If you ask what is the ATO's vision for the future you will find it embedded in sustaining and enhancing the wellbeing of Australians.
To this end we see our role as contributing to the development of a society which believes in and supports civic and legal responsibilities, which in turn underpins citizenship and the tenets of our democracy.
Within this wider context we see our mission as being to nurture an environment that fosters high levels of proper participation in Australia's tax and superannuation systems.
Was this the answer you expected?
When you think about it, a few truths become obvious. Revenue, of course, funds public goods and services, and the tax system is used to further economic, social and environmental policies. Superannuation works to secure retirement income for Australians, and the Australian Business Register helps to promote efficient online dealings for Australian businesses.
It is in furtherance of these goals that our Strategic statement 2010-15, corporate values and corporate plans set the benchmarks for our performance and clear directions for our future.
At one level the ATO's performance in 2010-11 included significant highlights. Our achievements included:
- meeting a wide range of specifically funded commitments to the government, including the 'level playing field' initiative and the implementation of new laws such as the flood levy, as well as our commitments to the states and territories as outlined in the GST Administration Performance Agreement
- considerably improving our performance against our service standards, meeting 22 out of 27 commitments to the community - a significant improvement on a year ago
- responding to community needs, particularly following the devastating natural disasters that struck parts of the country in early 2011
- helping to reunite 1.2 million people with their superannuation, providing funds with more up-to-date addresses for over 500,000 lost members and contacting over 650,000 people with lost superannuation or money held in the superannuation holding account
- managing collectable debt as a percentage of net revenue collections, while continuing to be empathetic with people and businesses facing short-term difficulties
- matching over 539 million transactions to support a range of compliance and service activities, such as pre-filling of tax returns
- undertaking a broad range of work to ensure compliance with Australia's tax system - in its Report 424 Eighth biannual hearing with the Commissioner of Taxation the Joint Committee of Public Accounts and Audit commended the ATO for its efforts and successes in this area
- promoting cultural change, both within the ATO and more broadly, particularly with large business, based on a more transparent and up-front relationship.
While revenue collections of $273.0 billion were 4.5% below the federal budget forecast, this was largely a result of weaker than expected economic conditions.
Within the ATO we:
- completed our transformational change program
- managed our departmental budget effectively - with a small surplus of $3.5 million against a final operating budget of $3.10 billion
- finalised arrangements for the provision of managed networked services, end-user computing and centralised computing services
- invested in the skills and engagement of our people by moving to an enterprise-wide learning and development approach and by placing further emphasis on continuous improvement and innovation.
So I think it is fair to say that in 2010-11 the ATO did what we set out to do and took steps forward in investing in our capabilities, including significant recruitment at base and graduate levels. From our perspective there is much to be proud of and I thank ATO staff, as well as taxpayers, their agents and others in the community, who have played their part in these achievements.
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.
Another area requiring further consideration is the lower level of community confidence in our administration of superannuation (68%) compared to 83% of the community who think that overall we are doing a good job in administering the tax system.
When reflecting on 2010-11, we also need to remember the challenges we faced.
Weaker than expected economic conditions and natural disasters placed a significant strain on some people in coping with their tax and superannuation obligations. They required a flexible and empathetic approach from us. On the other hand, we observed an increase in opportunistic non-compliance and attempts to cheat the system, requiring vigilance and quick responses on our part. There was also a significant increase in merger and acquisition activity which required the acumen and skills of the finite number of staff with expertise in these complex transactions.
There has been a very large scale of work and significant resources directed to our change program. While the program will pay for itself in a relatively short time and will continue to provide ongoing benefits, 2010-11 was very much a bedding down and learning period for us and tax agents in the use of our new integrated core processing system.
Complaints remained high early in 2010-11 and were only brought under control later in the year with us meeting our two service standards on a monthly basis by April 2011. At 30 June 2011 we had returned to more traditional levels of complaints.
During the second half of the year our monthly service standards and wait times for more complex calls in relation to debt and business issues (reflecting sectorial and geographic differences in economic conditions) and for superannuation (associated with legislative caps on superannuation contributions) were not at the level both we and the community would have liked - even though we met our annual benchmark.
These issues generated an increased level of dissatisfaction as shown by our survey results. These were also matters raised as concerns by the Joint Committee of Public Accounts and Audit in its Report 424 Eighth biannual hearing with the Commissioner of Taxation.
The end of the year saw our people voting on our enterprise agreement proposal. I believe we have high levels of engagement of ATO staff in the important work we do on behalf of the community. Our people enjoy professional standard accommodation in most sites, and pay levels for nearly all classifications are above Australian Public Service averages.
Nevertheless, on 30 June 2011 the majority of our people voted against the proposal, which mainly reflected cross-public sector concerns about the level of pay rise offered and rising costs of living.
The health of the system
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 IncomeTax 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.
Provisions such as Part IVA, and the anti profit-shifting rules in Division 13 of the Income Tax Assessment Act 1936, are intended to safeguard the community against contrived or non arm's-length dealings which have the effect of reducing the tax properly payable in Australia. Generally speaking, the interposition of steps within a wider commercial arrangement which serve no commercial purpose, or non arm's-length dealings or related party dealings that produce a loss over a protracted period, or which magnify the tax losses of a related Australian entity, are often indicia that may enliven the possible application of these provisions. If these provisions fail to achieve their intended purpose, both community confidence and the integrity of the system are diminished.
Both sets of 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.
Further aspects of this sobering and broader context include the complexity and a degree of fragility in the business tax system, with some legislative measures costing significantly more in revenue foregone than parliament may have expected.
Our ATO corporate plan 2011-12 outlines our focus areas for the year ahead.
The ATO plays an ongoing and significant role in implementing the government's extensive legislative program, as well as supporting Treasury, the Board of Taxation and the government in the consideration, design, and costing of new policy proposals. At 30 June 2011 the ATO had more than 50 announced measures on its plate for implementation.
This work will require a big effort from the ATO in 2011-12, having regard to the assistance we provide Treasury and others on the range of policy matters currently under consideration, including those associated with the health of the system; measures that might flow from the Cooper Review into superannuation and other reviews and forums; and annual Budget measures. This work will be challenging for us both in terms of administrative, law design, interpretative and consultative workloads and capabilities, and in supporting community readiness in the application of relevant legislative changes.
A particular administrative concern would be the complexity of possible information technology requirements associated with new superannuation initiatives. The technology elements of major changes to the administration of the superannuation system would be a high-risk priority project for us and could impact the scheduling of other information and communications technology work.
We are committed in 2011-12 to improving service delivery, given the trials and tribulations of the past two years. We are looking to improve our call handling, processing of payments and returns, and the management of taxpayer accounts. The outcomes of the change program and further modifications to our systems and processes should help us do this. In addition, we currently have a review in progress to better align our service standards with community expectations.
We expect the economic environment to remain challenging in the area of debt collection. We are improving our analysis of debt cases to better support differentiated approaches based on taxpayer circumstances.
Our Compliance program 2011-12 outlines the key risk areas and differentiated responses for the year ahead. Areas of focus include the fragility of the business tax system, enhanced tax fraud detection, offshore avoidance and evasion, the cash economy, employer obligations - particularly in relation to superannuation guarantee charge requirements - and assisting in the fight against serious and organised crime.
Our compliance approach emphasises 'prevention is better than cure' strategies, such as acting up front and in real time so that we address problems at an early stage (as reflected in our continuing dialogue with large business on risk categories and governance of tax risks). We are focused on end-to-end processes from a citizen viewpoint, making it easy to comply (and difficult not to) and actively engaging with taxpayers, their agents and other stakeholders.
For example, we tailor much of our information and guidance materials around market segments or events in the business life-cycle (such as our suite of materials for self-managed superannuation funds), and we are developing more self-help tools and online services, including improving our portals and website. Our small business assistance program, which provided support to 85,000 new and existing businesses in 2010-11, exemplifies a 'right from the start' strategy in action. We plan to continue this program, which includes guidance on good record-keeping practices.
Two further examples of this 'right from the start' philosophy are our focus in 2011-12 on better engaging with young Australians and with new migrants.
Last year we supported the new Tax Practitioners Board in its regulation of tax and BAS agents. This year we will be working with the interim Charities Commissioner in setting up a Charities and Not-for-Profit Commission.
Within the ATO, we will continue to progress our People strategy 2009-12, with particular emphasis on enhancing our workforce capabilities (through our enterprise learning approach and through our 'transforming tax technical decision making' project). The engagement and productivity of our people, facilitated by a new enterprise agreement and through an emphasis on end-to-end processes, innovation and business cohesion, remains a priority.
In 2010-11, having just finalised our transformational change program, we started to develop a plan for ensuring our future investments in information and communications technology align with our corporate priorities and future direction. With this in mind, we are developing an ATO Online 2015 (IT forward plan) program of work, to schedule an ongoing program of investment in modern technology, with a view to fostering business and community take-up of more efficient and effective online opportunities.
Our next 100 years
During the past year we celebrated the ATO's centenary, giving us the opportunity to reflect on our past achievements and evolution and to look beyond to the future. We believe that our vision, our values and our people will continue to serve the Australian community well in the years ahead.
Commissioner of Taxation