Board of Taxation reports released

While most tax consultations in recent times have been satisfactory, Treasury acknowledges that from time to time some consultations have fallen short of desired outcomes. Treasury has taken steps to improve its consultation and broader stakeholder engagement processes.

Treasury recognises that enacting measures in the shortest possible timeframe from announcement should increase certainty for taxpayers. However, there is an inherent trade-off between a measure's complexity and the timing of its enactment.

• recommends that Treasury continue to develop its project planning techniques and capabilities, and makes information about this available to stakeholders, and
• considers that there would be value in the Treasury investigating the Rapid Response Design Solution approach used by the ATO.

Treasury seeks to continually improve its project planning techniques and capabilities, including regular updates of its detailed tax design process map to guide policy officers on best practices.

Treasury will consider incorporating elements of the ATO Rapid Design Solution approach as appropriate.

The Board recommends that:

• the Government generally consult on tax changes at the initial policy design stage, prior to any Government announcement;
• the nature of interaction between the government and non-government sectors should be determined in a systematic way, both early in and during the tax design process and by reference to the Tax Consultation Characterisation Matrix;
• seeking a commitment from all stakeholders to achieving good tax system outcomes would encourage openness by participants, engender trust, and enable a joint commitment to a national interest outcome;
• the Treasury should establish ground rules for engagement or consultation at the start of each process;
• consideration could be given to the development of an explicit ethical framework for members of professional bodies who become involved in tax design; and
• Treasury and the ATO should consider systematically adopting quality assurance processes as a component of tax policy and legislative design.

Treasury's Tax Design Process Map includes a general requirement to consult on tax changes before any Government decision on a policy measure. In certain cases, such as budget measures and minor tax changes, consultation may not be achievable in the initial policy design stage. Treasury also observes that in practice, the exact nature and scope of any consultation is a matter for government.

Treasury is adapting its tax policy and law development processes in line with its Tax Consultation Characterisation Matrix.

Since December 2011, Treasury has held twice‑yearly relationship‑enhancing stakeholder forums that seek to address short‑ and medium‑term tax policy and law issues.

Treasury and the ATO have developed improved quality assurance processes for developing tax law.

The Government accepts that an explicit ethical framework for members of professional bodies would further underpin the integrity of tax consultations, and invites stakeholder views on how best to achieve this element of the Board's recommendation.

The Board is of the opinion that the Treasury has taken some useful steps in ensuring more effective engagement with the tax community, but that further steps could be taken, including:

• systematically applying the Treasury's Tax Consultation Characterisation matrix;
• emailing directly its consultation summaries to those involved in a consultation process; and
• consultation summaries are made easily accessible on the Treasury's website.

See the comments for recommendation 6.

A summary of Treasury's twice- yearly stakeholder forums is emailed to participants and published on Treasury's website. Disseminating information arising from stakeholder engagement and consultation meetings is the most appropriate way, and would be consistent with Treasury's Tax Consultation Characterisation Matrix.

In relation to the Government's not-for-profit (NFP) reform agenda, Treasury has developed, in consultation with the NFP Sector Council, a sector specific consultation strategy, which incorporates a series of confidential and public consultation processes, and includes providing regular updates via NFP reform newsletters and general and specific consultation summaries released at each stage of reform.

Given that the Review Panel's Recommendation 11 appears to have been implemented, the Board makes no further comments.

(Review Panel Recommendation 11 - Approval to consult on draft legislation should be sought simultaneously when seeking the Prime Minister's or Cabinet's policy approval for a tax measure)

The Board considers that no one model of external involvement in tax design is, in fact, suitable for all tax measures. A more practical approach might make the decision to engage external expertise dependent on the comparative advantages that such expertise can deliver on a specific project.

Such matters could be assessed using the Treasury's Tax Consultation Characterisation matrix.

The Board considers that, irrespective of whether Review Panel recommendations (1,2,12) regarding tri-partite design teams are implemented, the Tax Consultation Centre model could be used to ensure involvement of the people who are best placed to contribute to the intended policy outcome in a cost effective and efficient manner.

The Board recommends that the Government establish a Tax Consultation Centre.

The Board notes that submissions did not raise any substantial issues in relation to Review Panel recommendations 14 and 15, and makes no further comment on these recommendations.

(Review Panel Recommendation 14 - No change to current drafting arrangements

Review Panel Recommendation 15 - No change to the location of drafting resources)

The Board is of the view that Review Panel recommendation 24 has been implemented as the matter is before the Government. The Board makes no further comment on this recommendation.

(Review Panel Recommendation 24 states - the Government should consider whether the Commissioner of Taxation should be given further power to modify the tax law to give relief to taxpayers, or whether there are preferable ways in which the Commissioner could provide extra-statutory concessions in appropriate circumstances)

In the absence of evidence pointing to a specific process or structure to implement the Review Panel's recommendations, the Board has been unable to conclude that Review Panel recommendation 25 has, in fact, been implemented.

(Review Panel Recommendation 25 states - The Government should ensure there is a mechanism in place to drive the implementation of the new tax design process).The Board notes Treasury has a central role in ensuring that legislative products match their policy intent. It is vital that the Treasury continue to be adequately funded to perform that role, but also to ensure that a mechanism is in place to drive the new tax design process.

Treasury will continually reflect upon and improve its engagement with stakeholders, including other agencies, in order to deliver effective outcomes from a whole of government perspective.

This recommendation and any consequential work will be accommodated within Treasury's budget allocation and in line with the Government's broader objectives.

The Board recommends that the Government supports further initiatives aimed at raising the awareness of TIES. These include:

• encouraging the tax publishing houses to note when a new item has been added to the TIES database or an existing item has been dealt with in a particular way;
• encouraging the professional bodies to promote the use of TIES through their newsletters, technical committees, conventions and links in their websites;
• considering whether a subscription service could be included in the TIES website where subscribers would be notified of any changes to the website, in particular when new issues are raised or current issues are finalised, and provide appropriate resources for this purpose; and
• for the Board, to continue to promote the use of TIES over the next two to three years ensuring awareness and use of TIES is well established within the community.

As a result of meetings between Treasury, the ATO and CCH Australia Publishing in December 2010, tax material published by CCH now includes a prominently placed overview of TIES.

The ATO has been active in promoting TIES through the Commissioner's speeches, Tax Agent Magazine, National Tax Liaison Group (NTLG) subcommittees and the Department of Innovation website amongst other channels. Most recently, the ATO published an article in the March 2012 issue of Tax Agent Magazine highlighting the successes of TIES.

Since February 2009 the ATO has asked the NTLG secretariats to submit all 'care and maintenance' issues to TIES for evaluation. At the October 2010 NTLG meeting, the Commissioner stressed the importance of using TIES for raising issues. All NTLG subcommittees have a standard agenda item to review all issues raised for consideration through TIES.

Further developments and improvements to the TIES website have been investigated and will not be undertaken as the benefits do not outweigh the costs.

The Board recommends that enhanced transparency and accountability be provided in TIES through the following actions:

• inform submitters promptly of when their issues will be considered by TIES together with an indication of likely timing for a considered response. This initial contact should be preferably by phone and provide an opportunity, when appropriate, for submitters to clarify the issues that are being raised;
• as a matter of course, hold monthly meetings whenever new TIES issues have been raised or further information is obtained on previously raised issues;
• for issues assessed as within the scope of TIES that require legislative amendments, provide to the submitter the contact details of the Treasury officer responsible for progressing those amendments;
• for issues assessed as within the scope of TIES that require the exercise of the Commissioner's general administrative powers, or for out of scope issues that are referred to the ATO for further consideration, provide to the submitter the contact details of the ATO officer responsible for progressing those matters;
• for the TIES working group to aim to make a determination on whether the issues are within the scope of TIES within 2 months of the issues being registered in TIES;
• for those issues with a minor revenue impact that need to be considered within established Budgetary processes, the Government could commit to make a decision within the next available Budget;
• for technical amendments without revenue impact, the Government could commit to make a decision within 4 months of the issues being assessed within the scope of TIES; and
• for the panel appointed by the Board to assist enhanced accountability by monitoring and following up on the resolution of TIES issues that have been assessed within scope, including following up that agreed timelines are adhered to.

The submission of issues is usually acknowledged within 48 hours of receipt by either mail or e-mail, depending on the correspondent's preferred form of contact. Further direct contact with correspondents is made as necessary to seek clarification of their issues. The time required for a considered response varies greatly depending on the complexity of the issue. In cases requiring detailed analysis, we agree that it is appropriate to make personal contact with the correspondents to discuss their concerns.

Meetings are typically held every two months and monthly when required. However, two of the three meetings scheduled for the first half of 2012 were cancelled because no issues were ready for the Working Group's consideration. Should the number of issues raised through TIES increase, it may be appropriate to hold meetings monthly. This process will be monitored and revised as necessary.

It is not practicable to advise correspondents of a particular Treasury or ATO contact officer. However, we will highlight on the TIES website and in correspondence that correspondents can contact TIES directly and ensure that they receive a response from the appropriate policy officer.

Some issues submitted to TIES require significant analysis to determine if they are in scope and to identify the appropriate solution. These issues may be discussed with the Working Group at a number of meetings. Other issues are straightforward and can be resolved relatively quickly. Therefore, it is not possible to set a single general timeline for assessing issues. However, it is agreed that issues should be progressed in a timely manner having regard to other Government priorities.

Amendments arising from TIES are included in taxation and superannuation bills as schedules of miscellaneous amendments. The timing is subject to Government priorities. However, Treasury progresses miscellaneous amendments on an ongoing basis.

The Board recommends that existing consultations and feedback arrangements for TIES issues be further enhanced by providing:

• more detailed feedback to submitters on the reasoning behind the assessment of a TIES issue, particularly when it is assessed as out of scope;
• regular feedback to submitters on the progress of issues assessed as within the scope of TIES;
• further development of the TIES website to enable taxpayers to comment on issues raised in TIES and provide appropriate resources for this purpose; and
• a significantly better description and prompt register of issues submitted in the TIES website.

Treasury and the ATO are jointly committed to continuously improving the quality of the feedback provided to TIES correspondents.

There is also a commitment to continuously improve the quality of the descriptions on the register of TIES issues and to ensuring that new issues are uploaded to the register as soon as possible.

To further assist transparency the Board recommends that:

• all technical corrections raised by the public with Treasury or the ATO, including those raised in subcommittees of the National Tax Liaison Group, be registered in TIES, and for this to be actively monitored by Treasury and the ATO;
• technical corrections identified by Treasury and the ATO continue to be addressed through current processes, not required to be reviewed by the TIES working group, but for transparency being published in the TIES website, identified and grouped under a separate heading, following their agreement by the Government; and
• the TIES website provide links to the lists of all issues that are being raised and considered in consultative forums, such as at subcommittees of the NTLG and responsibility for administering the TIES website be allocated to Treasury, with input from the ATO. Appropriate resources should be provided.

NTLG subcommittees are raising issues through TIES. Since February 2009 the ATO has asked the NTLG secretariats to submit all care and maintenance issues to TIES for evaluation. At the October 2010 NTLG meeting, the Commissioner stressed the importance of using TIES for raising issues. All NTLG subcommittees have a standard agenda item to review all issues raised for consideration through TIES.

Technical corrections identified by Treasury and the ATO will continue to be addressed through current processes, however, at the current time these corrections will not be published on the TIES website.

Further developments and improvements to the TIES website have been investigated and will not be undertaken as the benefits do not outweigh the costs.

The Government considers the appropriateness of a retrospective start date for amendments arising from TIES, as it does for all amendments, irrespective of where or by whom an issue is identified.

The principle is that where an amendment would ensure that the law operates according to the original policy intent, the amendment would typically operate retrospectively to the taxpayer's advantage, and in other cases, it would typically operate prospectively, usually with effect from the date of Royal Assent to the correcting Bill.

The Board recommends that:

• further clarification be provided on the TIES website on the type of issues that would be considered within and out of scope; and
• consideration be given to providing a point of contact in the TIES Secretariat for discussing with interested stakeholders potential issues prior to their eventual submission and provide appropriate resources for this purpose.

Recommendation 111 of the AFTS review provides:

The Government should establish a more transparent means of dealing with community ideas about the tax system by extending the Tax Issues Entry System website and further developing its use.

The Government continues to encourage and invite ideas and discussion as to the care and maintenance of the tax system. However, further developments and improvements to the TIES website have been investigated and will not be undertaken as the benefits do not outweigh the costs.