ATO law expertise: Evolution or revolution?

Section 2: Re-shaping law interpretation

I mentioned earlier the rising expectations from stakeholders of the level of law expertise of our field and advice staff. This reflects the increasing sophistication and complexity of modern life and business. After all, there are many more taxpayers with complex affairs these days. One obvious example is the need for our field and advice staff to understand international tax law. It is no longer a specialty only required for those dealing with large multinationals; even sole traders may be trading internationally over the internet and it isn't unusual for individuals to move in and out of Australia for work during a tax year anymore.

There is also a rising demand to discuss and resolve the more complex issues with all the experts around the table. This means there is an increasing demand for early access to our relatively small number of deep law experts.

For example, as I've already noted, during the development of the Minerals Resource Rent Tax legislation where we worked very closely with the Policy Transition Group, we provided guidance on how we would interpret legislation still in development. This required the ATO to resolve technical issues quickly, and anticipate issues that would likely arise once the law was in operation. It is not normal practice for early guidance to be provided before law has been passed by Parliament and it was only possible in this case as the ATO had been integrated consistently throughout the policy law design process, including consultation with external stakeholders. As the new resource rent tax arrangements have significant process and practical issues such as valuations, early guidance fits well with the arrangements. In other cases, the ATO may be limited to providing advice on law as enacted.

How we best leverage our relatively small amount of deep law experts where demand has rapidly outstripped supply poses a difficult dilemma for us. We have about 380 people in our Tax Counsel Network and Centres of Expertise. They work on public and class rulings, strategic litigation, law design, complex interpretative advice, precedential matters and provide high level assistance to our Compliance and Operations sub-plans - which number around 16,000 staff - as well as to the Treasury.

So just how do we utilise them to best effect? Obviously, we need to lift the level of expertise available at the front line. Graduate recruitment programs and in-house and other specialist training helps, but to be truly agile and responsive we need to change our current structures and processes to invest more of our expertise in the frontline and make our processes for escalation more flexible. The Transforming Tax Technical Decision Making project (known as the 'T Project') is implementing these key shifts. The objective is to broaden and deepen our tax expertise across the entire organisation.

One key way in which we will do this is through the early engagement of experts. We are developing processes and criteria to identify and prioritise technical issues, so we can engage the right people to resolve the issue early in the technical decision-making process. Learning from other fields, in this case hospitals, we will triage cases to swiftly decide which require more resources to ensure faster a resolution. It will mean the right people will be involved earlier in the technical decision making process, whether they are in the front line or in Law.

The early engagement of our experts will mean they will be more accessible and visible. It will also help us to ensure taxpayers remain informed at all stages. One of the key initiatives of the pilot project is to inject law experts from centres of expertise and tax counsel to front line areas to strengthen or establish technical networks. The experts will be available to help advice and field staff and will also play a key role in lifting the level of expertise across their area. It will also ensure our deep law experts are freed up to work on the most critical areas of risk.

This approach is a calculated risk. It means we will have a substantially smaller number of law experts within tax counsel and the centres of expertise, so it will be important that these initiatives quickly demonstrate that significantly more law interpretation work of greater complexity can be managed at the front line. Our initial pilots have been promising, and we are well on track to implement this project by 1 July 2012.

Given these significant changes, we are at the same time considering the structural changes required within our Law area to complement these shifts whilst also considering what the specialisations should be within our law expert area. Currently our broad specialisations within centres of expertise are subject specialisations (such as consolidation, debt/equity and TOFA) and, when escalated to tax counsel, are shared broadly between direct and indirect taxes.

Early discussions include whether we should specialise by segment rather than by tax and specialist topic. For example, should business tax bring teams together to deal with particular parts of the business cycle e.g. start up or public float, instead of by topic. Whichever way we configure, one thing is certain, increasingly our experts need to continue to deepen their expertise whilst also keeping it broad - a tricky balance, but a necessary one. After all, tax issues no longer neatly fit into one box and we cannot afford to hand off from one expert to the next to most efficiently and effectively solve problems. We also need to have a strengthened capacity to bring our interpretative skills to the table to support the Treasury in developing tax policy and law design.