On 2 June 2014 the government released a report by the Inspector-General of Taxation (IGT) entitled Review into the Australian Taxation Office’s management of transfer pricing matters.
The review was prompted by concerns raised by taxpayers, tax professionals and their representative bodies regarding the ATO’s management of transfer pricing matters. The IGT found that key causes of the concerns were inadequate succession planning and resource management. Experienced specialist officers had left the ATO’s transfer pricing area and their knowledge was not effectively disseminated across the organisation. Another significant cause was the complex interactions between the ATO’s internal functions and a lack of clarity with respect to the decision-making process.
Broadly, the issues raised during the consultation phase related to the ATO’s overarching strategy and recent organisational changes, protracted timeframes to complete compliance activities, lack of ATO communication during compliance activities, inadequate public advice and guidance and ineffective use of consultative forums. The key underlying theme seemed to be insufficient staff capability in dealing with transfer pricing matters.
The report makes 18 recommendations aimed at developing sufficient organisational capability to address transfer pricing risks, including giving priority to measures that target the highest risks to tax revenue. The ATO has agreed with 17 of those recommendations in whole, in part or in principle. The IGT has observed that the recommendations are an integrated package where each builds upon the other; as the ATO has disagreed with certain recommendations or aspects thereof, the full benefit of the intended integrated outcome may not be realised.
The full text of the IGT report, which includes the IGT’s recommendations and the ATO’s responses to those recommendations, is available here.