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Senior advocate Robyn Jacobson says it is “deeply concerning” to have to rely on regulator guidance to ensure the government’s changes are implemented sensibly.
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TPB’s ‘pragmatic’ code stance a Band-Aid solution: Tax Institute
18 July 2024
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The TPB’s promise to implement changes to the code of conduct “pragmatically” is welcome but only a “Band-Aid” solution in keeping unintended consequences at bay, the Tax Institute says.
The warning comes after TPB chairman Peter de Cure on Tuesday reassured practitioners that guidance would be forthcoming to clarify and urged them not to feed into “unhelpful scaremongering” over the provisions.
“I'd really like to assure people that the legislative instrument and the requirements in there are consistent with the existing code and will be implemented in a pragmatic and practical fashion,” de Cure told Accountants Daily.
But the Tax Institute said it was “concerned” by the regime’s impending 1 August start date in the absence of guidance for controversial provisions that affected practitioners’ client relationships and privacy.
“The Tax Institute welcomes the TPB’s indication that it will take a ‘pragmatic and practical’ approach in implementing the new rules,” senior advocate Robyn Jacobson said.
“However, the TPB needs to finely balance the implementation and enforcement of the new law with phased education and awareness to support practitioners.”
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"Assurances from the TPB must be supported by formal written guidance."
Jacobson said the TPB’s stance was also a “Band-Aid fix” and that it was “not good enough” to have to rely on a regulator to read down the government’s law for it to be practically and sensibly implemented.
“It is deeply concerning that the letter of the law can be drafted with so wide a scope that the regulator is required to limit that scope through pragmatic guidance which does not carry the weight of law,” she said.
Unintended consequences
The changes come from a legislative instrument made by Assistant Treasurer Stephen Jones under section 30-12 of the Tax Agent Services Act 2009.
Jacobson pointed to an obligation under paragraph 15(2)(c) that was introduced without industry consultation and would force practitioners to report clients to the ATO or the TPB if they refused to correct materially false statements within a reasonable time.
While de Cure said the industry’s concerns around the section breaching confidentiality obligations were “clearly not correct” because it imposed a positive legal duty on practitioners, Jacobson said it went against the tax system’s long-established design that allowed for honest mistakes, voluntary disclosures and amendments.
“Introducing or proceeding with law, where there hasn't been a due process of consultation, always carries the risk of unintended consequences,” Jacobson said.
“A positive obligation to report the client, even in circumstances where it is intended to correct a false, incorrect or misleading statement, is concerning,” she said.
“The new code obligations raise the intolerance bar [for mistakes] to an unacceptably high level.”
The new obligation also had the potential to undermine practitioners’ relationships with their clients, and clients’ relationship with the tax system.
“The relationship of trust between a practitioner and client is foundational and fundamental to the agent being able to represent their clients in dealing with their tax affairs,” she said.
“More broadly, the relationship is important if we're wanting to engage the community to comply with their tax obligations. We don't want to see increasing numbers of taxpayers dropping away from engaging tax agents, which carries with it the risk of increased errors and to the collection of tax revenue.”
Chartered accountant Joe Kaleb also told Accountants Daily he feared the new obligation would push taxpayers away from trusting advisers.
“The obligation overrides the relationship we have with our clients,” he said. “It’s also an unnecessary burden on us that's going to ultimately impact on our practices, we might lose a client as a result. Who wants to be dobbed in to the ATO?”
“TPB has said ‘we're going to issue guidance’, but we've seen already with the dob-in provisions that guidance that they've issued hasn't gone far enough. And that's the issue – it’s created so much uncertainty.”
Another concern was the requirement for practitioners to disclose “any” matter that might significantly influence a client’s decision to engage a practitioner to provide tax services.
Jacobson said the scope of this wording was so “impossibly broad” that the TPB would need to read it down to avoid disclosures of personal matters infringing on privacy rights.
“Practitioners should not be required to disclose matters beyond the scope of whether they are a fit and proper person to provide tax agent services to their clients, such as the state of their mental health.”
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