The leading tax watchdog in Australia has placed a taxpayer bill of rights at the top of his list for public consultation this year.

The Inspector-General of Taxation, Ali Noroozi, this morning announced the commencement of public consultation for developing his new work program for 2014 and beyond. Also included on the proposed program are whether Tax Office support for tax practitioners is adequate, including its approach to differentiated lodgement programs, the ATO’s audits of employer obligations (such as fringe benefits tax and PAYG withholding) and the taxman’s approach to debt collection.

The announcement of a possible taxpayer bill of rights comes days after Crikey revealed the Tax Office was threatening individual taxpayers with big fines and even prosecution because they had missed lodging tax returns up to a decade earlier — despite many still being at school at the time. Crikey has long reported that taxpayer rights have not kept pace with the explosion of powers granted by the government of the day to the ATO. Last year, David Russell QC, an international tax barrister and former vice president of the Liberal Party, said: “Taxpayer rights are a disgrace in this country, they don’t deserve to be called rights, because there are none.”

Today, Russell said he was pleased with the IGT’s announcement and said it was a first step in finally addressing an imbalance in taxpayer rights in Australia. “It’s a process that’s not going to be simply achieved by being unpleasant and abusive and the ATO treating taxpayers as criminals but if you want to achieve the ideal of voluntary compliance then you treat people with respect and treating people with respect involves accepting taxpayers have rights,” he said.

Leading tax academic Dr John Bevacqua also welcomed the news. “In Australia taxpayer rights have stood still and have not been going anywhere. In other countries such as the United States, England and Canada common law and statutory rights have continued to be developed but in Australia there is a real nervousness by legislators that the revenue would be vulnerable to attack and that’s just a cop-out because if you draft it properly and confine the ability to claim then there won’t be problems,” he said.

“In the US they have a monetary and time limits on claims and you have to exhaust other options before making a claim. The US Office of the Taxpayer Advocate has reported that claims for negligence against the IRS has dropped out of the top 10 most sued topics.”

Tony Greco, a senior tax advisor with the Institute of Public Accountants, says it’s extremely difficult to gain compensation from the ATO for administrative errors. “The existing rules for compensation are uncommercial and require better outcomes to protect taxpayers from ATO’s wide powers,” he said.

Tax lawyer David Hughes from SMH Tax Lawyers has represented high-profile tax victim Ron Pattenden, who won six times against oppressive Tax Office actions in court including a big win in the High Court last year. He strongly agrees with the proposed bill of rights, “but it needs enforceable remedies and provision for meaningful compensation when the ATO gets it wrong. Otherwise it will be as ineffectual as the taxpayers’ charter.”

Hughes was quick off the mark this morning, sending a letter to the IGT pushing for a bill of rights.

Ali Noroozi says it’s important for people to come forward and tell him what systemic problems there are in the Tax Office. “My work program is not set in concrete and it all depends what the tax community tell me,” he told Crikey. “I want people to come forward. My office maintains the strictest confidence with stakeholders who raise issues or concerns. Where applicable, legal professional privilege is also maintained in relation to any matters raised with me.”

IGT’s potential review topics include whether:

  • taxpayer bill of rights with enforceable remedies for inappropriate ATO conduct is needed or whether the current taxpayers’ charter and compensation schemes provide sufficient taxpayer protection;
  • The ATO’s approach to debt collection is appropriate, including whether it sufficiently considers taxpayers’ and third party creditors’ viability, both in terms of disputed debt and collectable debt;
  • The ATO’s support for tax practitioners is adequate, including its approach to differentiated lodgement programs, electronic lodgement, payment and advice systems access;
  • The ATO’s approach to test case litigation and funding arrangements allow taxpayers to conduct their case appropriately, including appeals on adverse decisions to a higher court;
  • The ATO’s application of the general anti-avoidance rules (GAAR) is appropriate, including the management of relevant evidence, case selection, cost-benefit analysis, reputational impacts, internal decision making and also the level of the GAAR panel’s independence;
  • The ATO’s administration of the product ruling system is appropriately managed and accessible to taxpayers;
  • The ATO’s audits of employer obligations, such as fringe benefits tax and PAYG withholding, supports and delivers appropriate, accurate, timely, consistent and transparent decisions;
  • The ATO’s approach to information security sufficiently ensures data integrity and safeguards against cyber attacks and identity fraud;
  • The ATO’s audits of not-for-profit organisations adequately considers their arrangements, exemption status and tax deductibility for donations received; and
  • The ATO’s corporate quality assurance process (Integrated Quality Framework) is effective in identifying improvement opportunities and management’s effectiveness in delivering required change.