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The Commissioner of Taxation has published his annual report to Parliament on the performance of the ATO in 2010–11.

In relation to community satisfaction with the ATO's perfomance, the Commissioner said:

"However, there was an overall dip in community satisfaction in 2010–11, as judged by our various independent surveys. The reduction in satisfaction levels was particularly evident for tax agents. While a successful Tax Time 2011 should improve matters, enhancing our relationship with tax practitioners remains a priority for us."

In relation to a number of high profile losses that the Commissioner suffered in the courts at the hands of aggrieved taxpayers, the Commissioner said:

"At a broader level of review, the success and integrity of Australia’s tax and superannuation policies are matters for government and parliament. The ATO’s role is to administer the relevant laws in accordance with their tenor. However, it should be noted that the ATO was not successful in some major litigation over the last 12 months. This was particularly so in the application of the general anti-avoidance provision, Part IVA of the Income Tax Assessment Act 1936, to corporate arrangements that were structured in a way that did not give rise to a tax liability or which reduced that liability or which shifted the downside risk of transactions to related parties in a way that reduced the tax payable in Australia...

[These] provisions are highly sensitive to the facts of the particular case. Given this, it may be premature to question whether, in relation to the structuring of major commercial transactions, Part IVA is going the way of its predecessor, section 260. However, were this to be the trend, and if there were to be a flaw in the provisions, then this should raise serious concerns for parliament and the community.

In relation to the effectiveness of Division 13, consideration might also be given to the modernisation of the Act to better align these provisions with those found in Australia’s double tax agreements, incorporating the guidance provided by the OECD commentary."

In relation to the Commissioner's comment on Division 13, readers should note that on 2 November 2011, the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, announced that the Government will reform the transfer pricing rules in the income tax law and Australia's future tax treaties "to bring them into line with international best practice, improving the integrity and efficiency of the tax system".

For a copy of the Commissioner's annual report, go here


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