The Board believes that more effective community input to the development of tax legislation will result in better tax system outcomes. In particular, effective consultation with the community should improve the quality of tax legislation.
Effective consultation involves bringing together different perspectives to develop more focused policy direction and to generate creative and effective solutions to implementation problems.
In the context of tax policy design and implementation, stakeholders regard consultation as both important and beneficial. There is considerable willingness among external stakeholders to be consulted. However, that willingness is not infinite, and depends on stakeholders continuing to see consultation processes as genuine.
It is generally acknowledged that the Government has recently improved the level and quality of consultation on the development of tax legislation. However, stakeholders still see considerable shortcomings in current legislation development arrangements, including:
- a lack of order and planning around the Government’s tax reform agenda;
- an ad hoc approach to consultation, contributing to a perception that the Government is not committed to “genuine consultation”;
- insufficient external input being obtained at the policy design phase;
- a lack of clarity and transparency about the aims of tax initiatives and the accompanying consultation processes;
- a lack of clear accountability for the tax design process, in particular for ensuring that legislation achieves the Government’s policy intent;
- an over-emphasis on compliance in tax legislation and its implementation; and
- an insufficient continuity of technical expertise and experience within government agencies, and not enough government use of external expert advisers.
Improved legislation development arrangements will bring significant benefits for both the Government and the community through better design and implementation of tax legislation.
In the Board’s view, the integrated tax design principles that have been endorsed by the Government provide the appropriate framework for the tax design process. Especially important is the focus on a clear and early articulation of the policy intent of tax policy initiatives, and establishing a shared understanding of that intent among stakeholders.
Within the overall tax design process, consultation arrangements should be founded upon a culture of cooperation and trust. The parties must share a goal of achieving outcomes that best serve the national interest. These foundations are presently lacking and will take time to build.
The Government can begin the process by making an explicit commitment to appropriate consultation in relation to all tax initiatives. The goal is an enhanced consultation framework built upon the principles of commitment, transparency, accountability and review, and characterised by the following:
- a commitment by the Government to consult on all substantive tax legislation initiatives, except in exceptional circumstances only;
- a clear explanation of the policy intent of each new tax initiative, and a description of the proposed consultation processes for each initiative;
- an approach of seeking the most effective forms of community input at each phase of the tax design process, including:
- before any public announcement, obtaining input from external technical experts to assist high level policy development and to identify implementation options; and
- after the public announcement, further input from external technical experts, combined with sectoral and broader community consultation as appropriate; and
- “road-testing” of legislation and related products before implementation;
- clear accountability for developing and implementing legislation that delivers the Government’s policy intent;
- open communication and appropriate levels of feedback; and
- sufficient resources of time, personnel and finances being provided for consultation.
The Board sees its role within this framework as one primarily of monitoring and reporting on general arrangements for consultation. The Board also would regularly review consultative processes and the legislative outcomes.
In relation to the institutional arrangements for tax design, the non-government members of the Board believe that leadership and responsibility for the tax policy advising and legislation development functions, currently split between the Treasury and the Australian Taxation Office (ATO), should be unified within a single “Tax Policy and Legislation Unit”, located within the Treasury. This should result in better coordinated tax design and consultation processes, and clearer accountability for implementing the Government’s tax policy initiatives, while addressing concerns over the inappropriateness of the ATO, as the administrator of tax legislation, holding the responsibility for designing that legislation.
The Tax Policy and Legislation Unit should have the accountability and independence to ensure the delivery of good tax law or to advise in circumstances where good tax law is being sacrificed to achieve broader economic and social policy objectives.
The Board’s specific recommendations are shown below and discussed further in the body of the report.
- The Government reaffirm its commitment to the principles of integrated tax design and their implementation.
- The Government make a commitment to consult on the development of all substantive tax legislation initiatives, except in exceptional circumstances only. When exceptional circumstances do arise in specific cases, these should be explained publicly at the appropriate time.
- The Government adopt a framework for consultation that embraces three key phases of external involvement:
- early external input to the identification and assessment of high level policy and implementation options (before the public announcement of policy intent);
- technical and other input from external stakeholders in the development of policy and legislative detail; and
- thorough road-testing of draft legislation and related products prior to their implementation.
- The Government enhance the transparency of consultation arrangements by:
- ensuring that the policy intent of each new tax measure is clearly established and articulated at the time of public announcement;
- developing and releasing for each new (substantive) tax measure a consultation plan that outlines the objectives of the consultation, the processes to be employed and indicative timeframes;
- the annual release by the Treasurer of the Government’s indicative tax legislation forward work program; and
- improving feedback provided to external participants.
- The Government should determine the form of consultation to be undertaken, with an emphasis on identifying and pursuing the most appropriate and effective external input at the various phases of the development process.
- The Government should ensure that there are clear accountabilities for:
- the overall design and implementation process for a particular taxation measure; and
- the consultation undertaken as part of that process.
- There should be regular and formal reviews of both the conduct of consultation processes and the effectiveness of the resulting legislation, including through obtaining feedback from external stakeholders.
- The Government should provide the necessary resources of time, personnel and finances to support implementing the recommendations of this report on an ongoing basis.
- Within the enhanced consultation framework, the Board should:
- monitor and report to the Treasurer and Minister for Revenue and Assistant Treasurer on the effectiveness of consultation arrangements for tax legislation development and implementation;
- conduct and report to the Treasurer and the Minister on post-implementation reviews of significant tax legislation initiatives; and
- in limited cases, where requested by the Treasurer or the Minister, directly participate in or undertake consultation on the development of specific tax measures.
- Leadership of, and responsibility for, the tax policy advising and legislative development (instructing) tasks, including consultation in relation to each, should be united within a single, specialised “Tax Policy and Legislation Unit” located in the Department of the Treasury.