Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 [2017] AUSStaCSBSD 49 (15 February 2017)

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Purpose	This bill seeks to amend various taxation Acts to: • introduce a new diverted profits tax; • increase the administrative penalties that can be applied by the Commissioner of Taxation to significant global entities; • update the reference to Organisation for Economic Cooperation and Development (OECD) transfer pricing guidelines in Australia's transfer pricing rules to include the 2016 OECD amendments to the guidelines
Portfolio	Treasury
Introduced	House of Representatives on 9 February 2017

Review rights^[62]

1.87 Item 1 of Schedule 1 proposes to exclude merits review before the Administrative Appeals Tribunal (AAT) of decisions made by the Commissioner of Taxation in assessing diverted profits tax (DPT). Item 44 of Schedule 1 proposes to insert a new Part into the Taxation Administration Act 1953 (TA Act) that sets out that an entity subject to an assessment of DPT can appeal to the Federal Court regarding the assessment.

1.88 The explanatory memorandum explains that the combined effect of these proposed amendments is that in relation to DPT assessments any taxation objection must be an appeal to the Federal Court and not to the AAT.^[63] However, in general, taxation legislation provides for its own comprehensive scheme of review of taxation assessments, enabling taxpayers to object to an assessment by way of an appeal to the AAT or the Federal Court.^[64] The general position is that taxpayers may elect whether to pursue their appeal in the AAT or the Federal Court.

1.89 The explanatory materials do not indicate why the taxpayer may not, as is usually the case, elect to take their objection to the AAT.

1.90 The committee seeks the Treasurer's explanation as to why merits review before the AAT is excluded in relation to diverted profits tax assessments and whether the inability to seek review in the AAT may, in any way, change the nature of the substantive outcome or the remedy for a taxpayer who succeeds in proceedings under Part IVC of the TA Act objecting to an assessment.

Pending the Treasurer's reply, the committee draws Senators' attention to the provisions, as they may be considered to make rights, liberties or obligations unduly dependent upon non-reviewable decisions, in breach of principle 1(a)(iii) of the committee's terms of reference.

Retrospective application^[65]

1.91 Schedule 3 of the bill seeks to update Australia's transfer pricing rules to include updated OECD guidance materials. Item 4 provides that the amendments are applied to income years starting on or after 1 July 2016. The explanatory materials do not justify applying this retrospectively, except to note that the measure was announced on 3 May 2016 in the 2016-17 Budget.

1.92 In the context of tax law, reliance on ministerial announcements and the implicit requirement that persons arrange their affairs in accordance with such announcements, rather than in accordance with the law, tends to undermine the principle that the law is made by Parliament, not by the executive. Retrospective commencement, when too widely used or insufficiently justified, can work to diminish respect for the law and the underlying values of the rule of law.

1.93 However, in outlining scrutiny issues around this matter previously, the committee has been prepared to accept that some amendments may have some retrospective effect when the legislation is introduced if this has been limited to the introduction of a bill within six calendar months after the date of that announcement. In fact, where taxation amendments are not brought before the Parliament within six months of being announced the bill risks having the commencement date amended by resolution of the Senate (see Senate Resolution No. 44). In this case the amendments proposed by Schedule 3 were announced over six months prior to the bill's introduction.

1.94 The committee seeks the Treasurer's advice as to why the amendments are proposed to apply retrospectively to income years starting on or after 1 July 2016 and whether this will cause detriment to any taxpayer.

Pending the Treasurer's reply, the committee draws Senators' attention to the provision, as it may be considered to trespass unduly on personal rights and liberties, in breach of principle 1(a)(i) of the committee's terms of reference.

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests