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The draft legislation leaves many questions unanswered and insufficient time for consultation, CA ANZ says.
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Compliance burden ‘raises doubts about scale’ of PwC response
21 September 2023
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11 minute read
Tighter regulation and tougher penalties in the legislative response to the PwC scandal will leave many tax professionals asking if the government has over-reacted, CA ANZ says.
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The body said the draft legislation, released yesterday, also left unanswered questions about the nature of closed-door government consultations, how the ATO and TPB would avoid regulatory overlap, and the application of revised secrecy laws.
CA ANZ group executive advocacy and international development Simon Grant also criticised Canberra’s lack of “appetite for considered input” with just two weeks allowed for submissions on the drafts.
The extent of the proposals, which include harsher promoter rules and penalties among a raft of changes, would be a major concern Mr Grant said.
“Many in the tax profession – particularly those in small and medium sized practices – will question whether the published proposals and those foreshadowed represent a proportionate response in the context of the broader tax system,” he said.
“The increased regulatory burden and penalty exposure, associated compliance costs, professional indemnity insurance ramifications, and the flow-on impact for clients are just some of the concerns likely to be raised.”
He said the government had taken advantage of the PwC scandal to fix some issues in the tax system but practical and ethical questions remained.
“While the PwC matter has undoubtedly been the catalyst for some of the measures (particularly those relating to confidential discussions), it is clear the government has also taken the opportunity to address perceived shortcomings in tax administration (eg, inter-agency collaboration) and procurement procedures.”
“The proposals rightly increase the sanctions for breaching confidentiality agreements, but this must be moderated by steps to maintain and support frank consultations with private sector subject matter experts.”
“Such dialogue remains vital to the development of well-drafted, workable legislation and related ATO guidance products.”
“Also yet to be debated is the broader question: Which types of government consultation are appropriate to conduct behind closed doors in the first place?”
He said the drafts enabled a greater role for CA ANZ and other professional bodies without corresponding protections.
“Changes to current secrecy laws will also allow tax regulators to disclose reasonably suspected misconduct to professional associations or professional disciplinary bodies such as CA ANZ to enable earlier investigation and disciplinary action,” Mr Grant said. “This is welcome and aligns with recommendations made by CA ANZ to the James Review [into the TPB].
“It will raise important issues for members of bodies such as CA ANZ and the operation of the associations’ professional conduct committees.”
“Notably, however, the proposed secrecy law exceptions will need to be extended to also clearly cover professional body staff who receive and handle the information in undertaking those investigations.”
Extending the powers of the TPB was a positive move, but also raised questions over implementation.
“Initiatives such as the enhanced public register maintained by the TPB, which will publish a greater range of information about tax agent misconduct, are likely to enhance consumer protection and usability by the community and the tax profession,” he said.
“It should also play an important role in the successful implementation of other reforms such as the proposed disqualified entities measure with which tax practices will have to comply.”
“The proposed framework also raises important practical questions for regulators, such as whether the TPB will be adequately resourced to efficiently, fairly and transparently perform the important tasks allocated to it.”
“Currently, both the ATO and the TPB actively monitor tax agents. A revamped, published strategy explaining how the two regulators will avoid duplication and streamline their interactions with busy tax professionals should be fast-tracked.” “The risk of over-governance must be front of mind for those officials charged with implementing and managing the government’s proposals.”
And Mr Grant said the submission window of two weeks was simply too short and suggested an unwillingness to properly consult.
“This does not allow adequate time for professional associations to engage with their members. It is unfortunate as it implies the government has little appetite for considered input. Representations will be made to the Treasurer’s office for an extended consultation period.”
The government expects introduce much of the proposed legislation to parliament this year.
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