Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello MP)
Chapter 3 - Deterring the promotion of tax exploitation schemes
3.1 Schedule 3 to this Bill amends the Taxation Administration Act 1953 (TAA 1953) and the Income Tax Assessment Act 1997 (ITAA 1997) to introduce measures to deter:
- the promotion of tax avoidance and evasion schemes (collectively referred to in the Bill as tax exploitation schemes); and
- the implementation of schemes that have been promoted on the basis of conformity with a product ruling, in a way that is materially different to that described in the product ruling.
3.2 On 5 December 2003, the then Minister for Revenue and Assistant Treasurer announced that the Government would introduce a civil penalty regime to deter the promotion of tax exploitation schemes.
3.3 Currently, there are no civil or administrative penalties for the promotion of these schemes, with the result that promoters can obtain substantial profits while investors may be subject to penalties under the TAA 1953. This represents a significant asymmetry in risk exposure.
3.4 Furthermore, the Commissioner of Taxation (Commissioner) cannot currently take legal action to stop the promotion of tax schemes. It is possible to warn investors about the risk that tax benefits will not be available, but educational initiatives have limited 'real time' impact. In contrast, the 'real time' remedies of injunctions and voluntary undertakings in this Bill can stop the promotion of schemes before investors participate.
3.5 To deter tax exploitation schemes, this Bill amends the tax laws to enable the Commissioner to:
- request the Federal Court of Australia (the Federal Court) to impose a civil penalty;
- seek an injunction to stop the promotion of a scheme or implementation of a scheme not in conformity to its product ruling; and
- enter into voluntary undertakings with promoters or implementers about the way in which schemes are being promoted or implemented.
3.6 A civil penalty, injunction, or enforceable undertaking may apply to an entity that:
- engages in conduct that results in them or another entity being a promoter of a tax exploitation scheme; or
- implements a scheme that has been promoted on the basis of conformity with a product ruling in a way that is materially different to that described in the product ruling.
3.7 A penalty or injunction may only be imposed by the Federal Court of Australia (the Federal Court). The maximum penalty the Federal Court can impose is the greater of:
- 5,000 penalty units (currently equal to $550,000) for an individual or 25,000 penalty units (currently equal to $2.75 million) for a body corporate; and
- twice the consideration received or receivable, directly or indirectly, by the entity or its associates in respect of the scheme.
3.8 In deciding what penalty is appropriate, the Federal Court can have regard to all matters it considers relevant, including the amount of loss or damage incurred by scheme participants and the honesty and deliberateness of the promoter's conduct.
3.9 The penalty provisions are framed to apply to entities, including individuals, to prevent individual promoters from using a business structure to avoid personal liability for the penalty. However, in cases where the individuals involved are not the controlling minds, but merely employees following directions from their arms' length employer, the employer entity will usually be the appropriate subject for the penalty.
3.10 The penalty provisions will not apply to entities or their employees who are peripherally involved in a contravention of the promoter penalties provisions through giving advice or minor involvement in implementing the scheme. Moreover, the Commissioner will not be able to seek penalties against an employee if a penalty has already been imposed on the employer entity.
3.11 In addition, an entity is not liable for penalty if:
- the conduct in respect of which the proceedings are instituted is due to:
- a reasonable mistake of fact; or
- the act or default of another, or due to an accident or some other cause beyond the entity's control, if they took reasonable precautions and exercised due diligence to avoid the conduct;
- a scheme treats the taxation law as applying in a way that agrees with a statement or advice given to the promoter (or their agent) by, or on behalf of, the Commissioner; and
- more than four years has elapsed since the entity last engaged in the relevant conduct. This mirrors the period for which taxpayers are at risk of scheme penalties.
3.12 The Commissioner may seek statutory injunctions against entities in addition to, or instead of penalties. The Commissioner can apply to the Federal Court for an interim, restraining or performance injunction to stop or remedy the promotion of a tax exploitation scheme or implementation of a scheme in a materially different way to its product ruling.
3.13 The Commissioner may also enter into voluntary undertakings relating to the promotion of a tax exploitation scheme or the implementation of a scheme in a way that is materially different to that described in its product ruling. Such undertakings are enforceable by the Federal Court.
|New law||Current law|
|There will be a civil penalty regime in the TAA 1953, allowing the Commissioner to apply to the Federal Court for injunctions and penalties to deter the promotion of tax avoidance and tax evasion schemes.||No equivalent.|
3.14 This Bill introduces three measures to deter the promotion of tax avoidance and tax evasion schemes (collectively referred to hereafter as 'tax exploitation schemes') and the implementation of 'schemes' that have been promoted on the basis that they conform with a 'product ruling', inconsistently with that ruling.
3.15 The Commissioner has a flexible range of remedies to achieve these outcomes. The Commissioner can accept a voluntary undertaking, apply to the Federal Court for an injunction, or seek a civil penalty.
3.16 The Commissioner may apply to the Federal Court for a civil penalty against an 'entity' that may have contravened the penalty provisions in this Bill. If the Federal Court is satisfied that the entity has breached the penalty provisions, the court can order the entity to pay a financial penalty to the Commonwealth. [Schedule 3, item 1, subsection 290-50(3)]
3.17 Entity is defined in subsection 995-1(1) of the ITAA 1997 to include an individual (in his or her personal capacity or in another capacity, such as a trustee), a company, a partnership, an unincorporated association, a trust or a superannuation fund.
3.18 The first civil penalty provision proscribes an entity from engaging in conduct that results in that entity or another entity being a promoter of a tax exploitation scheme. [Schedule 3, item 1, subsection 290-50(1)]
3.19 There are two separate proscriptions contained in the provision. First, an entity must not engage in conduct that would result in them being a promoter of a tax exploitation scheme. The concepts 'promoter' and 'tax exploitation scheme' are defined terms and are discussed in detail in paragraphs 3.40 to 3.67. The provision will be breached if an entity's (including an individual's) conduct amounts to them being a promoter of a tax exploitation scheme. Generally entities act through their employees and agents - therefore an authorised act of an employee or agent on behalf of an entity is usually regarded as the act of that entity also.
3.20 Secondly, the proscription states that an entity must not engage in conduct that would result in another entity being a promoter of a tax exploitation scheme. This proscription does not apply to conduct that is merely peripheral to the conduct that makes the second entity a promoter. There needs to be a degree of active engagement by an entity in causing another entity to be a promoter. The conduct of the entity must result in the second entity satisfying each of the elements of the term 'promoter' in subsection 290-60(1). For example, as corporations and other non-individual entities usually require individuals to act for them, those individuals must not take decisions that result in the entity being a promoter of a tax exploitation scheme. For example, a managing director of a company or partner in a partnership could trigger the provision by taking decisions that result in the company or partnership being a promoter of a tax exploitation scheme.
3.21 This approach is important as an individual may operate through another entity in promoting a tax exploitation scheme. Subsection 290-50(1) therefore enables the Commissioner to take action against the individual in these cases. This ensures that individual promoters cannot use a business structure with minimal assets to avoid liability for the penalty. The mechanism also enables the Commissioner to apply for a penalty against a key person promoting a tax exploitation scheme from within a larger entity. However the intention is not to make employees who merely carry out actions as lawfully directed by their arms' length employer responsible for the employer's actions.
3.22 To ensure that employees, subcontractors and others merely carrying out instructions are not unnecessarily brought into the scope of the provision, there are exceptions to the penalty for reasonable mistakes and reasonable precautions and where entities do not know that their conduct will result in the promotion of a tax exploitation scheme. In addition, employees are not to be taken to have had a substantial role in promotion merely because they distribute material provided by another, and cannot be penalised where the employer already has been. Finally, the definition of 'promoter' excludes merely providing advice. These exceptions and qualifications are discussed in detail from paragraph 3.31.
3.23 The second civil penalty provision is contravened where an entity engages in conduct that results in a scheme that has been promoted on the basis of conformity with a product ruling being implemented in a way that is materially different to that described in the product ruling. [Schedule 3, item 1, subsection 290-50(2)]
3.24 The note to this provision emphasises that a scheme will not have been implemented in a way that is materially different from a product ruling if the tax outcome for participants in the scheme is the same as that described in the product ruling. However, the law does not require that taxpayers need to experience a particular tax outcome before the provision is triggered.
3.25 To deter the promotion of schemes, it is important that the potential penalty for the promoter is greater than the expected benefit from illegal activity. Therefore, the maximum amount of penalty the Federal Court can impose is the greater of:
- 5,000 penalty units (currently equal to $550,000) for an individual or 25,000 penalty units (currently equal to $2.75 million) for a body corporate; and
- twice the consideration received, directly or indirectly, by the entity and associates of the entity from the promotion or implementation of the scheme.
[Schedule 3, item 1, subsection 290-50(4)]
3.26 There may be more than one promoter of a tax exploitation scheme. Where more than one promoter is identified, each promoter will be individually liable for the civil penalty. The maximum penalty for each promoter may be different if each received a different amount of consideration.
3.27 Consideration in this context refers to the total payment or financial reward derived from a scheme. Direct consideration encompasses, amongst other things, any fee, payment for services rendered, money, property, benefit, reward, compensation or recompense received or receivable that is directly related to the scheme. Indirect consideration includes in-kind payments, payments to third party associates and other payments that are indirectly related to the scheme promotion, even if they are described as something else.
3.28 It is important to note that the type of consideration to be taken into account for calculation of the maximum penalty is not constrained by the narrower consideration (related to marketing or encouragement) that is used to determine whether an entity is a promoter (see paragraph 290-60(1)(b) of this Bill).
3.29 The Federal Court may have regard to all relevant matters when determining the penalty, including:
- the consideration receivable in respect of the conduct;
- the deterrent effect of the penalty;
- the loss or damage incurred by scheme participants;
- the nature and extent of the contravention;
- the circumstances in which the contravention took place, including the deliberateness of the conduct and the period over which it extended:
- this can include whether there was an honest and reasonable mistake about the law;
- whether the entity took any steps to avoid the contravention;
- whether the entity has previously been found by a court to have engaged in the same or similar conduct; and
- the degree of cooperation with the Commissioner.
[Schedule 3, item 1, subsection 290-50(5)]
3.30 The civil penalty is not a tax-related liability. If the penalty is not paid to the Commonwealth within the time stated in the Federal Court order, the Commissioner may initiate proceedings for its recovery in the relevant jurisdiction and may apply for orders including judgment interest. [Schedule 3, item 1, subsection 290-50(6)]
3.31 An entity is not liable for a civil penalty if the conduct is due to:
- a reasonable mistake of fact; or
- the act, or failure to act, of another entity (not including an employee or agent), or due to an accident or some other cause beyond the entity's control, and the entity took reasonable precautions and exercised due diligence to avoid the conduct.
[Schedule 3, item 1, subsections 290-55(1) and (2)]
3.32 An exception is also provided for the promoter of a scheme if a scheme is based on treating the taxation laws in a way that agrees with advice given to the promoter (or their agent) by or on behalf of the Commissioner, or a statement in a publication approved in writing by the Commissioner. [Schedule 3, item 1, subsection 290-55(3)]
3.33 The advice that is the subject of this exception will not generally include private rulings, as such rulings are not advice to the promoter, but rather, advice to the entity getting the scheme benefit. However, a scheme where all participants are covered by binding rulings from the Commissioner - including public rulings, product rulings, class rulings or private rulings for all scheme participants - is, by definition, not a tax exploitation scheme (see section 290-65).
3.34 The exception for reliance on advice from the Commissioner covers promoters of schemes for whom it may not currently be possible to obtain a legally binding ruling. For example, a promoter may seek advice from the Commissioner about the way the tax law would apply to a proposed scheme that is to be entered into by a company that is not yet incorporated. In such a case a binding private ruling cannot be given to the non-existing company, but nevertheless administratively-binding advice can be given to the promoter. The promoter would be protected by acting in accordance with the administratively-binding advice. The Australian Taxation Office (ATO) publishes guidance as to the different types of advice on the ATO's on-line Legal Database.
3.35 The Commissioner must generally begin civil penalty proceedings within four years of the entity's involvement in the conduct proscribed in the penalty provisions. This time limit reflects the amendment period for taxpayers involved in tax avoidance schemes. [Schedule 3, item 1, subsections 290-55(4) and (5)]
3.36 However, consistent with the risk and amendment periods for taxpayers who have been involved in fraud or tax evasion, there is no time limit on the Commissioner instigating proceedings against the promoter or implementer of a tax evasion scheme or a scheme involving fraud. [Schedule 3, item 1, subsection 290-55(6)]
3.37 There may be circumstances where, for example, an employee of a company unknowingly engages in conduct that is later found to have resulted in another entity being a promoter of a tax exploitation scheme, or a subcontractor unknowingly engages in conduct that results in a scheme being implemented otherwise than in accordance with a product ruling obtained for the scheme.
3.38 An exception is provided for these cases to protect employees, subcontractors and others who did not know and could not reasonably be expected to have known that their actions would result in unlawful conduct, while preserving the Commissioner's ability to institute proceedings against other parties in relation to the promotion of the scheme. [Schedule 3, item 1, subsection 290-55(7)]
3.39 The Commissioner may not apply for penalties in relation to an employee of an entity if a penalty has been imposed on the employer in relation to the same scheme. [Schedule 3, item 1, subsection 290-55(8)]
3.40 The civil penalty regime applies to promoters of tax exploitation schemes. An entity is a promoter of a tax exploitation scheme if:
- the entity markets the scheme or otherwise encourages the growth of the scheme or interest in it;
- the entity or an 'associate' of the entity receives (directly or indirectly) consideration in respect of that marketing or encouragement; and
- having regard to all relevant matters, it is reasonable to conclude that the entity has had a substantial role in respect of that marketing or encouragement.
[Schedule 3, item 1, subsection 290-60(1)]
3.41 While the general expression '...encouraging the growth of the scheme or interest in it...' would ordinarily include most forms of marketing, the specific reference to marketing highlights the most common case. The broader phrase makes it clear that the civil penalty regime is not restricted to schemes that are directly marketed in a conventional sense. [Schedule 3, item 1, paragraph 290-60(1 )( a)]
3.42 For an entity to be a promoter of a tax exploitation scheme, that entity, or an associate, must receive consideration in respect of the marketing of that scheme or in relation to encouraging the growth of, or interest in, the scheme. [Schedule 3, item 1, paragraph 290-60(1 )( b)]
3.43 An associate is defined in section 318 of the Income Tax Assessment Act 1936 (ITAA 1936) to include relatives, partners, trusts that benefit the primary entity, and companies influenced by the primary entity.
3.44 Scheme promoters generally undertake promotional activities to earn higher financial rewards than would be available for providing independent and objective tax advice. Those scheme profits constitute consideration received from the marketing or encouragement of a tax exploitation scheme and help to establish that an entity is a promoter.
3.45 Salary, wages and other professional fees that reflect the time and expertise spent advising clients about a scheme are unlikely to constitute consideration in the context of the promoter definition because the consideration must be linked to the promotional activity. However, to avoid creating an incentive for promoters to attempt to characterise scheme profits as something else (such as professional fees for advice), no specific types of remuneration are excluded. (Provision of professional advice is dealt with from paragraph 3.49.)
3.46 Numerous entities may participate in the promotion of a tax exploitation scheme. However, not all of these will be liable to a penalty, because only promoters who receive financial rewards from promotional activity and who also have a substantial role will satisfy the criteria for being a promoter under the civil penalty provisions.
3.47 Whether a particular promoter has a substantial (considerable or large) role will turn on the facts of the case, having regard to all matters the Federal Court thinks relevant. [Schedule 3, item 1, paragraph 290-60(1 )( c)]
3.48 The matters that are relevant in this context are determined by the subject matter, scope and purpose of the provisions. They would include, for example, the degree of involvement of the relevant entity in the activities whereby the scheme was marketed or encouraged, the significance of that entity's role compared to the role played by others in those activities (ie, someone who plays a key role in devising the scheme and giving instructions to others in the course of its establishment and implementation will have a more significant role than someone who merely acts in accordance with those instructions), the nature and level of the consideration received by the entity in respect of the scheme, and the degree of the entity's participation in the management of the marketing or encouraging of the scheme.
3.49 An entity is not a promoter merely because they provide advice about the scheme. As a result, financial planners, tax agents, accountants, legal practitioners and others are not promoters merely because they provide advice about a tax exploitation scheme, even if that advice provides alternative ways to structure a transaction, or sets out the tax risks of the alternatives. [Schedule 3, item 1, subsection 290-60(2)]
3.50 The civil penalty regime is not intended to inhibit the provision of independent and objective tax advice, including advice regarding tax planning. Advisers who advise on tax planning arrangements, even those who advise favourably on a scheme later found to be a tax exploitation scheme, are not at risk of civil penalty to the extent that they have merely provided independent, objective advice to clients.
Example 3.1: When are tax advisers at risk of being promoters? A partner (Graeme) in a major accounting firm approaches a high wealth client (Matthew) to advise him on an arrangement to minimise his tax liability by moving taxable income to an offshore tax haven.The tax haven arrangement was initially developed by another partner (Brett) for another of the firm's clients and the firm decided it should offer similar arrangements to other clients in similar circumstances.Brett receives a fixed percentage of the fee obtained by other accountants in the firm who offer the arrangement to other clients. The other partners - including Graeme - who offer the scheme to clients receive a fee that is significantly higher than the billing rate for routine tax advice and that partly reflects the magnitude of the tax savings for scheme participants.Graeme is able to persuade Matthew to adopt the tax haven arrangement because Matthew will be paying much less tax. Graeme puts in place the offshore financial facilities to enable Matthew not to declare income in Australia.Matthew then tells his friend Barbara about his offshore tax arrangements and Barbara takes the initiative to contact the accounting firm mentioned by Matthew. Graeme is not taking on new clients and therefore Barbara goes to Deborah, in another firm.Deborah explains to Barbara how the offshore tax haven works, including the tax risks involved. Deborah bills Barbara her usual fee for advice.In this example, Graeme and Brett would be likely to satisfy the criteria for being a promoter. This is because they have played a substantial role in marketing the scheme and encouraging client interest, and have also received consideration related to their promotional role. Deborah is not a promoter because she has only advised her client and would qualify for the advice exception.
3.51 Employees are not taken to have a substantial role in respect of the marketing and encouragement of a scheme merely because they distribute information or material prepared by another entity (who may be their employer) [Schedule 3, item 1, subsection 290-60(3)] . There are several other measures in the civil penalty regime to protect employees of entities. Subsection 290-55(1) provides an exception for reasonable mistake or reasonable precautions (discussed in paragraph 3.31), subsection 290-55(7) provides an exception for an employee with no reasonable knowledge that their actions would result in unlawful conduct (discussed in paragraphs 3.37 and 3.38) and subsection 290-55(8), which provides that no action will be taken against an employee where the employer has been ordered to pay a penalty (discussed in paragraph 3.39).
Example 3.2: Are employees promoters of their employer's scheme? An investment bank develops a loan package for clients who wish to borrow money for both private and investment purposes. The loan is based on clients claiming tax benefits not available in normal financing arrangements.The bank approves the marketing of the product and arranges for an information package to be prepared for investment consultants in bank branches, outlining the advantages of the product over standard loan products and the types of customers to whom the product should be offered. The branch consultants receive performance bonuses related to sales of all investment products.When borrowers claim tax benefits, those benefits are disallowed by the Commissioner, who issues Part IVA (anti-avoidance) determinations in respect of these financial products. The Federal Court upholds these determinations.In this example, irrespective of whether the bank is found to have promoted a tax exploitation scheme, the consultants in the bank branches can rely on the employee exclusion (and/or the advice exclusion) to protect them from civil penalty.
3.52 Tax exploitation schemes are schemes that exploit the tax system through avoidance or evasion. The terms and concepts used to define a tax exploitation scheme in this Bill are taken from the anti-avoidance provisions of the ITAA 1936, the ITAA 1997 and the TAA 1953. These terms and concepts are well established in case law and administrative practice.
3.53 There are two preconditions for a tax exploitation scheme or a scheme that, if implemented, would be a tax exploitation scheme. At the time the scheme is promoted:
- it must be reasonable to conclude that an entity that entered into or carried out the scheme has a sole or dominant purpose of getting a scheme benefit; and
- it must not be reasonably arguable that the scheme benefit is available under the tax laws.
[Schedule 3, item 1, section 290-65 ]
3.54 Both these tests are to be applied at the time of the promotion by the entity. That entity is not liable for penalty if, at some time after the promotion of the scheme, another entity alters that scheme and uses it for tax avoidance in a way not intended or foreseen by the entity who first promoted the scheme.
Example 3.3: A promoter not liable for a different scheme or purpose A financial institution offers a range of loan products tailored to different circumstances. One of its products is designed to minimise the risk exposure of investors, albeit at a lower return.Brian, a promoter of a managed agricultural investment scheme decides to utilise this low-risk financing package for scheme investors. The financing package enables taxpayers to claim losses as tax deductions, even though they are not carrying commercial risks. Investors have their tax benefits denied, with the Commissioner relying on Part IVA of the ITAA 1936 and pointing to the nature of the low-risk financing arrangements as the distinctive tax avoidance feature.In this example, the financial institution is not a promoter of a tax exploitation scheme. The institution offered an arrangement designed to be used in legitimate commercial situations. It was not reasonable to conclude that anyone entering into this arrangement would do so predominantly for tax avoidance purposes.Note that the use of the financing product in connection with a managed agricultural investment scheme constitutes a completely separate scheme or arrangement that was not promoted by the financial institution. Brian may be a promoter of such a tax exploitation scheme.
3.55 The purpose tests in paragraph 290-65(1)(a) is modelled on the tests that apply to taxpayers in the scheme penalty provisions in subsection 284-145(1) of Schedule 1 to the TAA 1953.
3.56 Subdivision 284-C provides for penalties for taxpayers involved in a tax avoidance or evasion scheme, including taxpayers who claim scheme benefits and have those benefits disallowed under the general anti-avoidance rule (Part IVA of the ITAA 1936).
3.57 The use of the terminology in Subdivision 284-C in this Bill, including the requirement that it is reasonable to conclude that participants enter into or carry out the scheme with the sole or dominant purpose of receiving a scheme benefit, incorporates into the definition of 'tax exploitation scheme' the precondition that the scheme involves tax avoidance or evasion.
3.58 This approach helps ensure that promoters are generally at risk of penalty when taxpayers are at risk of penalties for participation in tax avoidance or evasion schemes under Subdivision 284-C. However, whereas taxpayers are only subject to scheme penalties after the event, the definition of 'tax exploitation scheme' operates where the Commissioner takes action against a scheme before taxpayers have entered into that scheme. Accordingly, the Federal Court may postulate a hypothetical purpose where the Commissioner makes an application before the scheme has been implemented. [Schedule 3, item 1, subparagraph 290-65(1 )( a )( ii)]
3.59 Scheme benefit is defined in subsection 284-150(1) of Schedule 1 to the TAA 1953. An entity gets a scheme benefit if a tax-related liability is less than it would be, or a tax credit is more than it would be, for an accounting period, apart from the scheme or part of the scheme.
3.60 Scheme is defined in subsection 995-1(1) of the ITAA 1997 as:
- any arrangement; or
- any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.
3.61 Arrangement is similarly defined broadly in subsection 995-1(1) as any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings.
3.62 The definition of 'scheme' in the ITAA 1997 is substantially the same as the definition of scheme in section 177A of the ITAA 1936.
3.63 For a scheme that has been implemented, a condition for the penalty is that it is not reasonably arguable that the scheme benefit is available under the tax laws at the time the promotional conduct takes place. [Schedule 3, item 1, subparagraph 290-65(1 )( b )( i)]
3.64 For a scheme that has not been implemented, it is a condition that it is not reasonably arguable that the scheme benefit would be available at law if the scheme were to be implemented. [Schedule 3, item 1, subparagraph 290-65(1 )( b )( ii)]
3.65 A promoter's liability to penalty is independent of any action that may be taken against scheme participants. The test of whether it is reasonably arguable that a scheme benefit is available at law is applied when the promoter's conduct takes place, and not with the benefit of hindsight once the review and appeal rights for scheme participants have been exhausted.
3.66 When examining what is reasonably arguable at the time of the promoter's conduct, the Federal Court may take into account anything that the Commissioner can do under a taxation law, including issuing a determination under Part IVA of the ITAA 1936 or exercising a discretion. [Schedule 3, item 1, subsection 290-65(2)]
Example 3.4: Not reasonably arguable at the time of the promotion A large wholesaling operation is advised by its accountant (Naomi) of a method of valuing trading stock that will considerably reduce the company's tax liability. Naomi obtains a favourable legal opinion from a respected tax counsel (Rona Silk SC) that the valuation method she is proposing is allowed under the tax laws.Naomi makes a compelling presentation to the company's Board of Directors focusing on the tax savings that will flow from this new method. The company's Chief Financial Officer (Gavin) recommends to the Board the adoption of the trading stock valuation proposal presented by Naomi. The Board is impressed with the potential tax savings and is reassured by the legal opinion about the scheme.The company's financial position improves significantly because of the tax savings from the trading stock arrangement and Gavin gets a bonus based on the company's good financial performance. Naomi gets remuneration based on the tax savings from the scheme she has prepared for the company. Rona received a professional fee based on her normal billing rate.Some years later, the Commissioner disallows the tax benefits claimed under Part IVA of the ITAA 1936. The company challenges the Part IVA determination in the Federal Court and loses; however, it is clear from the split decision in the case and the reasons that it was a close call and that Rona's opinion was not seriously flawed.In this example, it is likely that none of the people named will be liable for civil penalties as promoters of a tax exploitation scheme. Naomi could rely on an argument that it was reasonably arguable that scheme benefits were available at the time of her promotion. Rona is able to rely on the adviser's exception since she did no more than provide a legal opinion. Gavin did not receive consideration in respect of marketing or encouraging interest in the scheme.Note that, even if Naomi were a promoter of a tax exploitation scheme, Rona's conduct would not render her liable under the second limb of subsection 290-50(1) because it is not a cause of Naomi being a promoter. To conclude that the second limb is satisfied would subvert the adviser exception, which is not intended.
3.67 Where scheme benefits are guaranteed by legally binding rulings from the Commissioner that cover all scheme participants the scheme is not a tax exploitation scheme (because the rulings bind the Commissioner at law to make those benefits available to taxpayers). For additional certainty, this is explained in a note. [Schedule 3, item 1, subsection 290-65(1), note ]
3.68 If a scheme with a product ruling is not implemented in conformity with its ruling, with potential tax consequences for investors, then a penalty may apply under the second civil penalty provision. [Schedule 3, item 1, subsection 290-50(2)]
3.69 A product ruling is a form of public ruling issued by the Commissioner. Product rulings were introduced in 1998 to rule on the availability of tax benefits from particular investment products. The Commissioner has published information about how and when a product ruling is issued.
3.70 Scheme promoters or implementers can apply for a product ruling. The Commissioner can then issue a product ruling confirming that a tax benefit is available at law provided the scheme is implemented in the manner described to the Commissioner in the ruling application.
3.71 Where a scheme is implemented in a materially different way to that described in its product ruling, there is a risk that investors may lose the protection of the ruling and may have scheme benefits disallowed, and be charged penalties and interest. The second civil penalty provision ensures that the entity responsible for the scheme not being implemented in conformity with its product ruling is at risk of penalty.
3.72 Since product rulings are about tax impact, a material difference only arises where there is potential for a different tax outcome for investors. A change in the way the scheme is implemented will not be materially different if it is merely a difference in the physical implementation of the arrangement with no potential for a tax impact.
3.73 An example of a non-material difference would be where a plantation scheme installs a drip system for watering seedlings instead of micro-sprayers, on advice from experts that this would result in more efficient irrigation of the plantation. If such a departure from the implementation plan set out in the product ruling application does not impact on the commercial viability of the scheme or on the tax consequences for investors, then it would not constitute a material difference. [Schedule 3, item 1, subsection 290-50(2), note ]
3.74 It is not necessary that scheme investors have received an actual tax outcome different from that outlined in the product ruling for the civil penalty provision to be operative. The Federal Court may decide, on the facts of the case, if there has been a material difference in implementation with potential tax consequences for investors.
3.75 A person who is merely employed or contracted to carry out implementation tasks (such as planting seedlings or installing irrigation) at the direction of a scheme manager and without any knowledge of the departure from any relevant product ruling would be protected by the exceptions due to reasonable mistake, or the act or default of another entity or because they could not know the result of their conduct. [Schedule 3, item 1, paragraph 290-55(1 )( b) and subsection 290-55(7)]
3.76 The present system of imposing penalties on investors in tax evasion and avoidance schemes set out in Subdivision 284-C of Schedule 1 to the TAA 1953 will not be affected by the introduction of these amendments. The calculation of the penalty payable by the promoter or scheme implementer is not affected by any administrative penalties imposed on taxpayers or on the promoter in their capacity as taxpayer.
3.77 Civil penalty amounts paid under a court order are not deductible for income tax purposes (section 26-5 of the ITAA 1997).
3.78 The Commissioner may apply to the Federal Court for injunctive relief if any entity is engaging, or proposing to engage, in conduct to which the regime applies. Injunctions may be granted, for example, to stop the promotion of a tax exploitation scheme or implementation of a scheme in a way that is materially different from its product ruling (restraining injunction), or to require an entity to do something to remedy a perceived contravention of the law (performance injunction). [Schedule 3, item 1, section 290-125 ]
3.79 Injunctions can be used as an alternative to civil penalty proceedings or in addition to them if the Federal Court considers the circumstances of a case warrant both injunctive relief and a civil penalty order.
3.80 The Federal Court may grant an interim injunction against an entity to stop the promotion or implementation of a scheme when it has not yet fully considered the Commissioner's application for an injunction. [Schedule 3, item 1, section 290-130 ]
3.81 The Federal Court may grant an injunction against an entity on such terms as it thinks appropriate. The Court may grant an injunction restraining an entity from engaging, or continuing to engage, in the promotion of a tax exploitation scheme or implementation of a scheme in a manner materially different from that described in the scheme's product ruling. The Federal Court may grant performance injunctions requiring the entity to do something if it is satisfied that the entity has not done that thing and/or is likely not do the thing required without compulsion. [Schedule 3, item 1, subsection 290-145(2)]
3.82 The ability to seek injunctions and interim injunctions allows the Commissioner to take immediate action against scheme promoters and implementers, limiting the period during which Commonwealth revenue and investors are exposed to potential losses and risks from tax exploitation schemes.
3.83 A promoter may apply to the Commissioner for a product ruling in relation to the scheme. If the promoter has applied for a product ruling and the Commissioner either fails to make a ruling or fails to advise that he or she declines to make a ruling, the Commissioner cannot apply for an injunction under section 290-125 in relation to the applicant's promotion of that scheme. [Schedule 3, item 1, section 290-135 ]
3.84 The provision dealing with delays in determining product ruling applications ensures that a promoter cannot have the marketing of a scheme stopped (by a Federal Court injunction) merely as a result of delays by the ATO in processing a request for a product ruling.
3.85 Until the ruling is granted or denied, the scheme promoter may promote the scheme without being at risk of an injunction (although the promoter would be wise not to implement the scheme, as the Commissioner will not generally issue a product ruling on a scheme that has already been implemented). However, if the Commissioner declines to make a ruling and notifies the promoter, and the promoter continues to promote the scheme, the Commissioner may then take action.
3.86 The Federal Court may discharge or vary an injunction, at any time. [Schedule 3, item 1, section 290-140 ]
3.87 The Federal Court has broad discretion to grant restraining or performance injunctions. [Schedule 3, item 1, section 290-145 ]
3.88 The powers conferred on the Federal Court under this Bill do not limit or replace any other powers of the Federal Court. [Schedule 3, item 1, section 290-150 ]
3.89 The Commissioner may enforce a voluntary undertaking through an application to the Federal Court. [Schedule 3, item 1, subsection 290-200(3)]
3.90 A voluntary undertaking is a written undertaking given to the Commissioner in connection with a matter for which the Commissioner has a function or power. Enforcement is confined to voluntary undertakings given in furtherance of the purpose of this Bill - that is, to deter the promotion of tax exploitation schemes and the implementation of schemes in ways that do not conform to their product rulings. [Schedule 3, item 1, subsection 290-200(1)]
3.91 Voluntary undertakings allow the Commissioner to tailor enforcement responses to individual circumstances. They also result in outcomes that are more flexible, timely and cost-effective than would normally be achievable by injunction or penalty proceedings. They may be used as a preliminary step to prevent an entity from implementing an arrangement in a way that is materially different to the terms of the applicable product ruling. An undertaking may provide a timeframe for compliance with the undertaking.
3.92 Undertakings may be varied or withdrawn at any time, but only with the consent of the Commissioner. [Schedule 3, item 1, subsection 290-200(2)]
3.93 The Commissioner cannot compel an individual to give an undertaking. Equally, the Commissioner cannot be compelled to accept an undertaking. The Commissioner is under no legal obligation to explore the possibility of obtaining a voluntary undertaking before proceeding to injunction or penalty proceedings under this regime. However, in practice he or she is likely to do so in the majority of cases.
3.94 A voluntary undertaking can be made without either party admitting any liability.
3.95 If an entity breaches its undertaking, the Commissioner can apply to the Federal Court. The Court may issue an order directing the entity to comply with the undertaking, or any other order that it considers appropriate. [Schedule 3, item 1, subsections 290-200(3) and (4)]
3.96 This Bill incorporates standard civil penalty procedural provisions in the TAA 1953 that would also apply to any future civil penalties introduced to the tax laws.
3.97 The Federal Court must apply the rules of evidence and procedure for civil matters when hearing civil penalty proceedings under these provisions. [Schedule 3, item 2, section 298-85 ]
3.98 The Federal Court cannot make a civil penalty order against a scheme promoter or implementer if they have been found guilty of a criminal offence with respect to the conduct for which the civil penalty order would be made. [Schedule 3, item 2, section 298-90 ]
3.99 Criminal proceedings may be started against a scheme promoter or implementer for the same conduct for which a civil penalty order could be, or has been, made. [Schedule 3, item 2, section 298-100 ]
3.100 If criminal proceedings - for an offence constituted by conduct that might also be the subject of civil penalty proceedings - could commence, or have already commenced, the civil proceedings must be stopped. If the promoter or implementer is not convicted of the offence, the civil penalty proceedings may be resumed. If the promoter or implementer is convicted of the criminal offence, the civil penalty proceedings will be dismissed. [Schedule 3, item 2, section 298-95 ]
3.101 If there are criminal proceedings against an entity in relation to conduct that is also the subject of civil penalty proceedings, evidence given in the civil proceedings is not admissible in the criminal proceedings. [Schedule 3, item 2, section 298-105 ]
3.102 An entity that is ordered by the Federal Court to pay a civil penalty for a breach of these provisions is not liable to a civil penalty under some other provision of a Commonwealth law in respect of the same conduct. [Schedule 3, item 2, section 298-110 ]
3.103 The regime will apply to promoters of tax exploitation schemes offered to entities on or after the date of Royal Assent. The regime will apply to entities that implement a scheme in a materially different way to its product ruling on or after the date of Royal Assent. [Schedule 3, item 17 ]
3.104 Three new terms are included in the Dictionary (subsection 995-1(1) of the ITAA 1997), namely:
- 'product ruling' (a public ruling under the TAA 1953 that is stated to be a product ruling);
- 'promoter' (as defined in this Bill); and
- 'tax exploitation scheme' (as defined in this Bill).
[Schedule 3, items 3 to 5 ]
3.105 As this Bill introduces a civil penalty regime into the TAA 1953, certain notes and headings in the TAA 1953 must be amended to include a reference to the new civil penalties. [Schedule 3, items 6 to 8, 11 to 13 and 16 ]
3.106 Civil penalties under this regime are not tax-related liabilities, in contrast to other liabilities arising under the tax laws. For this reason, it is necessary to exclude the civil penalties in this Bill from the general rule in section 255-1 of the TAA 1953 which characterises pecuniary liabilities arising under a taxation law as tax-related liabilities. [Schedule 3, items 9 and 10 ]
3.107 Item 2 of this Bill amends Division 298 of the TAA 1953, which currently only covers administrative penalties. Accordingly, it is necessary to convert the existing administrative penalty provisions into a new Subdivision 298-A. [Schedule 3, items 14 and 15 ]
3.108 The main objective is to deter the promotion of tax avoidance and tax evasion schemes. An additional objective is to enhance the integrity of the product ruling system by deterring implementation of a scheme in a materially different manner to that described in its product ruling where doing so may have potential tax consequences for investors.
3.109 This measure will amend the taxation laws to introduce a civil penalty regime to apply to an entity, including an individual, that:
- is a promoter of a tax avoidance or tax evasion scheme; or
- implements a tax scheme that has been promoted as having a taxation product ruling, but in a materially different way to that described in its product ruling, with the potential for a different tax outcome for investors.
3.110 The maximum penalty the courts may impose is the greater of:
- 5,000 penalty units (currently $550,000) for an individual, 25,000 penalty units (currently $2.75 million) for a corporation; and
- twice the consideration received directly, or indirectly, by the entity in respect of the scheme.
3.111 The Federal Court has discretion to impose whatever penalty is regarded as appropriate in the circumstances. Where a promoter has received scheme profits in excess of the prescribed penalty units, the Federal Court can impose a penalty of up to twice the consideration received to ensure that the penalty has its intended deterrent effect.
3.112 Additional remedies of enforceable voluntary undertakings and statutory injunctions will be available to the Commissioner. This will enable a graduated preventative enforcement response to emerging schemes that appear to be ineffective. Some potential breaches of the law may be able to be addressed quickly and at low cost through a promoter giving voluntary undertakings to remedy any shortcomings in a scheme. Higher risk cases may warrant an application to the court for an injunction, involving short delays and some compliance costs. Serious cases may warrant penalty proceedings that can involve substantial legal costs for the parties involved.
3.113 The Commissioner cannot apply for a statutory injunction where an entity has applied for a product ruling in relation to a scheme until the Commissioner has either made the ruling or informed the entity in writing that the Commissioner has declined to make the ruling.
3.114 The Federal Court may require the Commissioner to give an undertaking as to damages as a condition of granting an interim injunction.
3.115 There are exceptions to penalty and/or injunctions to ensure that certain individuals and entities are not inadvertently caught by the regime. This includes special exceptions for:
- reasonable mistakes of fact or causes beyond the entity's control (provided the entity took reasonable precautions and exercised due diligence to avoid the conduct);
- reliance on advice from, or on behalf of, the Commissioner;
- certain entities who did not know, and could not reasonably be expected to have known, that their conduct would result in a contravention of the law;
- employees, where they are merely distributing information provided by someone else or where their employer has been penalised for the same scheme;
- financial planners, tax agents, accountants and lawyers and others who merely provide advice about a scheme; and
- scheme promoters who have sought a product ruling from the Commissioner but have not been notified of an outcome (with the protection ceasing to apply once they are notified of an outcome).
3.116 These exceptions protect entities in the specified circumstances so that the focus of court action can be on the active promoters of tax exploitation schemes and not those whose conduct is peripheral to the promotion of tax exploitation schemes. In particular, it is not intended that the regime will deter the giving of tax advice - even where that advice might mistakenly endorse a scheme that is subsequently found to be a tax exploitation scheme. This is because the regime seeks to deter the promotion of tax exploitation schemes, not to deter the giving of advice about those schemes. However if tax advisers encourage their clients to enter a particular scheme, and receive consideration in respect of that encouragement, they will not be covered by the adviser exception.
3.117 Except where fraud or evasion is involved (in which circumstances taxpayers are also at risk indefinitely), the Commissioner cannot institute action under the promoter penalties regime more than four years after the entity last engaged in the conduct proscribed by the civil penalty provisions. This period mirrors the period for which taxpayers are at risk of amended assessments and penalties for participation in a tax avoidance scheme.
3.118 Generally, there are several parties involved in the development and implementation of schemes. For the purposes of the penalty regime, an entity, which can be an individual, will be a promoter of a particular tax avoidance or tax evasion scheme if:
- the entity markets the scheme or encourages the growth of, or interest in, the scheme;
- the entity receives consideration in respect of that marketing or encouragement; and
- it is reasonable to conclude that the entity has had a substantial role in that marketing or encouragement.
3.119 The penalty provision for promotion of a tax exploitation scheme will only apply to promoters who satisfy all of these three criteria, or whose conduct results in another entity satisfying these criteria, as well as the conditions for a tax exploitation scheme, discussed below.
3.120 For a scheme to be characterised as a tax exploitation scheme, it must meet two basic conditions at the time the scheme was promoted:
- It must be reasonable to conclude that participants have a sole or dominant purpose of obtaining a tax benefit - this is tantamount to a sole or dominant tax avoidance or tax evasion purpose.
- It is not reasonably arguable that the tax benefit sought is available at law.
3.121 The test as to whether the scheme benefit is available at law is satisfied where the Commissioner has issued a binding ruling, such as a public ruling, or a product ruling, in relation to the scheme.
3.122 Scheme benefits are considered unavailable at law where it is reasonable to conclude the Commissioner would invoke anti-avoidance provisions to cancel claimed benefits.
3.123 Consideration was given to amending the taxation laws to allow the Commissioner to impose administrative penalties on promoters. Having the Federal Court determine whether promotion of tax schemes was unlawful and then setting an appropriate civil penalty was considered a fairer and more objective process and justified on the basis of the expected likely use.
3.124 It would be possible to supplement the civil penalty regime by introducing additional record-keeping and reporting requirements. This could include requiring promoters to report certain tax effective schemes to the Commissioner and to keep additional records in relation to financing arrangements and investor details. These requirements were considered to involve unduly high compliance costs for promoters. There were also privacy concerns over the information collected and held by the promoters.
3.125 The regime will have little impact on promoters and investors involved in tax effective schemes that are within the tax laws. Many tax schemes are now marketed with a taxation product ruling and are implemented in conformity with that ruling. In such circumstances, there will be no risk of penalty under the regime and there will be no additional compliance costs.
3.126 Investors in tax avoidance and tax evasion schemes will still be required to pay back any tax shortfall, any penalties incurred as well as applicable interest charges for late payment. However, the introduction of the civil penalty regime - and particularly the injunction and undertakings remedies - should reduce the number of ineffective schemes being promoted, and thus decrease the likelihood of investors incurring such shortfalls.
3.127 Advisers such as financial planners, accountants, tax agents and lawyers who merely give tax advice are not at risk under the new regime. Nonetheless, they may need to familiarise themselves with the new law to ensure they do not cross the line from advice to promotion. However, awareness of the law is not anticipated to involve significant costs for advisers that are small businesses since the concepts on which the measure is based either currently exist in the tax law, or are of a non-technical nature. Furthermore, their representative organisations have been active in the consultation process on this measure and have encouraged a high level of awareness of the new law.
3.128 Promoters of tax avoidance and tax evasion schemes and entities who implement schemes not in conformity with a product ruling will now be financially at risk for any unlawful behaviour under the new measures.
3.129 The implementation of this measure will not impose any additional compliance costs on investors.
3.130 Promoters of schemes offering tax benefits that are available at law, including schemes that have product rulings, will not need to incur additional compliance costs. It is relevant that many promoters now recognise that a tax product ruling offers significant marketing advantages for a scheme.
3.131 Promoters of high risk schemes who wish to preclude the risk of penalty may seek a product ruling or a class ruling from the Commissioner, or may encourage investors to seek private binding rulings, or may seek advice directly. In this context, it is important to note that no charges are imposed by the Commissioner for rulings or advice. Any costs involved in obtaining a ruling will arise in the preparation of an application for a ruling. The ATO has published on its website a checklist of information that is to be provided in a product ruling application.
3.132 Promoters hold all the information required to apply for such rulings. There will be some costs incurred by promoters in the lodgement of requests for a taxation product ruling. The level of costs incurred in applying for a ruling will depend on the complexity of the arrangements, and whether promoters prepare ruling applications themselves or engage professional advisers to obtain a ruling on their behalf. No quantitative information is available on typical costs incurred in preparing a ruling application, nor on the number of additional promoters that might seek a ruling as a result of the civil penalty regime. It is assumed a ruling will only be sought where a promoter identifies a net benefit in doing so. Product rulings offer marketing advantages as they provide certainty to investors; the costs involved in obtaining a product ruling need to be seen in this context as well as in the risk management context.
3.133 There may be some small transitional costs for tax advising firms who are in the business of promoting legitimate tax minimisation schemes. These firms will need to acquire an understanding of the new law to manage their exposure to promoter penalties. These costs have not been able to be quantified. However, as mentioned above, the high level of awareness of the measure generated in extended consultation on the draft legislation and the use of existing tax terminology is likely to minimise such costs.
3.134 The implementation of this measure will give rise to an increase in ongoing administration and enforcement costs for the ATO in the order of $7.6 million per year, plus $1.5 million start-up costs for systems modification and legal advice, all of which will be absorbed by the ATO within its existing budget.
3.135 The financial impact of this measure is estimated to result in a gain to the revenue of $15 million in the 2007-08 income year, $25 million in the 2008-09 income year, and $35 million in the 2009-10 income year, assuming a start date of 1 July 2006. These estimates are based solely on the anticipated deterrent effect of the regime.
3.136 The introduction of a penalty regime will remedy an existing asymmetry in the risks faced by scheme promoters and investors. By putting promoters at risk financially for the promotion of ineffective tax schemes, rather than allowing all risks to be passed on to investors, the market for investment schemes is likely to operate more efficiently, with the potential for investment capital to be redirected to legitimate and productive investments.
3.137 It is envisaged that the introduction of a penalty regime for promoters of tax avoidance and tax evasion schemes will enhance confidence in the integrity of Australia's taxation system, with potential flow-on benefits for tax compliance.
3.138 In late 2001 the ATO held a number of consultative meetings with tax practitioners and industry groups to discuss possible measures to address the promotion of tax avoidance schemes. There was broad support from tax practitioners and industry groups for effective sanctions against promoters of such schemes.
3.139 There was consensus that any proposal should be designed to avoid adverse impacts on genuine commercial arrangements or legitimate investment products, that any reporting obligations be designed to target mischievous arrangements, and that compliance costs be kept to a minimum.
3.140 The Government announced in December 2003 that it would introduce a new civil penalty regime to deter the promotion of tax avoidance and tax evasion schemes. Treasury undertook consultation throughout most of 2005 on draft legislation to give effect to this measure.
3.141 The Treasury consultation process included:
- confidential consultation with representatives of the tax-advising professions and scheme promoters on an exposure draft and explanatory material in February and March 2005, culminating in a roundtable discussion held on 16 March 2005. Treasury received over 20 written submissions on the exposure draft;
- a round of public consultation, announced by the then Minister for Revenue and Assistant Treasurer in a press release dated 10 August 2005. There were more than 20 submissions received for this round of consultation which officially closed on 2 September 2005 (but submissions continued to be received after that date); and
- further confidential targeted consultation as directed by the then Minister.
3.142 A key concern in consultation was that the promoter penalties regime had not been confined to the promotion of mass-marketed schemes and would catch promoters of boutique tax exploitation schemes, including those designed for only one client. The Government's policy objective to deter all forms of scheme promotion could not be effectively achieved by restricting the regime to mass-marketed schemes.
3.143 Apart from the scope of the regime to include all tax exploitation schemes, the most contentious issues were the definitions of 'promoter' and 'tax exploitation scheme' that govern the scope of the main penalty provisions. To address concerns raised in consultation, the definitions were refined as follows:
- design and implementation functions were taken out of the definition of 'promoter', leaving the more active promotional functions of marketing and encouragement ;
- for the purposes of determining if someone is a promoter, the consideration they receive has been confined to consideration in respect of promotion of the scheme;
- the promoter must have a substantial promotional role and not just a substantial role in relation to a scheme;
- it must be reasonable to conclude at the time of promotion that participants in a scheme have a sole or dominant purpose of obtaining a tax (scheme) benefit for there to be a tax exploitation scheme; and
- a scheme is not a tax exploitation scheme if it is reasonably arguable (at the time of promotion) that scheme benefits are available to investors, regardless of whether those benefits are eventually found to be available at law.
3.144 There were also concerns about employees of entities promoting schemes and tax agents and other advisers who merely give advice to their clients, often on the basis of material prepared by others, or who could not reasonably have been expected to know that their conduct would result in promotion. Employees and advisers have been given special exceptions in the law.
3.145 Clarity has also been provided in the new law about the concept of 'materially different' which is important for the second penalty provision of implementing a scheme not in conformity to its product ruling. This addressed a concern of scheme promoters who operate with product rulings.
3.146 Numerous other small changes to the exposure draft and the explanatory material were made in response to concerns raised during consultation.
3.147 The introduction of a civil penalty regime to deter the promotion of tax exploitation schemes is expected to enhance community confidence in the tax system and produce a more efficient market for investment products, including tax effective investments, by providing for promoters to be at risk of penalties when they expose taxpayers to scheme penalties. This measure will not impose significant administrative or compliance costs on legitimate business arrangements and may assist them to compete for investment funds.
3.148 The civil penalty regime is preferred to the options of administrative penalties and increased reporting / disclosure requirements because it is a more targeted and transparent measure that provides for substantial remedies to be imposed by the Federal Court against illegitimate promoters, while imposing low or no compliance costs on legitimate businesses.
3.149 The Treasury and the ATO will monitor this measure, as part of the whole taxation system, on an ongoing basis. In addition, the ATO has consultative arrangements in place to obtain feedback from professional and business associations through other taxpayer forums.