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Draft Tax Determination Leaves Consumers Exposed

Publication date: 30 Jun 04 | Source: THE TAX INSTITUTE

The draft ruling (TD 2004/D22) released today by the Commissioner of Taxation on the application of s 251L of the Income Tax Assessment Act 1936 clearly indicates that our tax laws cannot provide adequate consumer protection in the area of tax advice.

"The Taxation Institute strongly believes that this Draft TD demonstrates a fundamental flaw in our tax laws", said the Taxation Institute's President, Neil Earle.

"It is indeed unfortunate that the Commissioner has not taken a sufficiently broad approach to the interpretation and application of his powers to regulate the giving of tax advice for a fee", commented Mr Earle.

"This broad approach is not only necessary for the protection of consumers from unscrupulous and unqualified advisers, but is in fact consistent with Parliament's original intention when the provision was introduced into the Tax Act some years ago", he said.

These rules were introduced as a consequence of the 1934 Royal Commission on Taxation to '... prevent exploitation of taxpayers by unscrupulous persons'. The rules have only been significantly altered in 1988 in respect of qualifications and then in a minor way in 2000 to facilitate the preparation of Business Activity Statements.

"The Commissioner's approach to the level of advice covered by the regulatory regime casts doubt on numerous claims for tax agent services and leaves the majority of tax advice unregulated" noted Mr Earle.

What is incongruous is that at the same time the Commissioner is effectively seeking only to regulate a narrow range of tax advice, the Government intends to provide the Commissioner powers to penalize persons that are not regulated (i.e. Promoter Penalty legislation).

"The Taxation Institute calls for a thorough co-ordinated review of the whole regulatory regime covering the provision of tax advice, commencing with the release by the Government of the much anticipated regulatory framework for tax agents that has been under consultation since 1993.

A situation that allows anyone to give tax advice for a fee (provided it is not connected directly with a tax form etc) and forces those who are wronged to seek redress through the courts hardly provides an appropriate level of consumer protection" concluded Mr Earle.