Michael D'Ascenzo's speech at
the Curtin University Taxation Seminar
30 October 2012.
Firstly it is an honour to be giving this inaugural lecture in Curtin University's Taxation Seminar series. Thank you also for the opportunity to reflect on the role of good tax and superannuation administration in building and sustaining a civilised and prosperous community. The ATO has always been about serving the community, and for many years now we have been operating under the ethos of working with the community.
At the recent opening of the ATO's new Melbourne building, a young student 10-year-old Josh Robb said:
Did you know over a hundred years, some of the things tax has paid for are schools, hospitals, roads, the army, looking after the environment, and supporting people in the country that need our help. That's why the Tax Office is important. You collect money for all those things and that's what makes Australia a safe place to live.1
As Josh points out, a tax system that resources services and infrastructure for the development of social and economic institutions serves the community and builds the nation. Furthermore it could be said that a nation's outlook and wellbeing are to a large extent contingent on that nation having an effective and efficient system for raising revenue.
Of course, it's not just collecting tax that is important; it is also how taxes are collected that has a bearing on the nature of our society.2
Traditionally, in many countries tax has been collected under a command-and-control model in which any infringement is dealt with harshly or even arbitrarily or capriciously.3 This is even more troubling where the integrity of the administration and other institutions is open to question, or where it operates in a society that does not consistently uphold the rule of law.4
Fortunately, taxes in Australia are legislated by Parliament as the representative of the community. The power to tax resides with the Parliament and, as an independent agency of government, the ATO is charged with responsibly administering the legislative intention of Parliament.
Australia enjoys a tax administration of the highest integrity, and one that is modern, progressive, and recognised globally as first class.
For the ATO, the broader context of our work is to improve the wellbeing of all Australians. As Josh eloquently explained, revenue collected by Australia's tax system funds public goods and services, and superannuation helps to secure retirement income for Australians.5
Taxation, it can be argued, is central to the health and prosperity of a community. It is part of the social contract by which citizens collectively agree to contribute to a civilised society.
The theme of collecting revenue in a just and democratic way to support the growth and development of Australian society has underpinned the ATO's endeavour across its past century. Our tax administration has been characterised from the start by a concern for serving the public and for protecting honest taxpayers. They are qualities we can easily take for granted, but which compare extremely favourably with tax administrations in many other countries, or in other times.
Compliance
Like any government agency, the ATO's resources to carry out its wide range of responsibilities have always been limited, and so we operate on a risk-management basis. This means we have to make informed choices as to how we allocate these scarce resources to best serve the community. This is about anticipating potential risks (help and assistance activities, information and guidance, and prevention is better than cure strategies), as well as detecting and dealing with existing risks (again by addressing the causes of the risk as well as the symptoms).
The ATO's compliance model6 responds to risks on the basis of a belief that most Australians will respond positively to a system they believe is both fair and transparent, and will act accordingly in a proper and self-regulatory manner that enables them to get on with their lives and business. This is after all a hallmark of good citizenship. Basically, our compliance model is predicated not only on the cooperation of taxpayers but also the evidence-based conviction that the great bulk of Australian taxpayers try to properly fulfil their civil and legal responsibilities in relation to taxation and superannuation.7
We also rely on the integrity and professionalism of intermediaries in the system.8
For the vast majority of taxpayers who willingly try to abide by the law, and the agents who help them to do so, the ATO's ethos of helping taxpayers in every way possible9 is as strong as ever, if not stronger. For the small minority who deliberately attempt to evade or avoid their tax obligations, our focus is justly fair but firm. Our enforcement activities range from reviews through to audits, investigations, and legal action and we publish areas of focus in our annual Compliance Program.10
A tailored approach
In developing our compliance model, which differentiates between the economic, psychological, and social circumstances of taxpayers, the ATO has been a global innovator. This model is described as responsive regulation.11 Sagit Leviner of the Michigan Law School described our approach as follows, albeit under-stating both the ATO's emphasis on assistance and guidance and our efforts to make compliance as easy as possible (e.g. e-tax and pre-filling): "The responsive regulation approach is based on the proposition that effective enforcement requires a dynamic and gradual application of less to more severe sanctions and regulatory interventions. The Australian approach also advocates a deeper understanding of the motivations, circumstances and characteristics of taxpayers".12 The ATO's emphasis is on a differentiated approach, and on taking action that is proportionate and values-based.
To see how our tailored approach plays out in real terms, let's focus on that approach in relation to business.
At the heart of what we do is help businesses to understand their rights and obligations, and make it as easy as we can for business to properly participate in Australia's tax and superannuation systems. We recognise the diversity of small business and tailor our service accordingly.
Our support for businesses broadly falls under three key themes.
Firstly, we support businesses through tangible assistance, such as our business assistance visits and our empathetic approach to businesses in short term financial difficulties. Our approach to tax debts has seen us help taxpayers through tailored payment arrangements for over 266,000 small businesses in the last financial year alone.13
In 2011-12 we directly helped around 10,000 small businesses through one-on-one assistance visits. There were significant reductions in the cost of compliance for those businesses we visited. For example, we found that those we assisted during 2010-11:
- improved the average time they take to lodge activity statements by 11 days
- made 13 per cent more electronic lodgments
- had a lower taxation debt on average than the broader population, and
- were less likely to be subject to future compliance action after we provided assistance.
Secondly, we help businesses facing unfair competition by protecting them from those who seek to abuse our tax and superannuation systems. Our compliance and firmer debt action activities ensure honest businesses are not disadvantaged by the non-compliant behaviour of a few, for example through non-disclosure of cash income or non-withholding of PAYG. Our actions seek to level the playing field for those businesses making good and honest choices and who are trying to do the right thing.
The small business benchmark program for example is having a positive effect in lifting levels of compliance. We have also conducted free seminars and other education and marketing activities in industries where we assessed employers had a greater risk of not meeting their tax or superannuation obligations. This strategy contributed to a 15% increase in the number of employers voluntarily lodging super guarantee charge statements, as well as improved tax compliance.
Thirdly, we are constantly seeking to make it easier and cheaper for businesses to comply, through better ways of reporting information to us, for example through the use of Standard Business Reporting (SBR). I have championed SBR from the start because I believe it has the potential to substantially reduce business reporting costs. In my view there is scope to further reduce the regulatory burden on small business and to help them be more efficient by promoting online dealings.14
Another aspect of our work that makes it easier for people is our commitment to user-based design. We work with the community in designing products and processes to ensure they are user friendly.
Our most recent 2012 survey results for the small business sector have highlighted an overall rise in businesses agreeing that the ATO is providing the information and tools needed to manage their tax affairs and that our service has improved. This is pleasing as we regularly review these results and apply this feedback from the community with a view to improving and better tailoring the services we provide and the activities we undertake to support and protect honest taxpayers.
Similarly unsolicited comments made to me by tax agents, small business operators and large business bodies to the effect that they are seeing a positive and welcomed difference - cultural change in tax administration in this country - reflects the high level of alignment which my officers have to the ATO's vision, values and directions.
Citizen-centric
So, to reiterate, good tax administration starts from the philosophy that underpins our thinking and actions. It's about the framework of our corporate values; it's about working with the community; it's about building trust in our administration by taking a fair and professional approach; it's about being transparent in our approach; and it's about being empathetic as well as vigilant. Our commitment to engaging with the community and to living our values has helped us step into the shoes of others, treating them as we would expect to be treated in those circumstances.
Encouraging good tax behaviour, making it as low cost and easy as possible for people to comply with their obligations, 'walking the talk' that we are here to help those in genuine difficulty, and protecting honest taxpayers from those that seek to abuse the system. These are all strategies that will sustain Australia's tax and superannuation system for the long term.
As an organisation, we have sought to be as forward-looking as possible. We have worked diligently for a present and a future in which Australians value their tax and superannuation systems as community assets, and where willing participation is seen as good citizenship. Part of seeking to achieve has been through continuous improvement of our services, and through innovation more broadly. The gold standard for a modern tax administration is one which is increasingly service-oriented, and citizen-centric.15
Improving taxpayer experience (and minimising their costs) has been in our thoughts and actions for some time. Indeed, we were the first Commonwealth agency to develop a service charter - the Taxpayers' Charter.16
Our Taxpayers' Charter, now 14 years old, continues to guide our interactions and affirm the rights and expectations of taxpayers. The values it embodies are enduring, and have so far stood the test of time.
Modern technology, and a predominantly online business model, means that much of our work is now done electronically and benefits from economies of scale. However the main benefit of the ATO's interest and commitment to a more digital Australia is to reduce compliance costs and to make Australia more efficient.
The community
As well as making it easier for people to deal with us (and with other government agencies), we have reached out to offer broad support to the community. We have invested resources and training in a number of programs to help various disadvantaged groups in the community, including a volunteer program that helps people on low incomes with their tax returns. I am proud of these volunteers who give of their time and expertise to help others.
We also offer help to Australians facing hardship or affected by disaster. Part of our differentiated approach means taking into account the shifting circumstances of taxpayers' lives: the social, environmental, economic, or personal factors that impinge on their ability and capacity to comply.
During a natural disaster, such as flood or bushfire, our message is that tax matters should be set aside while people are dealing with trauma and the basics of survival. When people are ready to return to their everyday functions of normal life, we'll be there to help.
During difficult economic times we have helped many small businesses through short-term financial difficulties. We continue to do so.
In less dramatic times we look for ways to connect with the community. We work very hard to be in touch with the community, and to better understand "our customers". We use sophisticated analytics to help us do this.
We are working, for example, to provide young Australians, like Josh whom I quoted at the start of this talk, with an understanding of the tax and superannuation systems before they enter the workforce. To that end, earlier this year we released our new online educational resource, called Tax, Super & You.17 It is designed to help young people learn about the roles tax and superannuation play in supporting the kind of society and way of life we enjoy in this country.
The ATO's large workforce of over 21,000 people means that we are very much part of the community; we are touched by the same tides that sweep through Australia's shared national life; and by the same ebb and flow that courses through each local community.
We have tried to connect with the community's ideas, experiences and aspirations, with a desire that our tax and superannuation systems are as easy as possible for people to access, use, engage with, and value.
For example, we have worked closely with communities from a non-English speaking background and relevant agencies to build strong relationships and to pioneer approaches that nurture good citizenship.
I have enjoyed and valued attending an annual forum with non-English speaking communities and we have benefitted from their feedback, collaboration and co-design. For example, as a result of this feedback we developed a national in-language media and community outreach programme tailored to their needs, as a well as a range of tax products such as the Tax in Australia DVD,18 produced in 16 languages, and the Your Business and Tax DVD, which is now available in 11 languages. Our strong partnerships have also enabled us to provide information in key resources for those new to Australia, such as the Beginning Life in Australia and the Citizen Resource Book published by the Department of Immigration & Citizenship.
More broadly, we understand that Australians communicate with each other in many ways and we are constantly looking for new, better and more diversified ways of responding to the communication needs of the public whom we serve.
We use social media, for example, to share the latest information on tax changes, initiatives, products and services. This includes channels such as Twitter, Facebook, and YouTube.
Innovation
As some of the examples I have mentioned show, being open to new and innovative ideas helps promote excellence in tax and super administration. The ATO has a well-earned global reputation as one of the best tax administrations in the world. We are universally recognised as world class.
The ATO is committed to fostering innovation both inside and outside the ATO and also to embed innovation in our work and culture.
We have taken a focused approach to innovation in our organisation. This is an approach which recognises that successful innovation in the ATO depends on a strong foundation of senior leadership and high levels of staff engagement supported by best practice methods and tools.
The ATO's Change Program represented top down transformational reform of our systems and processes.
We have also encouraged bottom up innovation. This starts from having an engaged and committed workforce that cares about the important work it does. It's about empowering them to ask the questions: what are we seeking to achieve?; why are we doing this?; and can we do it better? A corporate innovation framework has been developed to help harness the ideas and contributions of staff. This ensures that specific innovations are adopted in the short term, and that innovation and continuous improvement are an ongoing and self-regenerating feature of the way we work; part of our 'business as usual'; part of our DNA, rather than separate formalised processes or events.
Of course, as I have said before, Australia's tax and superannuation system belong to all of us, and we also look to the community for innovative ideas. We engage and involve the community in the care and management of its tax and superannuation systems through consultation, collaboration and co-design.19
Many of the innovations and improvements we make reflect the concept of "prevention is better than cure" - where we try to be there early to help people comply properly. For individual taxpayers and for businesses large or small, we work with them to help them understand their rights and responsibilities.
For all taxpayers the ATO has championed a system of private and public rulings that improve the certainty and fairness of the tax and super systems.
For large business, for example, we also offer Annual Compliance Arrangements (ACAs) which attempt to enhance positive relationships and compliance outcomes with the business. Under an ACA practical certainty is provided for a business by considering tax risks in real time. It offers a "no surprises" approach which benefits both the business and the ATO, and reduces the likelihood of having to work through traditional compliance approaches such as audits and risk reviews. It also links in well with the concept of including tax risks within the governance framework of large businesses, a concept we have championed and which has been recognised as best practice in Australia and by the OECD.20
Similarly for all taxpayers, where there is an issue or dispute, we increasingly look for ways to attempt to resolve them directly with the taxpayer and their agent. Where a direct negotiation has not resolved the issue we will consider whether an alternative dispute resolution (ADR) process may assist. An ADR can provide a cost effective, informal, consensual and speedier means of resolving disputes and litigation. It can be useful to clarify and limit the scope of a dispute, limit issues and streamline procedures. Having said that, there are occasions where a principle cannot be compromised.
So, we have always been open to new ideas and improvements to our administration, both in the technology we use and the processes we adopt. We receive plenty of feedback from the community on specific areas of our administration which need attention, and this has contributed to a culture where we are open and supportive of ideas for improvement.
Closing
The ATO's actions are aligned to our vision21 and values22. Our strategies can be grouped within the five themes that support our vision:
- Engage (as we do with young Australians and NESB communities),
- Support (through guidance and assistance),
- Protect (by seeking to promote a level playing field),
- Enhance (through continuous improvement and innovation), and to
- Champion (with a view to make the system simpler and to make Australia more efficient).
In an environment where resources are finite and scrutiny of performance intense, we have tried to invest in those areas that give the community best value.
While our goal of excellent service and high levels of voluntary compliance is continuous, our range of tools has developed over the past decades. We are now a more deeply expert workforce with sophisticated and state-of-the-art technology. We are now well placed to deliver steadily better service, as well as more effectively identifying and dealing with emerging risks. We are now better able to employ a differentiated approach for the benefit of honest taxpayers and the community.
As you may know, my term as Commissioner finishes at the end of this year. I will be leaving the ATO in excellent shape. The Joint Committee of Public Accounts and Audit conclusion in its Report 242 is high commendation for the value the ATO has added to the nation: "The Committee found that the administration of Australia's tax system is robust. Overall it is well managed, providing a trusted foundation for Australia's people, business and government."
It has been an honour and a privilege for me to have served the nation in a way that has a positive impact on all Australians. This is because "taxes are the price we pay for a civilised society".
1 Melbourne building opening
At the age of 6 Josh was diagnosed with a relatively rare case of idiosympatic organ failure. Its treatment regime has until recently been 5 days out of 10-15 in a paediatric ward having extensive treatment to keep his organs functioning. Earlier this year he underwent experimental implant surgery for his long-term condition. I am often asked who I admire. It is people such as Josh who tackle adversity every day with courage and good cheer. I encourage you to take a look at Josh's speech transcript below:
Josh Robb
Junior project manager
'Good morning everyone, my name's Josh Robb and I've been the junior project manager when the Melbourne Tax Office was being built. Did you know over a hundred years, some of the things tax has paid for are schools, hospitals, roads, the army, looking after the environment, and supporting people in the country that need our help. That's why the Tax Office is important. You collect money for all those things and that's what makes Australia a safe place to live.
Because of the important job that you do, the Commissioner, Stewart and his people, Mr Walker and the United Group have given you a great, energy smart building to come to work in because all of you make a difference to every person in Australia by looking after our tax systems so it's fair and easy for everyone to do the right thing. Thank you for inviting me today.'
2 My speeches on this can be found at http://www.ato.gov.au/newsroom.aspx?placement=001/001/001/002/001
3 A Popular History of Taxation, by James Coffield, 1970.
4 The ATO has an Integrity Framework (Nat 13036-01.2006) to safeguard our standing as an integrity-based organisation http://www.ato.gov.au/content/20886.htm
5 Making a difference - the intent behind our strategic statement 2010 - 2011 http://www.ato.gov.au/corporate/content.aspx?doc=/content/00245012.htm
6 ATO Compliance Model: http://www.ato.gov.au/content/5704.htm The OECD's Compliance Model is based on the ATO's Compliance Model
7 See GST Gap analysis in ATO Annual Report 2011-12 http://annualreport.ato.gov.au/Our-performance/Protecting-people-and-the-community/Goods-and-services-tax/
8 See Commissioner's speech, A watershed year, 2010. http://www.ato.gov.au/corporate/content.aspx?doc=/content/00236915.htm See also Tax Practitioner Action Plan http://www.ato.gov.au/content/00307038.htm
9 Commissioner Ewing's Memorandum to Staff, 26 June 1920, file J97/99, CRS A7073, NAA. t 1920.
10 Compliance Program 2012-13 http://www.ato.gov.au/corporate/content.aspx?doc=/content/00326650.htm
11 Responsive Regulation and Taxation. Introduction. Valerie Braithwaite, Law & Policy, Vol 29, No 1 January 2007.
12 Sagit Leviner, "A New Era of Tax Enforcement: From 'Big Stick' to Responsive Regulation", Michigan Law School, 2006.
13 See also business videos on ATO YouTube channel: www.youtube.com/AusTaxOffice .
14 Productivity Commission Report http://www.pc.gov.au/gsp/rogs
15 See Commissioner's speech, Creating a community-first culture in the Tax Office, 2006. http://www.ato.gov.au/corporate/content.aspx?doc=/content/81250.htm
16 Overview of the Taxpayers' Charter http://www.ato.gov.au/content/25824.htm
17 Tax, super + you http://www.ato.gov.au/content/00306797.htm
18 Tax in Australia - what you need to know http://www.ato.gov.au/content/00204055.htm
19 We have over 60 formal advisory forums with community, business and industry partners
20 OECD Multinational Enterprise Guidelines http://www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/
21 The ATO vision is: Australians value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship.
22 The ATO values are: Being fair and professional; Applying the rule of law; Supporting people who want to do the right thing and being fair but firm with those who don't; Being consultative, collaborative and willing to co-design; Being open and accountable; and Being responsive to challenges and opportunities
Last Modified: Friday, 9 November 2012