Louise Pratt (WA, Australian Labor Party) Share this | Hansard source

I rise to speak on the Tax Agent Services Bill 2008. I was pleased to be a member of the Senate Standing Committee on Economics, which conducted an inquiry into this legislation. It was a terrific experience to hear from the many organisations eager to share their views on how best to give greater integrity to our tax system. Ironically, this bill had its genesis under the previous Labor government way back in 1992. At that time a working party was put together to review professional standards and regulatory arrangements for tax agents. The Standing Committee on Economics was informed by Treasury that, since 1943, tax agents have been subject to regulation under the Income Tax Assessment Act 1936. So, to say that a review and revamp of this legislation is a long time coming is something of an understatement.

I do not think the Howard government showed much interest in making the tax system fairer. Indeed, the previous government sat on their hands for a long time in getting this new framework together. Discussions were, in the words of the National Institute of Accountants, ‘protracted’. Fairness is the centre of this Rudd government bill. We have sought to get it before parliament in as timely a manner as possible. This government is active in making sure that everyone knows what is expected of them and committed to maximising transparency and accountability in the tax system, securing the quality of the service people receive.

As we all know from experience, tax time can be quite stressful and tax agents are critical to the effective operation of the tax system. We want to be confident in the work undertaken on our behalf. Therefore, the reworking of the legislation governing tax agent services aims to improve and modernise the framework that regulates the work of these critical participants in the administration of our tax system. Tax agents work very hard under outmoded regulations. So, not surprisingly, there is a significant level of eagerness on the part of the tax agents to see this bill become law. As Ms Vicky Stylianou of the National Institute of Accountants told the Standing Committee on Economics inquiry into this bill:

Our intention is to see the new regime instituted and established as soon as possible.

The Taxation Institute of Australia wrote of the importance of clear parameters for professionals and protection for consumers. They too want this bill now. The Institute of Chartered Accountants, representing nearly 48,000 individuals, also called for the implementation of this legislation. The institute remains:

…strongly committed to the earliest possible introduction of a national regime for the regulation of tax agents and BAS agents.

But this bill is also part of a broader reform project. It is yet another example of the Rudd government’s commitment to improving the integrity of our tax system. It modernises the way in which tax agents are regulated to ensure that this fits with a modern and coherent tax environment. In keeping with current community expectations, this bill will provide robust protection to consumers. The government recognises that reasonable safeguards for consumers are also in the interests of tax agents. Tax agents too will benefit from the greater clarity this bill will provide about their role and responsibility—so that they can have confidence that they are providing services in a manner which conforms with the regulatory environment for their industry. It was with some concern that I listened to the evidence where witnesses spoke with some honesty about work being undertaken by some unregistered agents, where people should not have an expectation or confidence that their returns have been calculated correctly. There is really no recourse for people in the current environment, other than their individual responsibility. As the Institute of Chartered Accountants put it:

We are keen to ensure that a robust regulatory regime is established and implemented efficiently so as to place the tax profession in a healthy and strong position for generations to come.

I want to turn briefly to some of the specific reforms in this bill which will help to modernise our tax system and return integrity and fairness to it. Firstly, the bill establishes a national tax practitioners board, which will make sure that we have a national and consistent approach to regulation and will replace the confusing and inconsistent system of state based boards. As the Commonwealth Ombudsman, responsible for taxation complaints, Professor John McMillan, pointed out in a submission to the inquiry, the various state based tax agents boards:

… adopt different administrative practices, potentially resulting in inconsistency at a national level—

hardly a fair thing for people around the country who are putting in their tax returns—

This can harbour a perception of inequality, inconsistency and arbitrariness within taxpaying and professional communities. That perception can undermine community confidence in the tax system and its administration and regulation.

On this basis, it is expected that the implementation of a national Board will provide for more consistent decision-making, more co-ordinated practices and more effective remedial action where necessary or appropriate.

Indeed, that is the very basis of the Rudd government’s efforts to provide integrity for our tax system. It is about providing confidence for all in our tax system. The state based Tax Agents’ Boards recognised the need for a national approach. In their submission to the economics committee inquiry they said they were:

… firmly of the view that the establishment of the new national Tax Practitioners Board as soon as possible will be of benefit to the tax system and its stakeholders.

The Boards’ support is based upon an informed awareness of the limitations of the current legislation and its impact upon the taxpayer public and the integrity of the tax system as a whole.

The Boards are reassured by the proposed post-implementation review of the legislation after three years of operation as set out in paragraphs 5.33 and 6.71 of the Explanatory Memorandum and regard this as essential. It will provide the opportunity to remedy any deficiencies which have become apparent with the benefit of having had the new system in operation for that period.

It is great to see that the new legislation has this kind of flexibility. The submission went on:

As the Boards see it, the principal benefits of the legislation can be summarised as follows:

i.

The new Board will be national.

ii.

The new Board will have greater disciplinary powers.

iii.

The new Board will regulate BAS preparers for the first time.

iv.

The New Board will have jurisdiction over unregistered preparers.

v.

The new Board will have the opportunity to grant conditional registration.

vi.

The new Board will be independent of the ATO.

The new Tax Agents Board will conduct a registration system for tax agents and agents administering business activity statements. It will have a role in disciplining tax agents and business activity statement agents who do the wrong thing. As the board pointed out, it will also have an important role in dealing with unregistered entities that are holding themselves out as registered. These are important things that are inadequately provided for within our current system. This is something that consumers who put in their tax returns and use these agents really need. Registration is an important feature, because we have witnessed significant growth in the use of BAS related services since the GST was introduced by the previous government in 2000. There has been an explosion of BAS related accounting services. Indeed, there has not been a great deal of regulation, attention or professional development for people who are putting in statements. In the view of the Commonwealth Ombudsman:

The inclusion of BAS service providers … addresses a major short-fall in the current system. The preparation of BASs is an important aspect of the current taxation system and BAS service providers play a key role. In the last year, around 9% of the complaints we received about the lodgement and processing of tax forms were about BASs. The inclusion of BAS service providers in the new regulatory scheme ensures relevant regulation of their conduct and should facilitate improvements in their work standards.

This system of registration will also be most helpful for the users of agent services. They are going to be able to easily determine who is and who is not registered as a professional in relation to the provision of tax agent services. Currently consumers do not have enough clarity about this. The professional registration role of the Tax Agents Board will provide the industry with a streamlined and, for the first time, consistent approach. One difficulty with having a number of different state based boards is a measure of inefficiency in the registration process. An example of this previous inefficiency was cited in the Commonwealth Ombudsman’s submission to the economics committee inquiry. This is Mr K’s story, as told by the Ombudsman:

Mr K complained to us about what he considered was an unacceptable delay by a state Tax Agents’ Board (the Board). Mr K lodged his application for registration with the Board in September 2007 and he was advised that a decision would by made by the Board at its November meeting. By December 2007 his application was still not decided and he was advised by the Board that a decision would not be made until February 2008, a delay of six months.

When we investigated Mr K’s complaint we found that due to an administrative error, Mr K’s application was not considered at the Board’s November or December meetings and, because the Board did not meet in January, he had to wait until the next meeting of the Board in February 2008. His application for registration as tax agent was approved in February 2008.

The new system will clean up the administration and inefficiencies like that. Importantly for the industry, the Administrative Appeals Tribunal will be able to review most of the board’s decisions. That is a very important development. It is really important that they have an appeals mechanism open to them, which is only right when the administration of law affects people’s working lives and livelihoods. If you are knocked back by the board, you need a transparent place to go to appeal such a decision.

As senators will be aware, systems of registration already work well for a range of other professions, and a system of registration will work equally well for tax agents. This system of registration will be complemented by a code of professional conduct. The new and legislated code of professional conduct will provide a professional and regulatory framework for tax and BAS agents. Currently, only some tax agents are required to comply with a code of conduct by virtue of their membership of a tax or accounting professional association. This code will make explicit the standards expected of tax agents and BAS agents and will clearly define their roles and responsibilities. The code of professional conduct will make it clear for agents what their areas of professional responsibilities are. It will also provide clarity and certainty for them, particularly in relation to the way in which they conduct their operations and the manner in which they provide professional services. The code of professional conduct will be of great assistance to tax agents to maintain the integrity of the services that they provide and will, in turn, return integrity to Australia’s taxation system. Importantly, as identified by the Commonwealth Ombudsman, the code should lead to a reduction in complaints about tax practitioners. Once again, we know that codes of conduct have worked well for other professions, and it will work well for tax and BAS agents.

Like other professions, there are, on occasions, some in the industry who might do the wrong thing. This happens, and we need to be realistic about that. We also have to make sure that everyone understands their rights and responsibilities. This bill will make it clear what is expected of taxation practitioners. In this context, one of the issues highlighted before the economics committee was the need for better education of tax agent professionals. The majority of people get their work done by a wide variety of practitioners. There is a great deal of inconsistency in the education standards and the certificate level qualifications of practitioners in this area. The lack of transparency in the act for regulating people who do this kind of work has flowed right through to the education system. A stronger framework and code of conduct of professional standards can now begin to be reflected in the education standards. That point was made very strongly by a number of submitters before the economics committee.

For those people who do the wrong thing there will be penalties, as there should be. The new Tax Practitioners Board will have a wider range of disciplinary sanctions, and it will put these to use in the regulation of tax agent services. I am sure that this will be of comfort to consumers because it is the kind of thing that will raise the standard. People who are putting in these kinds of returns will know that if they do not do it properly then there will be a penalty. Many of the industry associations predicted that there would be a number of people who would drop out of the industry because they are very self-aware of the fact that they do not meet those standards. New injunctions and civil penalties will replace some criminal penalties. They will provide relevant and appropriate penalties for those people who do the wrong thing. They will also provide active disincentives for those who might consider doing the wrong thing.

Overall, the bill provides for a coherent and comprehensive regulation of tax agent services. This will help support fairness and integrity within the taxation system for taxation professionals and taxpayers alike. I commend the bill to the Senate.