2011 federal government tax forum

5 October 2011
Address by the Institute's Tax Counsel, Yasser El-Ansary CA

Tax system governance

Most taxpayers and advisers would agree the manner in which our tax system is governed is critical to the integrity of the tax base. It’s also critical to instilling community confidence that everyone who is asked to make a contribution to the revenue does the right thing by society.

With all the will in the world, putting in place a robust tax system doesn’t end when the Governor-General proclaims royal assent to legislation passed through the Parliament. A strong and sustainable tax system must continue to deliver on the policy objectives – set by the government of the day, and approved by the Parliament – when the legislation giving effect to those principles is picked up and interpreted by the likes of the Australian Tax Office, as well as the estimated 65,000 tax practitioners engaged in providing advice to over seven million Australians, or roughly 70 per cent of the taxpaying community.

So, tax system governance takes on a whole new meaning when viewed through this perspective.

We need a world-class administration, we need the best tax laws man-kind can design, and we need appropriate checks and balances to make sure the system works in precisely the way it was intended to.

If I was scoring the existing governance arrangements a mark out of ten, I’d award it a seven.

I remember when I was at school my Dad said to me that seven was certainly nothing to be ashamed of, but with a little more effort and determination, an eight or nine was achievable.

Precisely the same analysis can be levelled at our existing governance arrangements. We’re doing well, but we could do better.

So, let me turn for a couple of moments to where we could do better.

Firstly, the last few years have served to highlight – in quite stark terms – the risks of not investing adequate resources into the process of consulting with key stakeholders outside of government and the bureaucracy on major aspects of policy and law design.

The tax system is complex – we know that.

So we should therefore remember when you’re trying to tinker with something as important and challenging as the tax laws of the country, you need to get expert help. Most of us would not be game to roll up our sleeves, strip out the engine and transmission of our car and try to fix the problem without getting some expert help. The same logic applies to our tax system.

We need to invest more resources into the tax policy formulation and law design processes. There have been good examples of how consultation can work exceptionally well, so let’s take those learning’s and apply them as best practice to the maximum extent possible.

Secondly, we need a more powerful amalgamated scrutineer agency to work with taxpayers and the Australian Tax Office in identifying improvements that can be made to avoid systemic problems, that we all recognise will inevitably arise across our tax system from time-to-time.

If we considered carefully the merits of bringing together the resources of the existing Inspector-General of Taxation, Ombudsman, and elements of the Australian National Audit Office, we could design a better resourced agency that is more adequately equipped to monitor the administration of the tax system.

With a resource base of around 25,000 staff, the ATO is an extremely large organisation by any standards of private or public sector comparison. And I’m not suggesting for a moment that the resourcing of the ATO should be reviewed, it’s appropriate that it maintain appropriate resourcing to manage our complex tax system. But I’m saying that having a ‘one-stop-shop’ scrutineering agency would undoubtedly help to deliver efficiency gains with the ATO.

This idea should be seen as an opportunity - not a threat. In the end, we’re all in this together, but a healthy tension should exist to keep everyone honest. An amalgamated scrutineering agency would serve to better manage that ‘healthy tension’.

This leads me a couple of final remarks about the road from here in respect of what’s been discussed during the course of these two days.

There has been constructive discussion here about numerous ideas, perspectives and challenges in relation to the design of our current tax and transfer systems. Many people in this room know that I had modest expectations about this two-day forum. I did not expect everyone to arrive at unanimous agreement about the various reform ideas canvassed. And who would want that anyway? I also do not expect the Government to commit itself to a substantial new reform agenda at this point – especially given that a number of reforms across the tax system are already in the pipeline and are yet to be bedded-down.

But I do expect the Government to outline a forward direction for how this community-wide dialogue can continue. It would certainly be easy for the Treasurer to put all of this discussion on the bookshelf, tick the box on the tax forum and move back to business-as-usual. But I’m confident he won’t do that.

There is a ravenous appetite out there in the community for substantial tax reform that makes things simpler and fairer – our 70,000 members hear that from the individuals and businesses they work with every single day.

There has been discussion in various submissions of the need to establish some sort of independent tax reform commission. But, personally, I must say that I’m not convinced we need to put in place yet another body to take things forward. I believe we can continue the momentum that has started to build by committing to a process that involves bringing together various stakeholders from the private sector, Treasury, the ATO and government to begin the hard work of laying out more detail behind the high-level ideas.

If we take a realistic view about tax reform being a long-term journey, then we are just setting out on this pathway. The challenge for all of us is to make sure we don’t stand still, because we know the global marketplace in which are playing, most certainly is not.

Article last updated 15 February 2012