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Forging ahead with its response to the PwC tax scandal, the government proposes introducing a wider range of civil and criminal penalties, suspension powers and administrative sanctions for the regulator.
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Canberra scales up TPB sanction powers, penalties
12 December 2023
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The TPB will be able to pursue tax agents who break the code of conduct with beefed-up civil and criminal penalties in an overhaul of its sanction powers proposed by a consultation paper released on Sunday.
The paper, Enhancing the Tax Practitioner Board’s sanctions regime, would also see the government expand the board’s suspension powers and add infringement notices and enforceable voluntary undertakings powers to its arsenal.
Assistant Treasurer Stephen Jones, releasing the paper along with draft amendments to the Tax Agent Services Act, said the proposals delivered on the government’s promise to oversee the “biggest crackdown on tax adviser misconduct” in history following the PwC tax scandal.
“While the vast majority of tax agents do the right thing, the PwC tax leaks scandal has shown that the current regulatory framework is insufficient to respond when misconduct occurs,” he said.
“The Albanese government’s plan to strengthen the TPB’s sanctions regime would improve deterrence and increase discipline for those who do the wrong thing.”
The TPB’s powers are currently limited to issuing low-level sanctions (such as written cautions and further education) and high-level sanctions (including the suspension or termination of registration and civil penalties), “but nothing between these two”, the consultation paper said.
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It said the TPB also had limited avenues to seek criminal penalties, available only when individuals refused or failed to comply with a taxation law or made false or misleading statements to a taxation officer.
“Stronger sanctions are necessary to deter egregious behaviour and enable the TPB to have a full range of graduated responses,” it said. “The current sanction regime does not allow the TPB to act quickly in certain circumstances where urgent action is required.”
Under the proposed changes, the TPB would be able to seek criminal penalties for unregistered practitioners deemed as “serious contraveners”, such as those who repeatedly provided tax agent services while unregistered or engaged in intentional wrongdoing.
The government also proposed expanding the circumstances when the TPB could apply to the Federal Court for civil penalties, as well as increasing the existing penalties available to “respond to emerging threats to the integrity of the tax system in an agile and proportionate manner”.
Penalties would also be available for a wider range of behaviour, such as acting dishonestly, failing to avoid conflicts of interest or keeping client information confidential, or providing services incompetently.
Maximum civil penalties for individuals would increase tenfold to $782,500.
The government also proposed increasing the penalties applied to firms that had directors or partners breaching the code of conduct from $391,250 to the greater of $15.7 million or 10 per cent of aggregated turnover, with a $782.5 million cap.
Additionally, the TPB’s suspension powers would be expanded to include “contingent suspensions”, deregistering tax practitioners until they remedied their breach instead of setting a suspension end date, and “interim suspensions” to allow it to respond immediately to breaches without waiting for an investigation to be finalised.
Also included in the consultation paper were proposals to add infringement notice provisions and enforceable voluntary undertakings to the TPB’s powers.
The government said the board would have to publish details of any sanctions it imposed on its public register to reinforce the deterrent effect of the sanctions and provide the community with “greater transparency and confidence in the tax system”.
Consultation on the proposed changes would be open until January 21 next year.
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