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A reform package aimed at improving the integrity of tax system and profession has been welcomed by the Tax Institute and Law Council of Australia.
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Government action on tax adviser misconduct ‘a positive step’
08 August 2023
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A significant package of reforms which will increase powers for regulators, expand the penalty promotor laws and review the regulations that apply to large consulting, accounting and auditing firms is a positive development, the Tax Institute and Law Council of Australia have said.
The Albanese government announced the reforms on Sunday in response to the recent PwC tax leaks scandal and will aim to introduce legislation this year.
Treasurer Jim Chalmers said the reforms would “rebuild people’s faith in the systems and structures designed to keep Australia’s tax system and capital markets strong” with the PwC scandal “exposing severe shortcomings in regulatory frameworks”.
“By increasing penalties, giving regulators stronger teeth to investigate and prosecute perpetrators and boosting transparency, collaboration and coordination within government, we are acting to restore public confidence and help prevent this from happening again,” said Dr Chalmers in a recent statement.
“We’re also cracking down on the scourge of multinational tax avoidance and making sure multinationals pay their fair share of tax in Australia.”
The proposed measures will expand the tax promoter penalty laws, making it easier for the ATO to apply to advisers and firms who promote tax avoidance. The maximum penalty for advisers and firms who promote tax exploitation schemes will increase from $7.8 million to over $780 million.
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The new measures will remove limitations in the tax secrecy laws that were a barrier to regulators acting in response to PwC’s breach of confidence.
They will also enable the ATO and Tax Practitioners Board to refer ethical misconduct by advisers (including but not limited to confidentiality breaches) to professional associations for disciplinary action and protect whistleblowers when they provide the Tax Practitioners Board with evidence of tax agent misconduct.
The government will also improve the Tax Practitioners Board’s public register of practitioners, so that people have more transparency over agent and firm misconduct.
The Tax Institute said the proposed reforms, which provide greater legislative mechanisms for government agencies to address misconduct and deliberate ethical breaches, “can only be a step the right direction”.
“Members of The Tax Institute are subject to our by-laws, and increased collaboration with the Tax Practitioner’s Board (TPB) to address issues and concerns with the behaviour of members is a positive step for the integrity of our system,” the Tax Institute said.
“Improved regulatory framework will also enable greater consumer confidence in all tax agents who do consistently act in accordance with the Code of Conduct.”
Tax Institute general manager of tax policy and advocacy Scott Treatt said the Tax Institute was pleased to see the government’s approach to continued consultation as the reform package would need to be implemented with appropriate consultation, transparency and scrutiny.
“For example, the implementation of the remainder of recommendations from the independent review of the TPB, which have a number of intricacies, must be handled with appropriate care,” he said.
“The Tax Institute represents tax practitioners from across the profession. We will be working actively through the consultation process to help ensure that the many positive recommendations put forward by the independent review of the TPB are appropriately implemented without unintended consequences.
“In recent times, many industries have faced the need to lift and improve standards. We are happy to play our part in ensuring our community is built on robust and fair systems, as are our members. We are here to support our members in upholding high ethical standards.”
The Law Council has also welcomed the government’s announcement of reforms aimed at strengthening the integrity of the tax system.
“We look forward to engaging with the Australian Government during its consultation on these proposed reforms, having regard to the views of the legal profession,” Law Council of Australia President Luke Murphy said.
“In particular, the Law Council supports the Government's public interest objective in ensuring that all members of a profession adhere to their professional and ethical responsibilities,” said Mr Murphy.
The Law Council said it supports amendments to the tax secrecy provisions to ensure that if the Australian Tax Office or Tax Practitioners Board have concerns about the professional conduct of legal practitioners, those agencies will be able to raise those matters directly with state and territory legal profession regulators and have them dealt with under the comprehensive legal profession complaints and disciplinary arrangements.
It also said it supports legal profession disciplinary referrals where a legal practitioner breaches a personal confidentiality undertaking given to the government.
“These existing disciplinary arrangements, operating across eight Australian jurisdictions, are strong and effective,” the Law Council said.
“We also look forward to working closely with Treasury and the Attorney-General’s Department regarding their joint review of the use of client legal privilege in Commonwealth investigations,” Mr Murphy said.
Chartered Accountants ANZ said it welcomed the opportunity to engage with the Albanese Government to ensure Australia’s regulatory frameworks work in a way that delivers the best outcomes for Australian taxpayers and our profession.
“A proposal to allow the ATO and Tax Practitioners Board to refer ethical misconduct by advisers to professional associations for disciplinary action is an important step,” the accounting body said.
“CA ANZ has confidence in our conduct and disciplinary framework and we have already taken steps to strengthen it through our Professional Conduct Framework Review. Many of its recommendations, including steps to extend our framework to respond more effectively to firm events, will be put to a member vote later this year.”
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