Chartered Accountants Australia and New Zealand will carefully consider its response to the publication of:

• The Treasury document titled Government response to the PwC tax leaks scandal. 
• Draft legislation proposing changes to: 
  • Tax promoter penalties 
  • Tax secrecy provisions 
  • Whistleblower legislation 
  • The powers entrusted to the Tax Practitioners Board  

Whilst the PwC matter has undoubtedly been the catalyst for some of the measures (particularly those relating to confidential discussions), it is clear the government has also taken the opportunity to address perceived shortcomings in tax administration (e.g., inter-agency collaboration) and procurement procedures.  

The proposals rightly increase the sanctions for breaching confidentiality agreements, but this must be moderated by steps to maintain and support frank consultations with private sector subject matter experts. Such dialogue remains vital to the development of well-drafted, workable legislation and related ATO guidance products. Also yet to be debated is the broader question: which types of government consultation are appropriate to conduct behind closed doors in the first place?  

Changes to current secrecy laws will also allow tax regulators to disclose reasonably suspected misconduct to professional associations or professional disciplinary bodies such as CA ANZ to enable earlier investigation and disciplinary action. This is welcome and aligns with recommendations made by CA ANZ to the James Review. It will raise important issues for members of bodies such as CA ANZ and the operation of the associations’ professional conduct committees. Notably, however, the proposed secrecy law exceptions will need to be extended to also clearly cover professional body staff who receive and handle the information in undertaking those investigations. 

Many in the tax profession – particularly those in small and medium sized practices – will question whether the published proposals and those foreshadowed represent a proportionate response in the context of the broader tax system. The increased regulatory burden and penalty exposure, associated compliance costs, professional indemnity insurance ramifications, and the flow-on impact for clients are just some of the concerns likely to be raised.  

Initiatives such as the enhanced Public Register maintained by the TPB, which will publish a greater range of information about tax agent misconduct, are likely to enhance consumer protection and usability by the community and the tax profession. It should also play an important role in the successful implementation of other reforms such as the proposed Disqualified Entities measure with which tax practices will have to comply. 

The proposed framework also raises important practical questions for regulators, such as whether the Tax Practitioners Board will be adequately resourced to efficiently, fairly, and transparently perform the important tasks allocated to it. Currently both the ATO and the TPB actively monitor tax agents. A revamped, published strategy explaining how the two regulators will avoid duplication and streamline their interactions with busy tax professionals should be fast-tracked. The risk of over-governance must be front of mind for those officials charged with implementing and managing the government’s proposals. 

Finally, CA ANZ notes that only two weeks have been allowed for submissions on the package of measures. This does not allow adequate time for professional associations to engage with their members. It is unfortunate as it implies the government has little appetite for considered input. Representations will be made to the Treasurer’s office for an extended consultation period.

Simon Grant FCA
CA ANZ Group Executive Advocacy and International Development