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16 Mar 09 Address by Dr Ken Henry to the Taxation Institute's 24th National Convention

On 13 March 2009, the Chair of Australia's Future Tax System (AFTS) Review Panel and Secretary to the Treasury, Dr Ken Henry, gave an address entitled "Confidence in the operation of the tax system" to the Taxation Institute's 24th National Convention held in Sydney, New South Wales.

Dr Henry's theme for the address was drawn from recent reporting of a roundtable discussion between representatives of some of Australia's largest companies. It was reported that uncertainty in Australia's tax system is damaging our international competitiveness. In particular, these business representatives expressed concern about their inability to get objective, timely and reliable advice from the ATO. They called for the tax law to be as clear as possible to minimise the need for ATO advice. They also suggested that the ATO's approach should take into account the attractiveness of Australia as a place to invest and do business. And they proposed a governance structure to support the ATO in this approach - specifically, a board of directors to oversee the ATO.

In relation to the last suggestion (a board of directors), Dr Henry was not sympathetic. He said:

"In large public companies, dispersed ownership means it is impractical for shareholders to be directly involved in management. A board of directors is delegated the power to manage the company in shareholders' interests. A critical feature of this governance arrangement is that the board has the power and responsibility to act, including the ability to appoint and remove the chief executive officer.

In relation to the Tax Office, the ultimate 'owners' are the Australian community, whose interests are represented through the Parliament. This institution might be thought of as the ultimate board of directors. Of course, Parliament leaves to the Executive the powers of appointment and dismissal. But it insists that the Commissioner is accountable to it – that is, the Parliament – for the administration of his office. Given the importance of the Commissioner's role in the relationship between the Executive and taxpayers, governments would properly be uncomfortable with delegating to anybody else their power to appoint and remove the Commissioner. It is not surprising that the boards that oversee other tax authorities do not have this power to directly appoint or dismiss the CEO."

For a copy of Dr Henry's address, go here.

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