Minority report by Labor Senators

1.1        The terms of reference of this hearing were to inquire into Senator Cormann’s amendment into the Tax Laws Amendment (2010 Measures No. 4) Bill 2010.

The amendments would require the Australian Taxation Office to provide taxpayers, along with their notices of assessment, with a break-down of how the amount of the assessment was spent on different functions in the financial year (calculated by applying the proportion of the Budget expenditure on each function to the amount of the assessment) and the level of Australian government net debt.[1]

1.2        The Labor members of the Committee acknowledge that taxpayers are entitled to have information about government expenditure that is as full and accurate as possible. It seems clear, however, that the proposal considered by the Committee is about political posturing around the government’s stimulus expenditure and the accompanying temporary budget deficit.

1.3        The main report goes through a number of significant problems raised by the proposal and each time recommends a vague fix that involves many assumptions and simplifications.

1.4        It is difficult to understand that other members of the Committee were able to conclude that the amendments to Tax Laws Amendment (2010 Measures No 4) Bill should be passed. The Labor members will address several specific issues.

Budget information

1.5        The difficulties in providing a true representation of expenditure to each individual, when such information is not finalised by the time lodgements are received and assessments returned.

1.6        This was discussed at length in the hearings between Senator Pratt and Mr Parker from Treasury:

Senator PRATT—I have a range of questions, but I might just pick up on some of what the chair has raised so that we can continue thematically. I would be concerned about whether what is listed here is a true representation of expenditure. For example, under item 7 it talks about taxation revenue going to the states, territories and local government, although much of that expenditure also relates to health, education and other types of activities that are listed at item 6. How accurate is the information listed before us as a true representation of government expenditure?

Mr Parker—There are essentially two issues in that sense. One is a measurement issue. The government does publish breakdowns of total expenditure into the categories. We publish probably the most digestible and high-level cut at that every year in the ‘budget glossy’, so called. It is at page 38, I think—a couple of pie charts of revenue and expenditure. Eventually all of these things can get sorted out, but these things are not sorted out on 30 June every year.

Senator PRATT—How soon do people start getting tax returns lodged and looking for their money back? It seems to me that there is a direct link between you getting your tax assessment and any money back and at the same time the government being ready to give you this information. Is there a problem there?

Mr Parker—Yes, there is a problem in terms of the ability to administer these things. It goes, as I mentioned at the outset, to timeliness and accuracy. Every year we publish the Final Budget Outcome, which has detailed reporting on what actually happened for the financial year. It can be amended in the event of new information as you get it, if there are errors and so forth. That is required to be published by 30 September every year. When I sign off on the accounts for the Treasury, that is generally in August or something like that, once the whole thing has been audited properly.

Senator PRATT—Is it September because it takes time—

Mr Parker—It takes time, yes.

Senator PRATT—to pull that kind of information together?

Mr Parker—That is right. And someone could lodge their tax return straightaway, essentially.[2]

1.7        This is a considerable problem in the eyes of the Labor members, because as Mr Parker had stated even reports such as the Final Budget Outcome are amended when new information is received, this becomes a problem when a tax return is lodged immediately.

1.8        Mr Monaghan from the Australian Tax Office adds:

Mr Monaghan—From our point of view, if we need to provide personalised information to taxpayers, that information has to be timely, accurate and final. So, to the extent that there is a lack of the data which we need to provide with an assessment, we would have to wait until we had that. If that was not final and accurate until September then we would not be able to provide that to taxpayers before then. Where the information to be provided is part of the assessment process, we would have to be extremely careful that the information we provided was timely, accurate and final. That would mean that we would not be able to issue assessments until we had that....[3]

Mr Monaghan supports Mr Parker's response for the need of the information to be timely, accurate and final.

Recommendation 2

1.9        The Government should not consider supporting such a measure because information on the breakdown of spending at the time of lodgement will not be timely. At the time taxpayers expect to receive their assessment, the breakdown may not be accurate or final, and will either delay assessments or provide poor information.

Taxpayer Calculations

1.10      During the hearing it was brought to the attention of the committee that the process of assessment could see some taxpayers challenge their assessment, if the information provided to the taxpayer was not accurate and final. This stresses the importance of Recommendation 1. Evidence from Mr Monahan addresses this issue:

Mr Monahan-....In speaking of the process of assessment, it is also important to note that taxpayers will challenge the validity of an assessment process, in particular the service of the assessment, where they feel there is an opportunity to succeed in a challenge. Some taxpayers will challenge the process where they feel that there is an inaccuracy in that process. So we would have to be very careful that what we provided to taxpayers was, as I said, accurate and final.

Senator PRATT—If you are creating a direct link between how much someone is getting back in their tax and a statement like this and if the information in the statement changes at some point in the future are you arguing that taxpayers will perceive that that is a reason to challenge their assessment, or can they just object to the information provided?

Mr Monaghan—It is highly likely that some taxpayers will challenge an assessment process where they can. Where we are providing information in addition to the normal assessment process it is inevitable that some taxpayers will challenge that, at least in the early days. We would then be in a position of having to decide what to do with all the assessment if there was a systemic issue. If there is a challenge to a tax technical point like whether you can deduct some particular expense or something we can corral those assessments, which we do, and we take no recovery action until a court case is resolved. We would be concerned where there could be a challenge to the actual process, a systemic challenge, that would create a lot of uncertainty as to the assessments issued to everyone else.

Senator PRATT—Why, because the bill outlines that this is your share of debt and because this is how much tax you pay? Is it those kinds of relationships?

Mr Monaghan—Where we need to provide precise information, as I have said, it would need to be accurate, final and ready in time. To the extent that there is any uncertainty in terms or uncertainty in whether the data is final or accurate that would bring serious disruption into the assessment processes and would also cause delay because we would need to wait until we were sure we had what we could reasonably argue was timely, accurate and final information.[4]

1.11      Timing and certainty are not ensured when an assessment is to be sent to a taxpayer. The evidence provided shows that if the assessments are to be returned in a reasonable time after lodgement, the break down information may not be accurate, and could lead to a challenge by the taxpayer.

Information on expenditure

1.12      Evidence was also provided in regard to the access of accurate information about expenditure. Labor Senators believe this is already widely accessible to the public, without the complications of providing such information of expenditure with the notice of assessment. Mr Parker from Treasury states:

As I have said, there is a range of information published at almost any level of detail you could wish for about expenditure, including the portfolio budget statements of each portfolio. In terms of accessibility and digestibility, the so-called budget overview, the glossy, is now part of the lexicon. Most people will go to that before any other document. That provides a summary. In line with the general move into the electronic medium, all of that information is available online from Treasury and other websites.[5]

Yes. It is all online, including the monthly department of finance financial flow statements.[6]

1.13      The evidence shows that the information published on the websites are timely, and accurate.

Recommendation 3

1.14      The Government should continue to maintain at least the current standard of accessible and available Government information on expenditure to provide the necessary transparency to all Australians.

Conclusion

1.15             The Labor Senators do not believe this proposal is a viable one. It is difficult to discuss the merits of such an implementation when there are no certain answers to the concerns of Treasury and the ATO about the departments’ ability to provide the information on a timely, accurate and final basis. This information is already accessible to the public. Consequently, creating a cost to government by providing detailed information within the taxpayer’s individual assessment is not justified.

Senator Annette Hurley
Deputy Chair

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