Should the revenue authority have the power to legislate?
It is a fact of life that various authorities and statutory boards have legislative power delegated to them by the Federal Parliament in order to ensure that the rules of a game are made by people who actually understand it. Accounting and auditing standards are an example to consider. The standard setters set the rules but they are not the enforcers of the rules. They are equally not authorities that sit in legal judgement in cases where there is a dispute in relation to the law. The principle being referred to here is that of a separation of powers to ensure that those that develop the law are not the enforcers of the law nor the judge and jury that decide whether someone has breached a legal requirement.
It is in this context that we find ourselves reflecting on the Australian Taxation Office’s recently acquired legislative powers. The Tax Office is able to alter the law in certain circumstances following the delegation of that power by the Federal Parliament. One of the objectives of this additional power is to make it easier to effect amendments to the tax law. While the objective of speedy and efficient amendment of tax legislation might look appealing there are a series of issues that need to be borne in mind when it comes to the trust in and the credibility of the system.
ATO can't be all things to everyone
Most people close to the tax system would agree it is common ground that expertise in the setting of law does help but the Tax Office is the administrator of the law and effective the enforcer of provisions. This means that there is a fundamental conflict between what the Tax Office should do as an enforcer or administrator and a role in developing amendments to legislation. It is fair for practitioners and taxpayers to express concerns about one body having a smattering of powers that defy the basic notions of a separation of duties. It is necessary to have different people doing the lifting across all areas of public administration.That is only starting point of this analysis because there are other concerns. Giving the Tax Office a greater role in legislating means that the function can be tarnished by other things that are happening to the ATO. Look at the issue related to the service outages being experienced by practitioners during a period of time when practitioners are in the throes of peak tax season. The Tax Office cannot afford to have the contagion of operational ineffectiveness cause taxpayers and the accountants that serve them to doubt the integrity of a legislative function. That role is better parked elsewhere in the system.
The crazy idea of 'earned autonomy'
The Tax Office went in to bat before the House of Representatives' Tax and Revenue committee for what is termed 'earned autonomy'. This essentially means that an agency should be given a free pass from certain elements of scrutiny. That is an argument that was appropriately rejected by the parliamentary committee given that the ATO is a body that does not have a board of governance like other government organisations to which it must be accountable. Can you imagine the ATO with less scrutiny from the agencies that currently hold it accountable given that it has an additional legislative function? 'Earned autonomy' might be a nice idea but from a practical point of view the ATO deserves the current level of scrutiny that it gets. The concept of 'earned autonomy' also should never be entertained in the context of the Tax Office if it is to continue to have a legislative power. You do not 'earn autonomy' if you have a legislative power that must be supervised.The policy of giving the ATO any legislative power must be revisited by the Federal Government because it is fundamentally at odds with the separation of powers. No entity and especially one that is the revenue collection agency deserves to have that much power.
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