Australia's Future Tax System

Final Report: Detailed Analysis

Chapter G: Institutions, governance and administration

G1. A responsive and accountable tax system

Key points

Australia needs modern and sophisticated tax policy and administration processes that can deliver a tax system to meet the demands of the 21st century. The tax system will face a range of challenges over the next few decades that will affect how tax policies are developed and administered. It is imperative that the tax system can meet these challenges and respond to the needs of the community.

The operation of Australia's tax system is fundamentally sound and there is general confidence in the system. The level of voluntary compliance is high, reflecting positive perceptions about the fairness and integrity of the system and how it is administered. Many of the current institutional arrangements will continue to perform well. However, a number of changes would further the system's ability to meet future challenges.

The nature of any tax system means there will always be some tension between taxpayers and tax authorities. The tax law is complex and there are inevitable uncertainties in its development and application to complex commercial arrangements or in novel situations. This can create tension about the authorities' interpretation of the law and efforts to improve certainty through amendments to the law. A more transparent and accountable system has the potential to ease these concerns.

We should further develop open and inclusive processes by which the community can raise issues and have them considered by government. Building on its existing strengths, the Board of Taxation could act as a 'circuit breaker' in the system — to quickly identify problems in the system, particularly those that arise at the boundary between policy and administration.

An advisory board would contribute further external views into the management of the Australian Taxation Office (ATO). These external views will help the ATO meet the considerable demands of the coming decades. Other changes would improve the effectiveness of external scrutiny of the system.