The government has released several reports prepared by the Inspector-General of Taxation, Mr Ali Noroozi, into the ATO's compliance approach to individual taxpayers.
The Tax Inspector found that data-matching was generally positively received where the ATO uses it to assist individuals. However, he found that stakeholders were concerned that the data used by the ATO could be inaccurate and not sufficiently vetted before comparisons were made with taxpayer-reported information.
In relation to the ATO delaying tax returns to check refund claims, the Tax Inspector recommended that the ATO improve its processes as well as communication with taxpayers. Among other things,
Mr Noroozi thought the ATO could better differentiate potentially fraudulent claims from mere mistakes. The ATO could also improve the time taken to review cases, and provide clearer reasons for any adjustments made.
The Assistant Treasurer has released three reports from the Inspector-General of Taxation (IGT), Mr Ali Noroozi. They cover the following:
Sources: Inspector-General of Taxation, "Review into the Australian Taxation Office's compliance approach to individual taxpayers - use of data matching", www.igt.gov.au/content/reports/ATO_data_matching/
- The ATO's compliance approach to individual taxpayers - use of data-matching. The IGT said data-matching was generally positively received where the ATO uses it to assist taxpayers, such as in pre-filling their income tax returns. However, he said stakeholders were concerned that the data used by the ATO was inaccurate and not sufficiently "cleansed" and "validated" before comparison was made with taxpayer-reported information. Tax agents were concerned about additional time and cost in handling data-matching queries. The IGT identified areas for improvement in relation to the ATO's management of data-matching projects, including the need to formalise processes, undertake evaluations of certain projects and re-distribute resources to maximise the benefits. The IGT made 13 recommendations, including: that the ATO actively raise awareness of the administration reversals process; that the ATO improve call centre scripting; that the ATO enhance its reporting capability; and that the ATO minimise the time between data being received and when it may be compared to taxpayer information. The ATO has agreed with all of the recommendations but with a qualification in respect of recommendation 2.2 concerning remission of shortfall interest charge (SIC) - the ATO says that, given the large volume of transactions undertaken through an automated process, consideration of the remission of the SIC will occur as requested by the taxpayer after issue of the amended assessment.
- The ATO's compliance approach to individual taxpayers - delayed refunds - income tax refund integrity program (ITRIP). The IGT said that in 2011-2012, the ATO's ITRIP system stopped 109,000 returns rather than the expected 33,000 returns. As a result, the IGT said a significant number of taxpayers experienced extended delays, sometimes of many months following lodgment. While he acknowledged the ATO's improvements to the ITRIP, he made 13 recommendations aimed at enhancing the ATO's processes as well as communication and engagement with taxpayers and tax agents. These recommendations include that the ATO: (i) better differentiate potentially fraudulent claims from mere mistakes; (ii) improve the time taken to review cases, and provide clearer reasons for any adjustments made; (iii) adopt a differentiated approach to expedited hardship applications; and (iv) streamline its governance processes to respond to unforeseen workloads. The ATO has agreed in full with 12 recommendations and agreed in principle with one (see below).
- The IGT recommended that as part of the ATO's work to improve communication of reasons for delays in processing income tax returns, including through the use of reason codes, the ATO: (i) better distinguish between "potential fraud" and "overstated claims" cases; (ii) provide greater specificity as to why certain tax returns have been held for review, such as which labels or which claims the ATO is seeking to address; and (iii) implement a mechanism for taxpayers and their agents to easily obtain more information where specific reasons cannot be provided in correspondence. The ATO says it agrees in principle with this recommendation. It says that changes to its IT systems and business processes would be required to implement this recommendation in relation to updated reason codes. The ATO says in some cases, these requirements are quite complex. This work will be subject to prioritisation on the Enterprise Solutions and Technology Forward Program of Work, the ATO says.
- Aspects of the ATO's use of compliance risk assessment tools. The IGT said stakeholders had broadly supported the ATO's risk-based approach to audits but had also raised some concerns. "Ultimately, the effectiveness of risk assessment tools can only be reliably evaluated if evidence-based metrics are used. Such metrics may include results from random audits, although the ATO does not currently conduct them", the IGT said. He said he had recommended that the "transparency" and "willing participation" of taxpayers should be objectively assessed in terms of the adequacy and accuracy of information available to the ATO. Overall, the report made 16 recommendations, all of which have been agreed to by the ATO.
default.asp; "Review into the Australian Taxation Office's compliance approach to individual taxpayers - income tax refund integrity program", www.igt.gov.au/content/reports/ATO_income_integrity/default.asp; and "Review into aspects of the Australian Taxation Office's use of compliance risk assessment tools", www.igt.gov.au/content/reports/risk_assessment/default.asp