3.1 In addition to reviewing information on overseas tax consultation practices, the review met with a wide range of stakeholders in the Australian tax system to understand better the current tax consultation processes and to gather information on whether international practice may be relevant to Australia.
3.2 The review met with peak industry groups, taxation expert groups, regulatory bodies, Treasury and Tax Office officials and state government treasury and revenue departments (further details are at Appendix B). These meetings were facilitated by an external consultant and produced considerable information on stakeholder views of the current tax consultation processes, and on the drivers for and impediments to any possible improvements.
3.3 Domestic stakeholder feedback on the key components of a sustainable approach to tax consultation was very similar in most instances to the international evidence outlined in Chapter 2.
3.4 The feedback on the current consultation processes undertaken by Treasury (often in conjunction with the Tax Office) on behalf of government was generally positive. There was also widespread recognition that consultation processes and outcomes had improved markedly in recent years.
3.5 The core areas of consultation considered important by external stakeholders to the effective and efficient function of the process are outlined below broadly in order of priority.
Views of external stakeholders
Stakeholder Analysis
3.6 External stakeholders felt greater attention could be given to stakeholder analysis for each consultation rather than in some cases relying on stakeholders who have an existing relationship with Treasury. Certain stakeholders (particularly SMEs and not-for-profit organisations) felt under-represented. There was also a widely held view that larger firms and well-organised groups are disproportionately represented in consultations.
3.7 External stakeholders suggested that in most situations it would be appropriate to share the names of all stakeholders in particular consultations with others in that process and consideration could be given to widening stakeholder representation in some cases, for example to an expert group or a consumer group.
Timely feedback of results
3.8 Most external stakeholders felt that feedback could be improved. There was a perception that Treasury does not feel able to provide specific feedback on submissions as it also has a role as a confidential adviser to government. This can result in a cautious approach and limited feedback. They also perceived gaps in feedback, with some consultations having long periods of little or no feedback on process or substance before there is renewed activity.
3.9 External stakeholders indicated they are more satisfied with a process if feedback makes it clear that their submission was given appropriate consideration, whether or not it was ultimately successful (this seemed to reflect a general recognition that government ultimately makes the decision).
Effective scoping of issues and setting clear objectives
3.10 External stakeholders indicated that scoping the issues that are the subject of consultation and setting objectives for the consultation are important for managing resources and for their decision about whether to be involved in particular consultations. They thought more could be done to improve the clarity and boundaries of consultation so they can make better informed decisions on resource allocation.
3.11 They also indicated that they could provide better input if there was greater clarity regarding scope and objectives.
Early access and input into the process
3.12 External stakeholders considered that opportunities for early access and input would improve the process by providing expert advice at an early stage from experienced practitioners and other stakeholders who are familiar with the needs and requirements of the community.
3.13 They thought this would provide better information to government on the various aspects (for example, political, social, technical and efficiency) of policy or implementation issues. There was a view that, on occasion, entrenched positions had been taken by government and officials and it was difficult to challenge these during consultation processes.
The transparency of the process
3.14 External stakeholders regarded the key elements of transparency as being the sharing of information, the integrity of the process and the trust that exists between the participants in the process. They saw a highly transparent process as one where they have sufficient information to be fully engaged and can provide input that has a material impact on the consultation. They were concerned that at times there are important information gaps and the process can appear designed to gather rather than share information.
Trust in the people and the process
3.15 Most stakeholders view trust in the system, the people and the process as important to the sharing of information and the quality of the input. Trust was not mentioned very often as a stand-alone issue; however, it was seen as valuable and necessary. Trust was seen as developing as other issues are strengthened such as transparency, openness, relationships and a commitment to consult in a two-way manner.
Resource issues
3.16 External stakeholders raised issues regarding both public and private sector resources available for consultation processes.
3.17 External stakeholders saw the key public sector resource issue as the retention of experienced officials with particular technical skills. There was a common view that Treasury staff tend to move frequently across a number of units, which external stakeholders considered results in a need for frequent reskilling on technical issues. They also considered that officials do not always have the necessary confidence or authority, and in those situations it can take the involvement of more senior officers to progress difficult issues. Both issues have the potential to slow the consultation process and make it less effective.
3.18 While external stakeholders also have resource constraints, most indicated a commitment to continue to find resources for each consultation opportunity. As noted, they can be assisted considerably by consultation processes that are properly scoped and have clear objectives.
3.19 External stakeholders also noted that requests for consultation and submissions can be made late in the process, causing even the very large firms to experience resource issues. Smaller organisations and bodies found it difficult to engage in the process when this occurred.
More considered use of confidentiality deeds
3.20 External stakeholders did not raise the use of confidentiality provisions as a significant issue. This was primarily because, where requested, additional external stakeholders have generally been added to consultation forums or provided with information after they complete a confidentiality deed. There was some concern that too much information is treated as confidential which at times slows the process.
Sufficient time
3.21 External stakeholders saw providing sufficient time as a measure of the integrity of the process and the commitment to consultation. Participants commented that on occasion submissions have been requested in late December or with very short response times. Such instances were seen as either poor management of the process or indicating a view that the process was not a high priority.
3.22 There was recognition that on occasion tight timeframes are unavoidable due to government processes, and on other occasions external stakeholders had pushed for tight deadlines, for example to implement a taxpayer-friendly change or improve certainty.
Road-testing
3.23 External stakeholders saw road-testing as providing an opportunity to check the effect of policy decisions before they are passed into law. The Tax Office is involved quite heavily in the testing of tax legislation before it is applied in the community. External stakeholders thought this was working well.
3.24 External stakeholders raised the possibility of road-testing policy to reduce pressure for changes to legislation after it is passed by Parliament. This could be achieved by, for example, increasing external stakeholder input into implementation decisions or drafting instructions, and/or by more use of exposure draft legislation.
Minor policy and technical issues
3.25 Many external stakeholders expressed concern with the current processes for addressing minor policy and technical amendments. This appears to reflect some lack of understanding about the existing TIMS process referred to in Chapter 1. It also seems to stem from issues about the transparency of the process, with external stakeholders not always being clear about the appropriate avenue to raise such issues. In addition, the process was seen by some as being too resource-intensive.
3.26 These factors have resulted in external stakeholders raising issues through several avenues (for example, representation to government, Treasury and the Tax Office), rather than through a single channel. They may also ignore the issue (and be formally non-compliant with the law) or alter their commercial practices (often at some cost to themselves and/or their clients) to fit in with the letter of the tax law even though they consider the intent of the law was being met by previous practice.
3.27 External stakeholders generally regarded non-controversial minor policy issues as covering issues that are consistent with their view of the policy intent of the law, even though the amendment sought is often beyond the government policy approval on which the law is based. In such cases, officials can be reluctant to engage in substantive dialogue with external stakeholders as this could be seen to foreshadow a possible change in government policy prior to officials raising the issue with ministers.
3.28 As is the case more generally, issues were also raised about feedback on the progress of minor policy and technical issues that had been raised through the various avenues.
3.29 Several external stakeholders suggested an annual technical corrections Bill as a way of providing impetus to a regular process for minor policy and technical amendments. It was thought that a regular Bill would be treated as business as usual and non-controversial. This issue is discussed in greater detail in Chapter 4.