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The government has been urged to reconsider placing the burden of proof on the ATO in certain circumstances such as allegations of fraud and evasion, as part of possible tax reform.
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Reform taxpayer’s burden of proof, government told
10 December 2020
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The suggestion by Richard Bobb of Encountr Tax Advisory, presented to standing committee on tax and revenue chair Jason Falinski, builds on a 2015 recommendation by the same committee that called on the government to make changes to the law to place the burden of proof on the Tax Commissioner to prove fraud and evasion after the elapse of a certain period.
The committee’s 2015 report noted that an allegation of fraud and evasion exposed taxpayers to a limitless record-keeping period, disadvantaging them when records outside the statutory record-keeping period no longer exist.
The government at the time shot down the recommendation, arguing that such a reversal of onus would “be counterproductive and encourage sham behaviour by taxpayers associated with fraud and evasion”.
Mr Bobb, who also prepared the paper for The Tax Institute’s disputes resolutions committee, believes it is the right time for the government to reconsider its stance.
He believes a compromise should be on the cards, and argues that the ATO should be made to provide evidence when alleging fraud or evasion.
“If the commissioner is to make a serious allegation that there has been either fraud or evasion, then the commissioner should be put to the test to support the allegations with all the evidence he will be relying on,” Mr Bobb said in the submission.
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“So, while the onus of proof might still be with the taxpayer, the commissioner’s position will not simply be based on a citation of facts and the application of the tax law to those facts; rather it will be a position that is supported with evidence that corroborates the position taken by the commissioner.
“This would drive ATO conduct towards what would be expected in private practice and allow the taxpayer to more fully understand the evidence that has been gathered to support the opinion.”
Another remedy presented to the government includes recomposing the National Fraud or Evasion Advisory Panel to include a non-ATO member, and allowing a taxpayer’s representative to attend the panel meeting to better understand the proceedings.
Mr Bobb also believes a further workaround could include amending the Administrative Decisions (Judicial Review) Act 1977 to allow the opinion that there is fraud or evasion to be tested in the courts before the issuing of an assessment.
“The utility in this approach is that it prevents the taxpayer being traumatised by the issuing of (amended) assessments that may consequently trigger a plethora of related and adverse issues (such as the commencement of debt recovering action, including legal proceedings), the potential to trigger a breach in a banking covenant and/or an event of insolvency, while Part IVC proceedings are still on foot,” he said.
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