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  • GST Advisory Group minutes 27 August 2015

    Meeting details

    Venue: ATO Offices, Level 9, Room 716, 747 Collins Street Docklands, Melbourne

    Date: 27 August 2015

    Start: 9.30am Finish: 2.30pm

    Chair: James O'Halloran

    Secretariat: Alison Zeitlhofer, Indirect Tax; contact phone: 02 6216 1013

    Members

    James O’Halloran

    Deputy Commissioner, Indirect Tax, ATO

    Gordon Brysland

    Assistant Commissioner, Tax Counsel Network, ATO

    Kathleen De Kleuver

    (Acting) Assistant Commissioner, Indirect Tax, ATO

    Professor Michael Walpole

    Professor and Associate Head of School (Research) School of Taxation & Business Law UNSW

    Jessica Mohr

    (Acting) Manager Indirect Taxes and Not-for-Profit Unit, the Treasury

    Paul Suppree

    Assistant Director, Corporate Tax Association

    Chris Plakias

    Head of Tax, GST and Technology Westpac, Member Australian Bankers’ Association

    Ken Fehily

    Principal, Fehily Advisory, Member CPA Australia

    Jeremy Geale

    The Tax Institute

    Kevin O'Rourke

    Indirect Tax Committee, Chartered Accountants Australia and New Zealand

    Andrew Howe

    Director, Greenwoods and Freehills Pty Ltd, Member Property Council of Australia

    George Nikolaou

    Coles Finance

    Andrew Sommer

    Partner, Clayton Utz, Member Law Council of Australia

    John Corlis

    States and Territories Representative

    Giles Wilmer

    Director, Commonwealth Taxes Unit, Queensland Treasury

    Guest attendees

    Thomas Ryan

    Assistant Commissioner, Corporate Relations

    Andrew Orme

    Assistant Commissioner Review and Dispute Resolution ATO

    Apologies

    Paul Nielsen

    Chairman, Board of Directors, Council of Small Business of Australia

    Discussion summary

    Introduction

    Deputy Commissioner, James O’Halloran opened the meeting.

    Apologies were noted. New members welcomed.

    Outcomes of the Review of ATO consultative arrangements and next steps – Thomas Ryan and follow up discussion on impacts with members

    Two key findings from Russell Miller AM, Centre for Strategy and Governance report on ATO consultative arrangements were discussed:

    1. The current consultation system is fit for purpose. No significant change is required. The focus should be on continuing to refine the ATO’s consultation processes to improve the efficiency of the system and the outcomes it produces.
    2. The current governance framework is appropriate. It is a coherent structure, with flexibility to engage stakeholders in the full range of appropriate consultative approaches.

    The suggestions impacting on Stewardship Committees including the GST Advisory Group included:

    1. Inviting stakeholder associations to nominate suitably qualified members for appointment
    2. appointments for fixed period (eg 2 years) with reappointment possible but not expected
    3. considering external chair or co-chair, -selected by external members, appointed for 1 year, with possible re-appointment
    4. reduce ATO membership to those who need to attend each time

    The following points in relation to the GST Advisory Group were raised:

    • It is important that each individual member joins the conversation and that the right people are at the table with a commitment to deliver
    • Smaller groups can be formed for specific topics
    • The knowledge and perspectives of members can draw out common problems, canvas topics, assist with submissions, and challenge the group
    • The whole system approach with Treasury, ATO and externals is making a difference
    • The committee should act as an early warning system and raise emerging issues rather than focusing on technical issues

    In relation to the review recommendations:

    • The composition of the group is working
    • Rotation of members is sensible; some members are coming to end of term
    • An external co-chair will bring depth and a different flavour to the group, the secretariat and logistics will remain with ATO so the role is not so onerous
    • The Chair invited nominations for a co-chair.

    Update on Emerging Industry Issues and Cross Border Issues

    Members discussed the importance of ensuring that the GST system remains robust in particular

    • Is the GST fit for purpose for digital age?
    • Are the laws of today future proof?
    • Will the utility of the current law give certainty?

    In a few months more up to date information on Tax Gap will be published. Tax Gap provides sound benchmarks for the efficiency and effectiveness of the system.

    From a policy perspective there are currently three items in focus, they are:

    1. Expanding GST to cover imported services from 1 July 2017. The government has released exposure legislation with submissions being sought.
    2. The State and Territory Treasuries agreed in principal to introducing GST on low value goods under $1000 imported into Australia, overseas vendors will be required to register and charge GST where their Australian turnover exceeds $75,000, goods will not be stopped at the border.
    3. GST reform – the tax white paper consultation period has closed. The green paper is expected to be available later in the year, following public discussion, the Government will release a White Paper.

    Causes of and Irritants Relating to Compliance Costs - Professor Michael Walpole

    Discussion: This topic has a long history; approximately 20 years ago the ATO’s Revenue Analysis Branch conducted a study on compliance costs. When considering compliance costs there is a balance between complying with tax administration versus natural business costs. The ‘cod liver oil argument’ suggests that while there are compliance costs, record keeping for tax compliance results in good managerial benefits for the business. Research has tried to disentangle tax versus business compliance. Micro business is where compliance costs are most felt. Another area that requires further research is the impact of complying with multiple taxes at the same time especially when there are the same reporting dates.

    One solution for small business that was suggested is to raise the threshold for registration. For example in South Africa you cannot register if your business is under a certain threshold. There may be a need to further understand why in the Australian system some people voluntarily register when they don’t need to.

    It was suggested there should be a multi-pronged approach to reducing compliance costs including:

    • Reviewing what information is being gathered and asking do we really need it.
    • Understanding why we ask for the information
    • Explaining why the information is needed
    • Comparing what records are kept by large unregistered (not for profit?) entities to see how much of an extra burden GST imposes.
    • Alternative Dispute Resolution and Independent Reviews – Andrew Orme

    The ATO has been making a concerted effort to resolve disputes early through cultural change as well as through initiatives such as independent review and in house facilitation. We are transforming from merely performing a function to resolving a problem.

    More disputes are being resolved at audit stage and litigation numbers are back at 2005 levels. We were seeing a lot of cases that go to litigation that were settled on the steps of the court, we want to settle well ahead of that. If the auditor and taxpayer are not working well during the audit stage we can find ways so we can work together to obtain the right outcome. However clients should be able to mediate with auditor before it gets to independent review.

    The independent review process was introduced in the ATO two years ago, with GST cases included about 12 months ago. Up to this point in time 30 independent reviews have been conducted with only a handful of those in relation to GST. The objection function now sits independently of the audit process, now there is no influence by the audit team over the objection process. Objection results are published on ato.gov.au, a very transparent process from start to finish. So far the independent review process has received positive feedback.

    GST Compliance program TNS research results – James O’Halloran

    TNS Social Research has been involved in the Compliance Program Research since its inception in 2011. The ATO commissioned the research to inform, support and monitor the effectiveness of the GST Voluntary Compliance Program. This research has provided a six year program range of benchmarks and trends. We have gained some interesting perceptions around the fairness of the tax system and the system in operation. The attitudes and beliefs towards the whole of the GST system have become more positive since the research program began. This research will now move to being undertaken less frequently but remain targeted and in-depth.

    Out of session updates – Kathleen de Kleuver

    The GST safe harbour working group has progressed on the following issues:

    • A possible safe harbour on barter transactions and will be presenting a submission to the ATO Steering Group at the end of August. The essence of the proposal is to leverage off commercial documentation in fulfilling tax invoice obligations.
    • Consultation with the industry body for credit unions has indicated an interest in pursuing a possible safe harbour and a small working group is being established to further explore the options that may be available.
    • An opportunity for a safe harbour within the international shipping area has also been identified and it is expected this will be taken to the ATO Steering Group for endorsement within the next few weeks.

    Further research has been conducted with small business on the proposal to extend Goods and Services Tax: Waiver of Tax Invoice Requirement beyond corporate card statements. The objective of the research was to determine if the proposal would benefit small business and understand any impacts of the proposal. Overall, the small business representatives believe that the proposal had merit but that they will use it as a back-up for lost tax invoices. Some concern was raised about the need to know at the time of sale whether merchants possessed adequate point of sale systems that would allow sufficient details of acquisitions to be reported on the customer’s credit/debit card statement.

    Next steps summary and close – James O’Halloran

    It was concluded that the GST Advisory Group has a valid work program going forward. The meeting concluded at 14.30.

      Last modified: 20 Oct 2015QC 47123