31 Mar 14 Commissioner's address to The Tax Institute - Reinventing the ATO
On 27 March 2014, the Commissioner, Chris Jordan, gave an address to The Tax Institute's 29th National Convention held in Hobart, Tasmania.
In relation to "U-turns" by the ATO, the Commissioner said as follows:
"I also want to mention U-turns. We realise that the way we implement changes in our interpretation of the law can have a significant effect on our relationships with the tax industry.
The Practice Statement we issued in 2011 [PS LA 2011/27] dealt with U-turns, in response to recommendations by the Inspector-General of Taxation. Basically, the Practice Statement requires ATO staff not to devote compliance resources to implementing a changed view of the law retrospectively, if the ATO significantly contributed to taxpayers taking the incorrect view of the law.
Some have suggested that last year’s Federal Court decision in the Macquarie Bank case has cast legal doubt on the ATO’s ability to give effect to the principles in the Practice Statement. In particular, the Court said that an assessment of a taxpayer’s liability must be made according to the law as the ATO understands it. The court also said that the Practice Statement should be amended to avoid any possible reading to the contrary. However, we think we have considerable practical scope to use the Practice Statement and we are committed to the principles in it.
Deciding how to allocate the ATO’s compliance resources – that is, the time and efforts of staff – is not simply a narrow cost-benefit equation. It is not just about comparing the cost of (say) finishing an audit with the amount of revenue expected from an assessment. Rather, in making choices we take into account the broader health of the tax system, and especially the public confidence in tax administration. This is the thinking that underpins the Practice Statement.
I have asked Second Commissioner Mills to take a special interest in this to ensure that on the infrequent occasion of a U-turn, we manage the outcomes and relationships the right way. Indeed, we want to avoid them as much as possible in the first place."
For a copy of the address, go here