D'Ascenzo, Michael --- "The Qualities of a Good Tax Administration" [2004] JlATax 1; (2004) 7(1) Journal of Australian Taxation 1

• 1. INTRODUCTION
• 2. ENGAGING THE COMMUNITY
• 3. FIVE FUNDAMENTAL BUILDING BLOCKS
• 4. CONCLUSION

---

THE QUALITIES OF A GOOD TAX ADMINISTRATION

Guest Editorial
by
Michael D’Ascenzo
Second Commissioner of Taxation

1. INTRODUCTION

Taxes are the price we pay for a civilised society.

In democratic countries the choices made in relation to taxation at the ballot box reflect the community’s agreement or disagreement with the decisions made by government in relation to taxation. However, what is clear is that some level of taxation is necessary to fund public goods and services. It follows that an ethical and effective tax administration is an important societal institution for any country.

The Australian Taxation Office (“ATO”) has a proud history as a “world class” tax administration which has generally exhibited the highest levels of integrity and probity. The approach of the ATO has for a long time been based upon encouraging taxpayers to comply with the tax law through a mix of help and active compliance strategies. Moreover Australian taxpayers have extensive rights and resources that are enforceable under the law. Structural features such as binding public and private ruling systems complement the more traditional rights of objection and appeal, and work to enhance taxpayer certainty.

Nevertheless, tax administrations increasingly need to engage with the community in respect of the community’s tax system. After all the Australian tax system (and the ATO) exist to support Australia as a civilised society – and belong to all Australians.

2. ENGAGING THE COMMUNITY

Engagement requires co-design, consultation, and responsiveness.

Another requisite for engaging the community is an open and transparent tax administration. Strategies such as the following are consistent with an open, transparent and responsive tax administration:

• publicly available compliance plans covering both help and active compliance strategies, which seek feedback on the risk management choices made;
• making available to the community the administration’s tax technical precedent database;
• engaging with software providers to build into natural systems good compliance protocols; and
• approaches that lock in forward compliance.

A tax administration that genuinely listens to the community and which seeks to co-design administrative solutions lives the values of an institution that works with and supports the community.

3. FIVE FUNDAMENTAL BUILDING BLOCKS

In order to build the community’s confidence and trust in the ATO, five fundamental building blocks are necessary:

1. Taxpayers must be able to know and understand their rights and responsibilities.
This challenge is multifaceted and there is scope for innovation:

(a) We need to be the voice of administration and the voice of the user in legislative design processes.
(b) Legislative policy should be implemented in a way that adheres to the legislative intent and minimises compliance costs; making it easier, cheaper and more personalised for taxpayers. Administration systems need to be designed with the user in mind.
(c) A purposive approach needs to be taken to the interpretation and the application of the tax law (ie take account of the context and the object of the words used by Parliament).
(d) Develop educative materials which make it easy for people to comply, and make that material available through a variety of channels which reach their audience (increasingly on-line and web based).
(e) Make processes for interaction simple. Demystify ATO processes.
(f) Support intermediaries (eg tax agents, software providers and financial institutions) that can assist taxpayers.
(g) Provide taxpayers with accurate, consistent and timely information, to make the tax system fairer and more certain for them.

2. Simplify and make transparent the processes of interaction with the ATO.
Modern tax administrations are heavily dependent on IT systems to account and record the variety of taxpayer interactions with the tax system. The ATO’s Change Program is about developing robust and integrated systems that provide easy and transparent processes for taxpayers, and intelligence data for the ATO. A more integrated and technology based commercial and financial environment provides scope for new approaches and further innovation.

3. Framework for supporting honest taxpayers that deters those that chose not to comply.

• Active compliance strategies (and appropriate sanctions) are essential in order to maintain community confidence.
• The indirect effects of active compliance activities (and built in checks and balances) are fundamentally more important to effective tax administration than the direct results.
• Tax compliance needs to build on the data provided by a more integrated tax system and tax administration, as well as by a more integrated and digital commercial environment.

4. Trust and Community Confidence as hallmarks of effective tax administration.
High levels of integrity and probity are necessary to maintain community confidence. The work of the ATO’s Audit and Advisory Integrity Committees nurtures these values.

5. ATO People
People are often an organisation’s most valuable asset. Personal interactions leave indelible marks on how taxpayers view the ATO and the tax system, and how ATO people view their organisation and their colleagues. Courtesy and professionalism must be features of the way the ATO carries out its role of a firm (but fair) enforcer of the tax laws, as well as its roles of educator and trusted advisor.

• The ATO need to remain committed to ensuring that its officers are trained, equipped and supported to do their jobs; and
• exhibit a “one ATO” culture which is aligned to corporate goals. The value of such a culture should seek to promote an ATO that is:
- open and transparent;
- efficient and effective;
- professional and trustworthy; and
- respected by the Australian community.

4. CONCLUSION

The structural attributes of the Australian tax system, if supported by a tax administration concerned with issues of taxpayer assistance, compliance costs, mutual respect and procedural fairness, as well as effective tax compliance, is apt to provide community confidence in the fairness, certainty and legitimacy of the tax system and of the ATO as its administrator.