The Board of Taxation, in conjunction with Treasury, was tasked to review international consultation processes with a view to identifying any improvements to the Australian tax consultation system, especially in respect of non-controversial minor policy or technical amendments, and report to government.
Existing arrangements, announced by the Government in May 2002, are consistent with international practice, generally functioning well and have community support. As a result, the review has made recommendations for evolutionary change to the tax consultation system, within the broad framework of the existing arrangements.
The high-level objective of the tax consultation system is to improve tax system outcomes by ensuring government makes decisions on taxation matters fully informed about the range of options and the benefits, costs and risks associated with those options. It is also important that the resources devoted to consultation are used effectively and efficiently.
Consultation takes place in an environment where government is responsible for policy decisions. There is not always unanimity of view amongst stakeholders and it may not always be appropriate to consult on particular measures (for example, certain anti-avoidance issues) or it may not occur in some cases (for example, election announcements).
Consultation can occur at different points as a proposal moves from the policy development stage to the implementation stage. Although consultation may not take place prior to the policy decision (including for the reasons outlined above), it can provide valuable input on the most effective way to implement government’s policy intent. In particular, consultation can assist in minimising compliance and administration costs and avoiding unintended consequences. Consultation at this stage can be especially relevant where implementation of a government policy decision requires consideration of complex legislative design issues.
Consultation can be conducted in a variety of ways. Whatever the approach, the consultation process should involve early engagement between officials and relevant external stakeholders and/or experts.
Sustainable, effective and efficient consultation requires a very clear distinction between consultation and any other activities external stakeholders undertake, for example lobbying or advocacy on policy matters.
Several factors make consultation on tax matters more challenging in Australia than in some other countries. In particular, there are the large number of peak bodies representing external stakeholders, little interchange of personnel between the public and private sectors, a high level of public and media interest in taxation matters and a tendency by some stakeholders to focus on differences of view rather than areas of agreement. While unlikely to change quickly, some of these factors can be influenced over time.
The review has identified four foundations for sustainable community consultation (clear scope and objectives, identifying stakeholders, transparency of information and process, and open and timely feedback), and four elements that support a sustainable process (maintaining confidentiality where required, early access and input, appropriate resources, and sufficient time).
The recommendations outlined below and explained in more detail in Chapter 4 identify opportunities for all of the key stakeholders to improve the effectiveness and efficiency of the tax consultation arrangements and ultimately improve tax system outcomes.
The recommendations would lead to an environment where:
- government, being responsible for policy decisions, clearly outlines its policy intent, and provides the opportunity and resources for early consultation wherever possible;
- officials use the opportunity to engage proactively with external sources of advice, provide open and timely feedback, and manage the consultation process efficiently;
- external stakeholders and experts commit to seek the most effective implementation options that are consistent with government policy intent, engage in consultation effectively and efficiently, maintain confidentiality where required, and clearly separate consultation from activities that may conflict, such as lobbying; and
- the Board of Taxation takes a more proactive approach, within its Charter, to seeking better outcomes from the consultation process through facilitation and monitoring of consultation.
All stakeholders see higher levels of trust as important to improving the operation of the tax consultation system. However, higher levels of trust cannot be imposed and will only come, over time, from all participants committing to seeking tax system outcomes that will improve the wellbeing of Australia when engaging in the consultation process. Discussions with key stakeholders indicate an environment of openness and trust is attainable.
External stakeholders should develop an environment, structures and processes for consultation that support tax system outcomes that are in the best interests of Australia.
The Board of Taxation should take a proactive approach to encouraging continuous improvement in the tax consultation system by liaising with stakeholders about possible improvements to consultation arrangements consistent with the Government’s framework.
Government should continue to ensure that policy intent is clearly described in initial consultation documents.
Government should continue to specify the policy intent at a high level wherever possible in order to enable consideration of a broad range of implementation options.
When appropriate, external stakeholders should be used to assist with clarifying how they might be best able to input into the consultation.
Government, officials and external stakeholders should place more emphasis on ensuring that relevant skills and experience are available in consultation processes by identifying the:
- expertise, including any paid external advisers, commercial experience and officials, required for a successful consultation; and
- external stakeholders who are best able to contribute to the consultation process. Expert external advice can be sought on who should be consulted.
External stakeholders should continue to work towards forming into a single group or at least fewer groups for the purposes of responding to consultation proposals, to make the consultation process less resource-intensive and to improve the opportunity to build long-standing relationships and trust between stakeholders.
Government, officials and external stakeholders should seek improved engagement with sectors currently under-represented in consultations, including considering mechanisms for assistance with resourcing issues wherever possible.
Treasury should as far as possible use technology-based tools to improve the provision of information and facilitate dialogue, thereby assisting transparency and efficiency.
Treasury should where possible provide appropriate feedback more consistently to participants in consultation processes by:
- acknowledging contributions as they are received;
- providing written summaries of points raised in discussions to participants to check that they have been heard correctly;
- keeping participants in consultations informed of developments relating to the process of consultation; and
- advising participants when decisions are announced or legislation is introduced. On some occasions, this may also provide an opportunity to give additional feedback that could not be given earlier.
Government should use public consultation processes for significant measures wherever appropriate to ensure that the community has maximum opportunity to participate in consultation processes.
Where consultations are confidential, all participants should respect that confidentiality. Where appropriate, confidentiality deeds should continue to be used.
The ground rules for consultations should be established clearly at the start of each consultation, indicating the behaviour expected of all stakeholders and the implications of any departure from the rules.
Government should provide external stakeholders with access and input to the consultation process in developing detail in relation to policy decisions, unless there are compelling reasons for not doing so (including for anti-avoidance measures). Government should also consider whether consultation may be appropriate prior to the policy decision.
Government, officials and external participants should ensure that consultation processes are appropriately resourced by involving resources and expertise from both the public and private sector. All stakeholders should also be aware of the value of input in consultation processes from those with commercial experience. Examples of how this could be developed include through secondments between the public and private sector and hiring in such expertise for specific projects. It will be important to ensure that there is appropriate funding for any such arrangements.
Treasury and the Tax Office should ensure their respective roles are clear to external stakeholders during community consultation to minimise demands on the resources of external stakeholders.
Treasury, the Tax Office and external stakeholders should as far as possible ensure that there is continuity of key staff in particular consultation processes.
Government should allow at least a six-week period for external stakeholders to provide input into consultations on significant measures, to ensure the community has maximum opportunity to participate, unless government considers the resulting delay in introducing legislation would outweigh the benefits of allowing this time.
Treasury and the Tax Office should proceed with the proposed pilot of the Tax Issues Entry System for identifying/analysing/prioritising/providing feedback on minor tax system issues requiring administrative change or legislative amendment, recognising that the resources to address these issues have to be considered in conjunction with other legislative and administrative priorities. The Board should review the operation of the system after 12 months.