Practice Statement Law Administration
PS LA 2013/2
|SUBJECT:||Provision of accredited economic advice|
This document has changed over time. View its history.
|TABLE OF CONTENTS||Paragraph|
|What is accredited economic advice|
|Economics in the ATO|
|Role and function of the Economist Practice|
|The Economist Network|
|The process for obtaining accredited economic advice|
|When accredited economic advice should be sought|
|Accessing accredited economic advice|
|Preparation of accredited economic advice|
|Assurance of economic advice|
|Obtaining external economic advice|
|This law administration practice statement is issued under the authority of the Commissioner and must be read in conjunction with Law Administration Practice Statement PS LA 1998/1. ATO personnel, including non ongoing staff and relevant contractors, must comply with this law administration practice statement, unless doing so creates unintended consequences or is considered incorrect. Where this occurs, ATO personnel must follow their business line's escalation process.|
- obtain accredited economic advice, and
- in certain circumstances, to obtain external economic advice.
What is accredited economic advice
4. Accredited economic advice is advice that has been prepared or assured by the Economist Practice which is intended to be sent outside the ATO and/or relied upon for decisions. For example, advice provided in a dispute with a taxpayer.
Economics in the ATO
6. Broadly, economics is described as the analysis of the choices made by individuals, firms, governments, and other participants in markets and the economy - in allocating resources (such as capital and labour) and optimising outcomes (such as tax costs).
- analysis of price, profit and other outcomes arising from commercial and business contexts
- identification and analysis of specific economic cause and effect relationships
- analysis of taxpayer decision making, which may include examining internal and external factors such as preferences, available options, market context, regulatory framework and the tax environment.
- analysis of patterns and trends in taxpayer and industry performance in the context of wider market and economic cycles
- risk assessment and case selection
- analysis of the economic impacts and compliance issues arising from tax policy.
Role and function of the Economist Practice
10. The taxation system operates with increasing complexity in the global economy. The ATO recognises the need to engage a variety of skills to effectively address risks and opportunities. The Economist Practice, located in Internationals in the Large Business & International business line, supports international and non-international work across the ATO with a focus on three broad areas:
- building economist skill sets, including through the Economist Network
- operational advice on cases including active compliance, advisings and litigation, particularly in relation to multinational taxpayers
- strategic research on economic issues which includes support for law reform and effectiveness evaluation.
Links to contacts within the Economist Practice are provided in the 'Other references and links' section at the conclusion of this practice statement.
Figure 1. Economist Practice input into the ATO risk management process
- Box 1 includes analysis of economic and tax performance across businesses, industries and markets
- Box 2 includes input into profit shifting and service trust strategies and publications
- Box 3 includes transfer pricing issues, service trust issues, and advice on General Anti-Avoidance Provisions such as Part IVA of the Income Tax Assessment Act 1936
- Box 4 includes evaluation of the Advance Pricing Agreement program, input to design and revenue implications for cross border arbitrage, tax base erosion, transfer pricing, thin capitalisation and other legislation
- manages the Economist Network which includes:
- Practice Manager role as referrals gatekeeper
- support for the development of economic skill sets across the ATO
- quality assurance processes (QA)
- maintenance of a register of network members across the ATO.
- provides economic advice across the ATO on issues and products particularly those with:
- external communication of the economic elements of the ATO view
- precedential impact in an economic context
- systemic risks.
- provides input into:
- legislative developments, interpretive advice, taxation rulings and other taxpayer guidance
- external speeches and publications
- Organisation for Economic Cooperation and Development (OECD) policies and working parties
- international relations via Mutual Agreement Procedure cases, support for ATO multilateral meetings and international training.
- manages the processes for obtaining external economic advice and experts as outlined in paragraphs 31 to 33.
13. To ensure efficiency and effectiveness, the Economist Practice employs QA protocols. These include regular technical discussions on cases, seeking client feedback and peer review of priority opinions, engagement with external experts and building relationships with other agencies/professional bodies that share our economic analytical expertise.
14. Revenue Analysis Branch is responsible for the measurement of revenue impacts, revenue forecasting and policy costing work that is done in conjunction with Treasury. Revenue Analysis Branch also provides advice to States and Territories on GST matters.
The Economist Network
15. The Economist Network comprises economists in the ATO, including officers from the Economist Practice and other areas of the ATO. The Economist Network aims to enhance the economics capability in the ATO and to provide support to ATO strategy and operations.
The process for obtaining accredited economic advice
When accredited economic advice should be sought
Accessing accredited economic advice
- prepare accredited economic advice, or
- assure economic advice that has been prepared by the business line.
Figure 2. Process for obtaining accredited economic advice
22. The Economist Practice must be engaged through the International and Economist Gateway, using the Economist Practice referral form available on the intranet. A link to the referral form is provided in the 'Other references and links' section at the conclusion of this practice statement.
- availability of economists
- materiality and revenue impact
- risk to the ATO reputation and the integrity of the system
- technical complexity and precedential value
- Compliance Program and ATO objectives.
25. Where the Economist Practice cannot provide appropriate advice or resourcing of a referral, the Economist Practice will discuss options for resolution with the referring officer. Options may include engaging external consultants, or referring to another business line or area which is part of the Economist Network.
Preparation of accredited economic advice
26. Accepted referrals will be allocated to an economist who will work collaboratively with the referring area to develop a plan, outline the scope and action required. This includes participating in taxpayer meetings and resolving the issues. In order to resolve matters efficiently and effectively:
- the type of assistance and the timeframes will be negotiated on a case-by-case basis and will be dependent upon the factors listed at paragraph 24 of this practice statement.
- the economist will determine the economic issues to be examined with the referring area, and will outline the approach to analysing and resolving the economic issues. In a case advice setting, this may include determining:
- the information required
- characterisation of issues including functional analysis
- analytical approach
- choice of method, and
- benchmarking and arm's length range (where applicable).
- the referring area needs to provide support throughout the process to allow the economist to form an appropriate view in a timely manner. This includes:
- including the economist in case planning
- gathering and documenting facts and evidence
- collecting the information and data requested by the economist
- liaising with the taxpayer
- providing the economist with the opportunity to attend relevant meetings
- providing regular updates and timely notification of material changes in the case, and
- taking into account the economic advice when making decisions on the case.
27. Timeframes for providing advice and responding to requests are dependent on receiving information that is both timely and relevant. A collaborative approach will ensure that requested advice is both relevant and completed in a timely manner.
Assurance of economic advice
Obtaining external economic advice
32. It is necessary to obtain approval from the Assistant Commissioner - Economist Practice to engage an external economic expert for advice on compliance issues. Business Line teams should discuss the need for external economic advice with the economist in the EP, who will then engage the Assistant Commissioner - Economist Practice. The final approval to engage an external economic expert will rest with the business line budget holder.
33. The process for obtaining external economic advice is outlined in Figure 3 below. For litigation matters, external economic experts are engaged via the Australian Government Solicitor. However, the issue should also be discussed with the Assistant Commissioner - Economist Practice.
Figure 3. ATO process for engagement of external economist experts on compliance issues
- engagement of external economist experts is based on level of complexity and materiality of the issue, and precedential issues
- the Economist Practice manages expert economist advice and procurement contracts
- for litigation matters, external economic experts are engaged via the Australian Government Solicitor.
|Date of amendment||Part||Comment|
|7 April 2014||Contact details||Updated.|
Date of Issue: 20 June 2013
Date of Effect: 14 January 2013
International Intranet Page (internal link only)
Economist Practice Mailbox - email@example.com
Economist Practice Intranet Page (internal link only)
Economist Practice referral form (internal link only)
Economist Practice contact list (internal link only)
Referral of Economic Issues
Minerals Resource Rent Tax
External economist experts
Accredited economic advice
Large Business and International
|Other Business Lines consulted||All business lines|