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Government Consultation with the Community on the Development of Taxation Legislation

Background

The Board’s Charter gives the Board the key function of advising the Treasurer on the “quality and effectiveness of tax legislation and the processes for its development, including the processes of community consultation and other aspects of tax design”.

In line with the Board’s Charter, the Board examined the Government’s approach to consultation with the community on the development of tax legislation. The Board sought to work out how to get more effective input from the community, leading to better Government decisions and, ultimately, a better tax system. That is, a system that implements the Government’s policy intent while minimising compliance costs for taxpayers and administrators and also ”unintended consequences”.

Board Report

The Board provided its report, Government Consultation with the Community on the Development of Taxation Legislation to government on 13 March 2002. 

Included in the report, the Board also recommended 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.

Recommendations

  1. The Government reaffirm its commitment to the principles of integrated tax design and their implementation.
  2. 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.
  3. The Government adopt a framework for consultation that embraces three key phases of external involvement:
    1. early external input to the identification and assessment of high level policy and implementation options (before the public announcement of policy intent);
    2. technical and other input from external stakeholders in the development of policy and legislative detail; and
    3. thorough road-testing of draft legislation and related products prior to their implementation.
  4. The Government enhance the transparency of consultation arrangements by:
    1. ensuring that the policy intent of each new tax measure is clearly established and articulated at the time of public announcement;
    2. 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;
    3. the annual release by the Treasurer of the Government’s indicative tax legislation forward work program; and
    4. improving feedback provided to external participants.
  5. 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.
  6. The Government should ensure that there are clear accountabilities for:
    1. the overall design and implementation process for a particular taxation measure; and
    2. the consultation undertaken as part of that process.
  7. 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.
  8. The Government should provide the necessary resources of time, personnel and finances to support implementing the recommendations of this report on an ongoing basis.
  9. Within the enhanced consultation framework, the Board should:
    1. 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;
    2. conduct and report to the Treasurer and the Minister on post-implementation reviews of significant tax legislation initiatives; and
    3. in limited cases, where requested by the Treasurer or the Minister, directly participate in or undertake consultation on the development of specific tax measures.
  10. 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.

Government Response

On 2 May 2002 the Government responded to the Board’s report. The government decided to largely adopt the Board’s recommendations dealing with consultation. In the response, the Treasurer stated, ‘the Board itself recognised that processes of community consultation cannot be mandated for each and every change to the tax system, particularly in cases where there is commercial or market sensitivity, or revenue or tax avoidance sensitivity. Also the flexibility government requires in managing the timing of policy change will at times determine the extent and form of consultation that can be undertaken.’

In response to the Board’s recommendations, from 1 July 2002, responsibility for the design of tax laws and regulations was relocated from the ATO to the Department of the Treasury.

In addition, the Government also recognised that the consultation process, and the legislation that results from it, should be reviewed periodically to ensure that the expectations of government and external participants are being appropriately managed. The Treasurer stated, ‘I have asked the Board of Taxation to undertake an ongoing role in monitoring the processes of consultation, and have agreed to the Board conducting post-implementation reviews of major pieces of tax legislation to ensure that government policy intent has been effectively translated consequent upon consultations undertaken. Such reviews could be in addition to, or complement, reviews undertaken within the Treasury and ATO.’

Further information about additional consultation reviews conducted by the Board can be found here.

For further information about this report please contact the Board of Taxation Secretariat on (02) 6263 4366 or at taxboard@treasury.gov.au.

 

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