Tax board is vehicle for community input

The Board of Taxation should not make tax policy, argues Richard Warburton

I share the widely held view that Australia's tax laws are too complex and would benefit from input by tax professionals and other community stakeholders.

But people who want to achieve this reform by restructuring the role of the Board of Taxation do not understand the powers of the board and the work it has been doing to increase community input in our tax laws.

The Federal Government created the Board of Taxation a year ago in response to a recommendation by the Ralph Review of Business Taxation. Seven of the Board's 10 members are from the non-government sector and the remaining three members are the heads of the Treasury, ATO and Office of Parliamentary Counsel.

Its functions include advising the Treasurer on the quality and effectiveness of tax laws and the processes of their development, including the processes of community consultation, on the functioning and integrity of the tax system and on any research the board may commission, with the Treasurer's approval. The Treasurer may also direct the Board to undertake particular tasks.

On the face of it, therefore, the Board has a very broad role. But it is an advisory body.

In particular, the Board is not in the business of determining tax policy. This is the preserve of the Treasurer and Government of the day; both are accountable to the Parliament and the voting public for the outcomes.

Nor is the Board in the business of directing the Commissioner of Taxation on how to run the Australian Taxation Office. This is a statutory role for which the Commissioner is directly accountable to the Parliament.

So where does that leave the Board? In my view, still with a very broad and important role in helping to facilitate better tax law outcomes for Australia.

Its areas of principal focus must be on achieving effective community input into tax laws, on assessing the quality and effectiveness of the laws and on acting as a lightning rod for Government to discern the community's priorities and concerns regarding the tax system.

As is the case with any board, the Board of Taxation must, for the most part, maintain a broad strategic focus. That is, an approach of seeking to ensure that the right processes and procedures are established and maintained, to deliver the best possible outcomes.

It is then up to the Treasury, the ATO and the Office of Parliamentary Counsel to manage these processes with appropriate accountability to the Treasurer. The Board also has a role as an honest broker in seeking to resolve concerns or disputes where it is perceived that processes have broken down and, above all, in engendering trust in the processes among all parties concerned.

At the same time, the Board is liaising directly with community groups to discern the community's concerns and priorities for the tax system and is looking to develop additional processes to keep abreast of these views.

The Board of Taxation has been very active in its first year of existence. It has focused on determining best-practice arrangements for effective community input into tax laws which it could recommend for adoption by the Government.

The Board has commissioned a report from KPMG Consulting, which includes a community survey of views about current consultative arrangements and suggestions for the future, analysis of processes employed in other comparable countries and analysis of processes employed in developing other areas of law.

The Board has also been evaluating the tax value method for calculating taxable incomes. The Board's strategy for this exercise is to allow for input from the community and stakeholders by developing a body of draft legislation and associated products, such as tax return forms, to demonstrate and test the idea.

This is the sort of open and transparent process that many in the tax advising sector and business argue should be adopted in developing our tax laws more generally.

The Board has instituted, in conjunction with its regular monthly meetings, a permanent program of meetings with key stakeholder representatives.

However, to be effective in promoting better tax law outcomes for Australia, it is essential that our community stakeholders work closely with us and not get sidetracked into debates about whether the Board should be statutory, have an independent Secretariat, and so on.

These arguments miss the point that with the current Board, a vehicle now exists through which all parties can work to achieve our unifying objective of better tax law outcomes for Australia.

What is now needed is commitment to do so.

Copyright John Fairfax Holdings Limited 2001. Not available for re-dissemination.

Sources: AUSTRALIAN FINANCIAL REVIEW 24/09/2001 P59