or groups of taxpayers.

The Inspector-General of Taxation would not be duplicating the roles of the Auditor-General and the Ombudsman, who assist the parliament to hold the government to account for public administration. Indeed, the office of the Inspector-General of Taxation is not exempt from review by the Auditor-General and the Ombudsman, nor from parliamentary scrutiny. In particular, the Inspector-General of Taxation Bill 2002 does not seek to override the strong information-gathering powers in the Auditor-General Act and the Ombudsman Act. The Inspector-General of Taxation would have a discrete and specialised role to provide independent advice to the government regarding taxpayers' views so that the government can take action to remedy any problem quickly.

The Inspector-General of Taxation is required to make an annual report to the parliament. Clause 41 of the bill requires the Minister for Revenue to table the inspector-general's report within 15 days of receipt. The inspector-general would be subject to the same annual reporting requirements and conventions as those that apply to other Commonwealth agencies. These include statutory requirements in the Financial Management and Accountability Act 1997 and annual reporting guidelines approved by the Joint Committee of Public Accounts and Audit under sections 63(2) and 70(2) of the Public Service Act 1999. In addition, there is an explicit provision in clause 4 of the bill requiring the inspector-general to report to the parliament on any directions given by the minister to conduct a review into a particular matter.

The bill has been drafted on the basis that reports by the inspector-general, including reports on particular reviews, would be released. For example, clause 10 requires the inspector-general to provide a written report, and the explanatory memorandum makes it clear that this is to facilitate publication of findings and recommendations. Division 4 in part 2 of the bill comprises provisions ensuring the protection of taxpayers' information and other sensitive information in the context of the government's policy position that reports by the inspector-general be released. In the government's response to the Board of Taxation report on the inspector-general, which I released on 16 September, the government agreed that it was important for the inspector-general's reports on reviews into systemic tax administration issues to be released publicly in order to maintain the respect and cooperation of taxpayers and their advisers. So public release of reports is not at issue here. The real issue is whether the report should be released immediately or, to avoid speculation and uncertainty in the tax system, simultaneously with any government response.

As a rule, changes to the tax system, including administrative changes to the timing of tax collections or the way in which tax is collected, have revenue implications and may change taxpayer behaviour. For the same sorts of reasons that budget initiatives are confidential until budget night, so also it is important to ensure that possible changes to the tax system do not become a matter for speculation. Accordingly, it is intended that the minister would have the role of releasing reports of reviews by the inspector-general along with the government's response to any recommendations. The economics committee proposes that there be a time limit of 15 days for the government to table reports of the inspector-general. I make the point that it would not be practicable to determine a policy response to recommended changes to the tax system to fit within this time frame. The government will most likely be required to seek costings from Treasury and the tax office, and there may well be complex legal and administrative matters that need to be resolved before the government response could be announced. It is conceivable that consultation with other departments and agencies may also be necessary—indeed, even consultation with stakeholders and externals. I want to make the point that the government is committed to acting quickly on recommendations of the inspector-general. However, it would not be appropriate to mandate a time frame for release of reports.

One other matter I want to touch on briefly is the independence of the inspector-general. There is universal agreement that the inspector-general must be independent; this was a strong theme in both public consultation processes. The bill does guarantee the independence of the inspector-general. The inspector-general would be appointed by the Governor-General, with strict limits on the circumstances in which the inspector-general may be dismissed from office by the Governor-General. Furthermore, the inspector-general would be empowered to conduct reviews on an `own motion' basis. The office of inspector-general will have its own appropriation through the budget process and would have autonomy in allocating resources to competing priorities. The inspector-general will report to the parliament on how resources have been expended in a particular financial year. The inspector-general may bid for increased resources in response to changing demands and workloads. The minister may direct the inspector-general to conduct a review into a particular matter under clause 8; nonetheless, the inspector-general does retain discretion as to how the review would be conducted and the resources allocated in the review.

In conclusion, I would observe that the proposals in the Inspector-General of Taxation Bill 2002 have been the subject of two intense community consultation processes. The bill has been designed to respond to stakeholder views and the recommendations made by the Board of Taxation and the economics committee while maintaining the government's original commitment to establish an Inspector-General of Taxation that would strengthen advice to government on tax administration and advocate the concerns of taxpayers. Tax administration has an impact on virtually every Australian household and business. Two consecutive consultation processes undertaken this year that have involved the community have shown that Australian taxpayers strongly support the establishment of an independent office of Inspector-General of Taxation to review tax administration. I commend the bill to the Senate.

Question agreed to.

Bill read a second time.