minutes	NTLG	december 2014	Unclassified
format	Audience	Date	Classification

National Tax Liaison Group Minutes - Final For the meeting of 3 December, 2014 Venue : Australian Taxation Office Latitude East, Level 12, Room 719 52 Goulburn Street Sydney
unclassified	For further information or questions, contact Annalissa Alexander Tel: 02 6216 6406 Mob: 0401 718 967

Members and attendance list

Australian Taxation Office (ATO)	· Chris Jordan, Commissioner (Chair) · Andrew Mills, Second Commissioner, Law Design and Practice (Deputy Chair) · Neil Olesen, Second Commissioner, Compliance · Andrew England, First Assistant Commissioner, Integrated Tax Design · Jeremy Hirschhorn, Chief Tax Counsel, Tax Counsel Network · Peter Coakley, Assistant Commissioner, ATO Corporate · Jorge del Busto, Senior Executive Advisor, Office of the Chief Tax Counsel · Deepti Paton, Adviser – Tax Industry Liaison and Consultation · Annalissa Alexander (Secretariat)
Treasury	· Tania Constable, Chief Adviser, Personal and Retirement Income Division, Revenue Group · Paul Horrocks, Principal Adviser, Corporate and International Tax Division, Treasury
Association of Taxation and Management Accountants	· Keith Clissold
CPA Australia	· Mark Morris · Greg Nielsen
Corporate Tax Association	· Frank Drenth · Michelle de Niese
Institute of Chartered Accountants in Australia (ICAA)	· Michael Croker · Grant Wardell-Johnson · Tony Stolarek
Institute of Public Accountants	· Tony Greco · Lance Cunningham
Law Council of Australia	· Adrian Varrasso · Clint Harding
National Tax and Accountants Association	· Rodney Wilson
Taxpayers Australia	· Mark Chapman
The Tax Institute	· Robert Jeremenko · Michael Flynn · Stephen Healey · Stephanie Caredes (Professional Association Bodies Agenda submissions co-ordinator)

Apologies

Treasury	· Rob Heferen, Executive Director, Revenue Group
Law Council of Australia	· Mark Friezer
CPA Australia	· Andrew O’Bryan · Sue Williamson

Guest discussion leads

ATO (in order of appearance)

· Michael O’Neill, Assistant Deputy Commissioner, Public Groups International (Agenda item 1.3) · David Allen, Assistant Commissioner, Public Groups International (Agenda item 1.3) · Erin Holland, Deputy Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support (Agenda item 2.2) · Greg Williams, Deputy Commissioner, Compliance Support and Capability (Agenda item 2.2) · George Hitti, Assistant Deputy Commissioner, Public Groups International (Agenda item 2.2) · Andrew Watson, Assistant Commissioner, Tax Practitioner, Lodgment Strategy and Compliance Support (Agenda items 2.2 and 3.3)

MEETING OPEN

Chair’s opening remarks

Chris Jordan (Chair) opened the meeting and provided members with an update on recent happenings at the ATO, including:

· Recent developments in the ATO’s reinvention agenda, including repositioning of the peak governance arrangements for this program under the ATO Executive Committee; and

· Continuing negotiation with stakeholders on the ATO’s future Enterprise Agreement.

Chris also noted upcoming major events for the ATO for 2015, including:

· Preparation for and contributions to the Senate inquiry into corporate tax avoidance;

· Supporting and contributing to the work of the House of Representatives Standing Committee in relation to the Committee’s Inquiry into Tax Disputes; and

· Ongoing Senate Estimates hearing and ATO engagement with Budget preparation processes.

Chris noted that the ATO’s post-implementation review of its consultation arrangements would be progressing in 2015 as previously flagged, and that planning for this review would include input from NTLG members.

He noted that positive changes in the operation of the NTLG over 2014 has led to some jointly-managed, positive outcomes for the tax system, but that in order to maximize the potential of this group, a review of contributions to and composition of the NTLG was warranted.

Chris acknowledged Frank Drenth’s retirement from the Corporate Tax Association (‘CTA’) and therefore the NTLG. He recognised Frank’s many years of constructive contributions to the forum and welcomed Michelle de Niese as Frank’s successor in the role of Executive Director of the CTA.

He extended his best wishes to Deepti Paton (ATO) ahead of her extended leave of absence. He acknowledged the importance of an effective interface between the professional associations and the ATO in supporting the development of the NTLG and the ATO’s broader consultation arrangements.

Alternates, apologies, guest attendees and changes in membership

Andrew Mills (Deputy Chair) acknowledged additional alternates, apologies, guest attendees and changes in membership, including:

· Michael Flynn stepping down from the NTLG at the end of 2014 due to the end of his tenure as The Tax Institute’s President; and

· Greg Nielsen stepping down from the NTLG at the end of 2014. Alexis Kokkinos will replace Greg as CPA Australia’s NTLG representative in 2015.

· Jorge del Busto and Annalissa Alexander (Secretariat) joining the NTLG in managerial and secretarial roles for the first half of 2015.

Open NTLG action items

Members agreed to close the following action items:

· NTLG 1906/2 – Nominations for the 2014 NTLG work-program. [A 2015 NTLG work program will be developed in conjunction with members.]

· NTLG 1906/8 - Red-tape reduction ideas raised at the NTLG. [Members agreed to progress ideas raised at the NTLG via existing projects.]

· NTLG 189/1 - NTLG member assistance to progress announced but un-enacted tax measures. [Capacity to utilise NTLG member assistance to be managed on a case-by-case basis].

· NTLG 189/3 - Mytax and pre-filling. [Scope for greater use of disclaimers to be considered in planning for Tax Time 2015.]

· NTLG 189/5 - Reinventing the ATO – workshops. [Significant developments in the Reinventing the ATO program to be added to the 2015 NTLG work program.]

· NTLG 189/6 - Government action to address identity crime / tax fraud. [ATO has relayed NTLG member concerns to the Australian Federal Police.]

· NTLG 189/7 - Data management by tax practitioners to prevent identity crime / tax fraud. [Key areas of concern summarised in ATO response to action item.]

· NTLG 189/8 - Review of public ATO advice and guidance. [Phase 1 of consultation is complete. See 2015 NTLG forward work-program for further planned NTLG involvement in this review.]

· NTLG 189/9 - ATO policy with regards to email interaction. [Current ATO policy summarised in ATO response to action item.]

Members agreed that action item NTLG 189/4 (NTLG member assistance in preserving corporate knowledge) should be progressed out of session by exploring capacity to use a ‘blog’ type facility where subject matter experts could contribute to discussions on issues nominated by the ATO or Treasury.

Members acknowledged that the following action items were ‘ongoing’ as they related to longer-term projects:

· NTLG 1906/12 (reviewing and revising the test case litigation program).

· NTLG 189/2 (the NTLG safe harbours project).

Segment 1 - Issues of significance in the tax law interpretation, policy and law design space

1.1 Tax policy and law design

Progress of Treasury’s tax measures work program

Tania Constable (Treasury):

· Provided members with an update on the progress of the ‘to proceed’ announced but un-enacted measures as per the then Assistant Treasurer’s press release of 14 December 2013 via an updated version of the draft legislative work program for tax and superannuation measures.

· Agreed with members’ views that there was greater scope for differentiating between politically contentious and non-contentious tax measures with a view to shortening time to completion for the non-contentious measures.

· Noted that such a prioritisation exercise would benefit from input from NTLG members on the relative priorities of various measures.

NTLG 0312/1:

Members were invited to submit views on the relative priorities of tax measures to Treasury via email to the following address: tom.reid@treasury.gov.au

· Members noted that measures with a retrospective date of effect were of greatest concern to industry.

· Tania undertook to relay member concerns about delays in the enactment of some tax measures to Treasury colleagues and the Government.

· Tania noted that efforts are currently underway to consider the breadth of resources available inside and outside Government to progress Treasury’s work program.

Update on progress of a proposal for a statutory remedial power for the Commissioner

· Tania noted the proposal for a statutory remedial power (‘ SRP’ ) for the Commissioner was being progressed in accordance with Government priorities.

· Members noted their intention to relay views as to the priority of this proposal directly to Government. Members noted that a SRP had the potential to reduce red-tape and resolve some of the ongoing delays in the enactment of tax measures.

Update on the Tax White Paper / Federation White Paper process

· Tania acknowledged recent reports in the media that an Issues Paper on tax reform would be released before Christmas 2014, with a view of conducting consultation over a reasonable period in early 2015.

· The Issues Paper will likely be followed by a Green Paper with options for tax reform, then a Tax White Paper, which the Government has committed to producing before the next Federal Election.

1.2 Increasing responsiveness of tax system to changes in environmental factors

· Robert Jeremenko (The Tax Institute) noted that there was greater capacity via the NTLG membership to keep the ATO and Treasury abreast of changes in environmental factors that may have tax consequences which require an administrative or policy response.

· Robert noted that such issues include changes in business practices (e.g. greater reliance on technology and cloud computing, trends towards crowd sourcing and big data mining) as well as the impact of evolving media practices on the political environment. Many such matters are not traditionally seen as ‘tax issues’ but may have unanticipated tax consequences.

· Chris Jordan (ATO) noted that there was capacity to collaborate within Australia as well as with major trading partners via the Forum of Tax Administrators and the OECD.

· Paul Horrocks (Treasury) noted that the Australian Public Service Commission is in the midst of a broader ‘horizon scanning’ exercise which could support efforts to identify tax issues earlier.

· Members noted that while unforeseen issues will continue to come up, a routine environmental scan via the NTLG could improve the timeliness of administrative or policy responses to changes in environmental factors.

NTLG 0312/2:

1. NTLG member associations to take turns presenting their perspective of events and changes “On the Horizon” at future NTLG meetings.

2. The relevant association should consider the most appropriate format for this segment e.g. presentation to the group, discussions in a workshop format etc.

Note: The Tax Institute will present at the March 2015 NTLG meeting.

1.3 Base Erosion and Profit Shifting (‘BEPS’) / Corporate Tax Avoidance

· David Allen and Michael O’Neill (ATO) provided an update on the program of work being undertaken to support global collaboration around addressing corporate tax avoidance.

· Michael noted an increasing shift towards greater alignment in government attitudes that was evident in (for example) the fostering of common reporting standards as well as the flow of emerging intelligence from participating tax administrations into better compliance outcomes.

· Chris Jordan (ATO) noted he has been appointed to the position of vice-Chair of the Forum of Tax Administrators (FTA). The Joint Information Tax Shelter Information Centre has transformed into a virtual collaboration network under the .administration of the FTA, and he has responsibility for running this network.

· David provided an overview of the meeting of the Study Group of Asian Tax Administrations and Research (‘SGATAR’), held for the 44th consecutive year and hosted by the ATO in November 2014. A permanent taskforce has been formed to develop an ongoing forward work program for a series of working groups which focus on G20 themes including BEPS, multinationals, risk assessment, bulk data exchange etc.

In the ensuing meeting discussion:

· Members acknowledged that the current debate on BEPS and Corporate Tax Avoidance had significant capacity to impact on community perceptions of fairness in the tax system, and as a consequence, willing participation.

· Members agreed that increased community understanding of the issues involved and current efforts to address BEPS from an administrative and policy perspective would benefit the tax system.

· Some members expressed the view that the ATO should make its public statements on the BEPS issue and information on ATO compliance activities and initiatives more prevalent and readily accessible via the ATO website.

· Members also noted that the associations had a significant role to play in ‘getting the message out’ through the media and other channels, and that communications should be audience-appropriate.

· Members acknowledged that the ATO’s message and views on this matter were part of a broader story which included a wider debate involving public policy, the appropriateness of current tax laws and the need for tax reform.

· Members agreed to continue discussions on this matter at future NTLG meetings as the Senate Inquiry into Corporate Tax Avoidance progresses.

Segment 2 – Strategic initiatives to reinvent the ATO

Overview

· Neil Olesen (ATO) thanked NTLG members for their contributions on the draft ‘Reinventing the ATO’ blueprint and work program.

· Neil noted that a significant amount of work had been done over the preceding few months on co-designing the client experience with stakeholders in key market segments, and that the ATO was currently drawing on the input received to finalize the Reinventing the ATO’ blueprint and work program.

· Members noted that feedback provided on earlier versions of the client experience designs had been taken into account by the ATO and was reflected in later versions.

· Neil noted that the ATO would be in a position to share and start seeking views from NTLG members on the revised blueprint and work program at the March 2015 meeting. In the meanwhile, the ATO was looking forward to engaging with NTLG members on the specific initiatives currently underway to reinvent the ATO.

Neil noted the importance of real-time feedback from key stakeholders such as NTLG members on the impact of the Reinventing the ATO program, especially in relation to changes beyond the leadership level.

Members provided the following feedback at the meeting:

· Some people within the ATO “get it” and are flexible, responsive and pragmatic. Other teams can be inflexible and aggressive. The taxpayer and advisor’s experience can be mixed and depends heavily on the actual ATO staff involved.

· Some programs are very highly regarded, such as Independent Review and the focus on Alternative Dispute Resolution.

· Associations advise taxpayers and advisors who have had negative experiences to escalate matters up the chain as it is difficult for the ATO to address problems unless the taxpayer is willing to disclose particulars to senior ATO officers.

· There is a feeling amongst the tax profession that the ATO is focusing on electronic interactions and pulling away from being available to interact by phone, though this matter is currently being actively addressed by the ATO.

· Many tax professionals are hearing the messages from senior ATO leadership but are not seeing any significant changes ‘on the ground’. One association noted that complaints from members had not dropped over preceding months.

· Inconsistent treatment of taxpayers that owe debts to the ATO continues to be a problem. Some debt collectors are excessively aggressive even when small amounts of money are involved.

· Some members acknowledged that debt collection in the SME sector was a delicate balancing act of competing factors, but recommended that the ATO examine whether the current stance was too lenient and unjust to taxpayers that paid tax debts on time.

· Access to mediators in the SME market is working well and has been welcomed by taxpayers and advisors.

· Some high volume letters are written with an accusatory tone which is not well-received by taxpayers. The ATO fixes such problems quickly when brought to their attention.

Chris Jordan (ATO) noted that the ATO was in the process of reviewing all high-volume letters to make them short, sharp and comprehensible with a view to ensuring that the ATO communicates well in such situations.

Neil Olesen (ATO) noted that such feedback was essential to driving change within the ATO and identifying areas of concern. Member feedback at the meeting was appreciated and was also welcome out of session via direct email.

2.1 Review of ATO advice and guidance

Jeremy Hirschhorn (ATO) noted that the feedback received on phase 1 of the consultation on ATO advice and guidance (in relation to potential improvements) was underpinned by a number of key themes, including:

· ATO advice and guidance is generally useful and welcomed. However, a number of potential improvements should be actively considered.

· Decisions as to what guidance to issue and when need to be made more strategically.

· Advice and guidance should be subject to genuine consultation at the right stage.

· Accessibility to advice and guidance needs to be improved.

· Guidance needs to present the ATO view (i.e. not just restate the law) and needs to be pragmatic and relevant. Guidance needs to be used as a risk mitigation tool.

· Guidance needs to be tailored to the audience.

· The ATO needs to actively consider what the best / most appropriate product is under the current legislative framework. Consideration should also be given to whether changes in the current legislative framework are necessary.

· The currency and relevance of guidance is not actively maintained.

Jeremy noted that the review was now moving to a second stage of consultation in February 2015 focused on road-testing some potential solutions.

Robert Jeremenko (The Tax Institute) noted that in the meanwhile, The Tax Institute had volunteered to lead a project to identify rulings that could be retired, updated, or made more relevant / useful. Members noted the need to identify some potential ‘quick wins’.

NTLG 0312/3:

1. The Tax Institute to commence a project to identify rulings that could be retired, updated, or made more relevant / useful initially in consultation with Tax Institute members with a view to involving the wider NTLG membership at a later stage.

2. NTLG members seeking to provide input into this project at an early stage to contact The Tax Institute directly.

3. Tax Institute to update NTLG members on the progress of this project at the March 2015 NTLG meeting.

2.2 Rethinking compliance

Neil Olesen (ATO) noted that the ATO had been rethinking the traditional compliance paradigm i.e. audits as the primary deterrent and encouragement towards compliance, and had recently undertaken some research with a view to identifying key levers of compliance.

The primary driver for this piece of work was to challenge existing paradigms and determine whether the (approximately) $1 billion spent each year on ensuring taxpayer compliance was being invested in the most effective way.

Greg Williams (ATO) noted that the results of this research had been tested against the management of three key risks (phoenix activity, trading in the cash economy and compliance with employer obligations) as a pilot, and would over the coming months be tested against a further 10 key risks:

· Wealthy Australians

· Public Groups and International restructuring / significant events

· Serious and organised crime

· GST serious evasion

· Omission of income for individuals (including third party data matching and prefilling for individuals)

· Individuals deductions and offsets including work related expenses

· Income tax refund integrity

· Risk of non or late lodgment

· Real Property - Non-compliance with GST obligations by property developers

· Business Activity Statement refund integrity

Andrew Watson (ATO) provided a summary of the outcomes of research on ‘levers’ of compliance, including:

· The complexity and cost of compliance

· Perceptions of fairness and justice

· Efficiency and perceptions of integrity of the administrator

· A service-orientated approach by the administrator

· Trust in the legitimacy of the administrator’s power

· Personal and social norms

· Relationship with tax practitioner / advisor / professional

· Deterrence (e.g. the risk of getting caught, perceptions that the administrator is taking action when justified, audits, penalties and fines)

NTLG member views were invited on three key questions in a workshop context:

· What behaviours can the tax professions better influence than the ATO and how?

· How do you as tax professionals balance responsibilities to the tax system with responsibilities to your clients and how do you deal with the sometimes inevitable tensions between these two aspects? What should the ATO expect in terms of assurance?

· What influencers of behaviour should we collectively be focussing more on and why?

NTLG 0312/4: ATO to summarise and circulate the feedback provided by NTLG members on the three workshop questions aimed at ‘rethinking compliance’.

Neil Olesen noted that NTLG member feedback would be taken into account as ATO thinking in this space evolves.

Neil also noted that the ATO would consider ways in which to engage the NTLG in 2015 to ensure this Group is involved in setting ATO strategy in this space, including the bigger piece of thinking that the ATO plans to embark on in relation to measuring tax compliance outcomes / evaluating effectiveness.

2.3 Overview of consultation arrangements and proposals to advance further topical issues

· Peter Coakley (ATO) noted that the ATO continues to improve its consultation arrangements and manage submitted issues on a case-by-case basis. The ATO welcomes submissions of potential issues for consultation and potential improvements in the consultation arrangements.

· Members acknowledged the Commissioner’s opening comments as to the need for an independent post-implementation review of the consultation arrangements in 2015 and agreed to progress planning for this review out of session.

· Robert Jeremenko / The Tax Institute expressed an interest in contributing to the planning for this review.

NTLG 0312/5:

1. Peter Coakley (ATO) to set-up a Group comprised of ATO staff, NTLG members and other key external stakeholder/s to begin work on draft terms of reference for the post-implementation review of the ATO’s consultation arrangements.

2. This Group should bring the draft terms to the broader NTLG membership at the March 2015 NTLG meeting for comment.

· The ATO and members agreed that the operation of the NTLG in terms of composition and contribution should be reviewed separately, and in March 2015 (at which stage the NTLG will have been operating in-line with the outcomes of the March 2014 workshop for approximately 12 months).

· Such a review is necessary to ensure that the momentum of the March 2014 workshop is maintained, and the Group is well placed to realise its full potential.

NTLG 0312/6:

1. Peter Coakley (ATO) to lead discussions with NTLG members to develop a ‘best-practice NTLG member / participant statement’ for consideration at the March 2015 NTLG meeting.

2. The ‘best-practice NTLG member / participant statement’ should then be used to evaluate the NTLG’s operation and composition.

Confidentiality in consultation

· Peter Coakley (ATO) acknowledged inconsistent and differing practices in relation to the use of confidentiality in consultations and noted the need for a ‘best practice’ guide.

· The ATO and members agreed that the starting / default position for any consultation should be no confidentiality constraints, but that this position needs to be balanced against potential risks especially where the consultation is undertaken at a very early stage of development.

· Tania Constable (Treasury) acknowledged the concerns expressed by members and noted that Treasury needed to manage a different set of risks when evaluating whether confidentiality was appropriate.

NTLG 0312/7: Peter Coakley (ATO), Treasury and interested NTLG members to investigate the circumstances of the nominated ‘confidential’ consultations with a view to developing a best practice statement to guide the use of confidentiality in consultation on tax matters.

Segment 3 – Red-tape reduction

3.1 NTLG safe harbours project

Michelle de Niese (CTA) provided members with an update on the NTLG safe harbours project:

· The Safe Harbours Steering Group met for the first time on 27 November, 2014. The membership of this Group consists of Michelle de Niese (NTLG large business representative), Michael Croker (NTLG small business representative), ATO (Jeremy Hirshhorn, Andrew Watson) and Treasury (Tom Reid, Paul Horrocks).

· The Steering Group will aim to achieve quantifiable red tape reductions through the different safe harbor initiatives it will oversee.

· The Steering Group determined that, to commence its work, four new working groups will be set-up to explore potential safe harbours in the following areas: transfer pricing, fringe benefits tax, aligning tax and accounting differences and small businesses (the latter based on the Board of Taxation’s review of tax impediments to small businesses).

· The Steering Group intends to initially focus on the four nominated areas with a view to achieving some ‘quick wins’ first.

· These working groups will be based on Terms of Reference agreed to by the Steering Group and made up of external and ATO members, with Treasury involvement as necessary.

· The Steering Group will maintain oversight over the working groups and provide advice on maintaining an appropriate balance between integrity concerns and easing compliance costs.

· The Steering Group will also stay abreast of and support additional new or existing working groups / initiatives to implement ‘safe harbours’ that are being actively considered within the ATO (e.g. GST barter transactions).

3.2 Relevance of external research on red-tape in the private sector on Government efforts to reduce regulation

Steve Healey (The Tax Institute) provided members with an overview of external research on addressing private and public sector red-tape (The Deloitte Access Economics Report entitled ‘Get out of your own way - Unleashing Productivity’):

· The research indicates a significant amount of red tape in the private sector that is rarely challenged or reviewed, and a growing culture of compliance based on risk aversion.

· Deloitte recently launched a successful internal campaign to challenge existing processes and identify opportunities for reducing red-tape.

· The key to reducing private sector red-tape is to challenge the status quo and focus on what needs to be right rather than on what could be wrong.

Chris Jordan (ATO) noted that a similar exercise had recently been undertaken successfully in the ATO to identify the ‘silliest’ practice statements, and acknowledged the difficulty of moving from a risk aversion culture to a risk management culture.

The ATO and members agreed that learning to manage risk and living without the security of prescriptive rules required cultural change within the ATO as well as amongst taxpayers / advisors.

3.3 ATO-wide activities in relation to red-tape reduction

Members acknowledged the summary of red-tape reduction activities being driven across key market segments by stewardship committees. Members noted that subject matter experts were best placed to identify and drive initiatives in their area of expertise.

MEETING CLOSE

Potential matters for inclusion on the 2015 work program

· The ATO agreed to present a further update to the March 2015 NTLG meeting on compliance activities and ATO input on policy developments related to BEPS, to inform whether a new limited-life ‘International Tax Group’ needs to be established to progress consultation in this space.

· Learnings from the post-implementation review of the Reportable Tax Positions pilot.

Other business

In response to a member request, the ATO undertook to consider whether financial planners needed to be represented at the NTLG since the passage of laws allowing financial planners to provide tax advice in the course of providing financial advice.

Govdex as an information dissemination system

· Members noted that the take-up of Govdex as an information dissemination system has been low, partly due to the lack of incentive to use Govdex while email is available as a parallel system, and partly due to the inconvenience of using certain Govdex features.

· Members agreed that email and Govdex should be run in parallel for the foreseeable future, but that mechanisms to encourage the use of Govdex should be implemented.

*****

There being no further business, the Chair closed the meeting at 3.30pm and thanked members for their attendance and contributions.

The next NTLG meeting will be held on Wednesday, 4 March 2015 in Melbourne.