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The IPA’s senior tax adviser has hit out at recent comments made by ATO second commissioner Geoff Leeper regarding an expected $500 million dollar reduction in fee income for accountants.
IPA slams the ATO's income shortfall claims
03 December 2014
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6 minute read
The institute's Tony Greco rebuked Mr Leeper for his comments on Standard Business Reporting (SBR) and the technology’s effect on the accounting industry in which Mr Leeper said much of an expected $500 million red-tape reduction saving from SBR would come from professional fees.
Mr Greco dismissed Mr Leeper's claims saying the technology is nowhere near capable of making such an impact.
“I don’t think he understands some of the practicalities of the current restrictions,” said Mr Greco.
“Software packages just can’t - even with a standard chart of accounts - they can’t automatically produce a tax return, especially for a business client,” he said.
Mr Greco said the current taxation legislation and current accounting framework differ too greatly for a standard chart of accounts to be feasible.
“There is a thing called the Tax Act that unfortunately a lot of things have to be adjusted for, and that all happens off book. There is no software system that can handle all the ins and outs of the Tax Act and produce a return with minimal intervention. It’s just not there,” Mr Greco said.
“It’s just not possible, even with SBR, that you can generate that seamless result, and if you ask privately people in the ATO they will agree that Geoff Leeper's comments are bullish and a bit visionary and don’t take into account the reality of the situation.”
Mr Greco said major legislative reform would be needed to achieve the type of streamlined processes Mr Leeper has talked about.
“You’d need to make it possible by re-engineering the Tax Act,” he said.
“I think the tax office has to recognise some of the practical difficulties with some of the stuff that they’re stating publicly and I'd be surprised if Geoff Leeper where to make the same comments going forward - that’s how strongly I feel. His comments are just not realistic."
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- <p>AND THEN THERE IS THE ATTITUDE OF THE BUSINESSES..<br>Seriously, where is the most important part of this discussion about how many businesses are actually going to allow their data just to be transferred to the ATO on a real time basis - or in fact on any basis that gives the ATO more information than businesses are compelled to give?</p><p>IT WONT HAPPEN!! Seriously? Does anyone expect businesses to willy-nilly hand over information to the ATO... And without that willingness the whole discussion above is wasted.<br>And that such a huge data base would of itself make a amazing target for commercial hackers to steal & sell the info. And can organisations seriously believe ATO is capable of developing the proper safeguards against data theft... given the unbelievably poor development and disasters of their computer systems over the last several years? <br>I hope that Mr Leeper's salary is accordingly low in comparison to his misguided comments. Maybe he needs to get a job in commerce to find out about the real world.<br>Reading this is a couple wasted hours I wont get back.</p>0
- <p>A very good perspective Matthew. The regulator's driver is how to do more with less resources. Hence the need for utilising big data concepts to enable compliance automation. Whether it is successful is a very good question.</p><p>I'm the last to say that compliance services will die. It's been predicted for years and never happened. We have very complex regulation in this country and it is hard to see compliance being completely automated. Yet, it is interesting to see the ATO's view that perhaps it can.</p>0
- <p>Thought #1: Does the ATO actually have authority to only prosecute those outside of the bell curve?</p><p>Thought #2: Doesn't bell curve theory mean that all businesses should be the same?<br>Doesn't it mean that the entrepreneurial company that does things differently and has a different cost structure to others, maybe even makes extraordinary profit will have more tax compliance cost simply because they are better or different? How can this be a good perpsective?</p><p>Doesn't this theory mean that business will strive to be average? Is either of these the the right message for business?</p><p>Thought #3: A part of the perspective is that business systems exist so that the business can do business. The stock has to be bought, the wages have to be paid, The sales have to happen and be recorded and the money collected. Datafeeds verify that this has happened, they dont make it happen.</p><p>It also appears that businesses dont want to spend their time understanding what the ATO wants and that businesses will continue to engage advisors to assist them.</p><p>Thought #4: If we play with the theory "will clients be willing to pay the cost to pick the errors up if the ATO doesn't care" I think that 90% - 95% that willingly strive to comply now, might just have a change of heart. But I also think the theory only works if the ATO issues certainty statements about the level of "non-audit". Small business will need certainty that the ATO considers what they have done is accepted. They currently pay advisors to provide that level of certainty.</p><p>I still expect that if technology is going to move and "remove" the need for advisors to business to help them comply then the ATO are going to receive a mammoth amount of data that is just so wrong. Speak to the accountants and bookkeepers helping small business use the best technology and understand what they do!</p>0
- <p>As the person who interviewed Geoff Leeper at ATSA, there are some points to be considered:</p><p>1. The ATO is focused on revenue collection not necessarily data accuracy. We all accept that clients will make posting errors and there will be errors in the ledgers as processed by the clients. The question is though, from the ATO's perspective, "Does it matter?" The other side of Mr Leepers comments related to the use of Big Data, the data inside the ATOs databases. Mr Leeper is understandably reticent to discuss this issue however consider this.</p><p>The ATO has a database of the business performance of every business in Australia. They can compare that performance to previous years and to other businesses in the same industry. Where I think we're heading is that the ATO will rely upon these big data technologies to highlight those businesses where the data may be materially inaccurate or results are outside the bell curve. Those businesses will be subject to scrutiny while the others are passed through. Data matching at the ATO will also be part of their armory. Therefore, even though it's acknowledged that there will be errors the question is will the ATO care if the revenue base is maintained and will clients be willing to pay the cost to pick the errors up if the ATO doesn't care. Perhaps they might as they may want to avoid unwanted scrutiny but you never know. If nothing else they may not be willing to pay the same price. Perhaps the appropriate response is that accountants need the tools to access to the same big data technologies to uncover clients outside the bell curve. Interestingly, these databases are rapidly being build by the cloud accounting providers,</p><p>2. The second point relates to the generation of the tax return directly from the accounting system. I suggest one shouldn't be too sure that this won't be possible sooner than you think. Look at the SMSF space, Class, BGL, SuperMate have been generating the tax return automatically for years. Why is that possible? It's because each transaction also carries with it the tax consequences of that transaction. So when the year is finished, the tax return can be generated automatically as the data to do so is already there.</p><p>None of the small business software providers yet carry the tax consequences of the transaction with the transaction. Surely they will at some stage. Automatic tax returns will happen then question is how far away will it be.</p><p>3. Automatic datafeeds are increasing data accuracy (and reducing processing times). We are surely going to see more and more connectivity between businesses with transactions moving between different businesses accounting systems. The result will be a significant increase in processing accuracy.</p><p>4. Nobody is suggesting that automation will happen for all businesses as some are just to complex. The point that Mr Leeper is making is that ATO compliance automation may well be possible for a large number of Australia's small businesses.</p><p>Fire at will !</p>0
- <p>I fully support Tony's comments. <br>In some future execution of SBR into businesses accounting packages transactions may be coded in a way that flows through into a box predetermined on a tax form. The software may even have great analysis and checking tools.</p><p>BUT: As is evidenced by all practitioners (Tax Agents, BAS Agents, Bookkeepers, Accountants) on a daily basis, for every business; people think differently and process in interesting ways. We spend our lives fixing data allocation and interpreting how the law applies to transactions.</p><p> The tax, GST, employment law is just NOT simple and business people want to do business not understand SBR coding that suits the government. Tony is correct it would take MAJOR legislative overhaul and MAJOR tax concept changes to achieve the result that is being dreamed of.</p><p>If the view is that there is $500m less fees in the professional services fees of accountants due to SBR alone, I expect that is replaced by $500m more wages in the ATO sorting out what on earth is in the data that they have been sent. Because the data will not reflect how a business should be taxed under current law.</p><p>The Law would need to change drastically to simplify taxes on business in order to achieve this type of red tape reduction.</p><p>Recoding a businesses chart of accounts into the tax forms is not a new function of software - some software has allowed tagging for tax purposes for at least 15 years.</p><p>We fully support the development of SBR and automation of manual tasks. We support the simplification of laws. It is a long journey. We encourage the ATO to computerise business interactions with the ATO, we look forward to improved contemporary digital interactions. We perceive there is still much work to do at the ATO end of updating their computerisation.</p><p>oh for a simpler business environment.</p>0
