Reforms to Community Consultation Processes and Agency Accountabilities in Tax Design
I am today announcing changes designed to enhance consultation on tax issues, and a change in the accountability for tax legislation design.
In making these changes the Government has taken into account recommendations of its advisory Board of Taxation. As a result of these changes, responsibility for the development of tax legislation and regulations will be transferred from the Australian Taxation Office (ATO) to the Department of the Treasury.
Consistent with its Charter to advise me on processes for community consultation in the development of tax laws, the Board of Taxation last year commenced an evaluation of how community consultation could be made more effective. After extensive consideration, the Board provided a report to the Government on 13 March 2002.
The Government has decided to largely adopt the Board’s recommendations dealing with consultation. 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.
However, the Government has pursued a policy of widespread consultation on Business Tax Reform. Including in areas such as debt/equity distinctions, thin capitalisation, capital allowances and consolidation where it found it particularly useful.
In continuing this process, during the development of future tax measures the Government will be working from an in-principle position of:
- consulting on all substantive tax legislation initiatives, except in circumstances as outlined above;
- seeking early external input in the identification and assessment of high-level policy and implementation options;
- seeking technical and other input from external stakeholders (including the Board of Taxation) in the development of policy and legislative detail;
- thoroughly road testing draft legislation and related products prior to implementation;
- ensuring policy intent for each new measure is clearly established and described by public announcement;
- announcing for each new substantive tax measure a consultation process, with roles and responsibilities specified;
- releasing an indicative forward programme of tax legislation; and
- providing better feedback to external participants in consultation processes.
The Government also recognises 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. 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.
Legislation Design Role
From 1 July 2002, responsibility for the design of tax laws and regulations will be relocated from the ATO to the Department of the Treasury. Treasury currently has responsibility for providing tax policy advice. The transfer will bring the accountability for tax policy and legislative design more directly under Ministerial control. The change in responsibility will also reinforce the need for whole-of-Government perspectives to be taken into account in tax law design processes.
The new arrangements will see policy and legislative development brought together within the Department of the Treasury, providing maximum opportunity for legislation to be developed in a manner consistent with the policy intent set by Government. Working arrangements between the ATO and the Treasury will ensure that the administrative, compliance and interpretive experience of the ATO fully contributes to policy and legislation processes.
I note the ATO’s considerable contribution to delivering the Government’s tax reform agenda and the new arrangements will provide the ATO with the opportunity to focus even more on its core business of tax administration.
I have asked the Secretary to the Treasury and the Commissioner of Taxation, in consultation with the Office of Parliamentary Counsel as appropriate, to develop arrangements that will give effect to these decisions. As the Board’s report emphasises as one of its underlying recommendations, any new working arrangements between the agencies in developing future tax measures should seek to build on progress to date in ensuring a high level of integration across the policy, legislative and administrative aspects of change.
The transfer of the legislation function to the Treasury will take effect from 1 July 2002. Details to give effect to the decisions on community consultation will be implemented over the course of this year in the context of the new structural arrangements.
I take this opportunity to thank the Board of Taxation for its considerable work in preparing what is a very valuable report on community consultation processes. The report will be available on the Board’s website at http:/www.taxboard.gov.au.
2 May 2002