PwC has lodged a submission to the Inspector General of Taxation on his Review into the ATO's Management of Tax Disputes with Large Businesses and High Wealth Individuals (HWIs). A similar submission has also been provided to the House of Representatives Standing Committee on Tax and Revenue, in relation to its wider Inquiry into ATO Tax Disputes.
PwC’s concerns in the context of the management of tax disputes relevant to large businesses and HWIs arise from the lack of consistency across the ATO. We observe ATO disputes that are managed efficiently, effectively and fairly. But we also observe the opposite, where ATO audit teams exhibit behaviours or engage in practices which call into question the ATO’s objectivity, transparency or fairness.
Our submission raises a number of general and specific observations relating to ATO Tax Disputes and puts forward a number of recommendations. These include:
- Upholding the rule of law in the conduct of ATO Tax Disputes will build community confidence in the tax system. In our view, the ATO’s independence, objectivity and expertise of in dealing with disputes need to be strengthened and consistently applied.
- PwC has commented on various issues faced by large business and HWI taxpayers in dealing with information gathering processes, and has made a number of recommendations to improve the efficiency, transparency and fairness of these processes, and the conduct of ATO reviews and audits more generally.
- Various initiatives are welcomed and have progressed significantly since the arrival of the current Commissioner of Taxation, including: Independent Review, separation of Public Groups & International (PGI) objections from the compliance function, the early assessment and resolution (EAR) process for early ‘triage’ of Administrative Appeal Tribunal cases, a stronger focus on Alternative Dispute Resolution (ADR) and early resolution of disputes more generally.
- However, PwC recommends that these initiatives have a way to go to strengthen application of the rule of law through:
- structural change within the ATO (not a separate agency) to create an independent and separate Review and Dispute Resolution area, under a new Second Commissioner
- moving all internal review, objection and appeals functions to this new area, under a new Second Commissioner – including Indirect Tax, Private Groups, HWIs, Small Business and individual taxpayers, and
- stricter observance by the ATO of the ‘Model Litigant’ obligations.
- PwC also recommends that the ATO co-designs a ‘Dispute Resolution Charter’ with the profession, to provide a framework to unify ATO guidance documents relevant to tax disputes at the level of principle and key details.