Contents

Summary of recommendations

Introduction

• Focus of report: principal issues of concern

Committee procedure

• Natural justice provisions applied
• Allegation of criminal wrongdoing not pursued
• Statutory secrecy and select committee powers
  • Advice of the Solicitor-General and the Clerk of the House of Representatives
• Adverse findings

Term of reference A

To review the powers of the Commissioner of Inland Revenue to assess and collect income tax pursuant to the Tax Administration Act 1994 and other relevant Acts and to assess whether these powers are justified

• Overview of the Commissioner’s powers
  • Information-gathering powers
  • Assessment powers
  • Powers to impose penalties and grant relief from payment
• Statutory powers generally appropriate
• Manner in which powers exercised problematic
• Time bar period should be more comprehensive
• Burden of proof
• Ability of taxpayers to access their personal files
• Operation of care and management provisions needs assessing
• Delegation of authority not monitored appropriately

Term of reference B

To review the Inland Revenue Department’s application of the compliance and penalties regime established under the tax acts, including the process by which and the rate at which use of money interest is set, and also the simultaneous application of late payment penalties

• Overview
• Late filing penalty
• Non-electronic filing penalty
• Late payment penalty
• Shortfall penalties
  • Lack of reasonable care
  • Unacceptable interpretation
• Simultaneous application
• Process for challenging assessments needs review
• Use of money interest
  • Operation of policy
  • Extent of differential in rates opposed

Term of reference C

To review the debt management practices and the adequacy of the powers of the Inland Revenue Department to remit tax liabilities or enter into arrangements for deferring the payment of tax and the department’s operation of its powers

• Department needs to take action on outstanding debt more quickly
  • Refocusing of debt and return management strategy
• Write-offs
• Cancellation of penalties
• Instalment arrangements
• Serious and financial hardship provisions require review
• Ministerial approval threshold in cases of serious or financial hardship
• Bankruptcy proceedings
• Department’s statutory preference in liquidation proceedings should be reviewed
• Tax amnesty

Term of reference D

To examine the feasibility and desirability of establishing a tax ombudsman to investigate taxpayer complaints

• Complaint mechanisms within the department
• Current role of the Ombudsman in tax matters
  • Options for enhancing the Ombudsman function
• Need for effective departmental complaints service

Term of reference E

To review whether the structure, operation and culture of the Inland Revenue Department, and its understanding of the law, have affected the department’s application of the compliance and penalties regimes and the service it provides to taxpayers and their agents

• Structure
  • Overview of structure
  • Current changes and restructuring
  • Quality of telephone services
  • Responses to written correspondence require improvement
  • Internal provision of drafting services inappropriate
  • Desirability of a board of directors should be considered
• Culture
  • Staff require greater interaction with business community
• Understanding of law
• Taxpayers’ charter

Conclusion

Appendix A

• Terms of reference
• Approach to inquiry
• Committee members
• Committee staff

Appendix B

• List of Inland Revenue Department submissions
• List of public submissions