ATO Chief Outlines New Conciliatory Approach To Corporate Tax Compliance

by Mary Swire, Tax-News.com, Hong Kong

18 October 2005

Australian Tax Commissioner Michael Carmody announced last week that the Australian Tax Office (ATO) will endeavour to speed up corporate audits and increase consultation activities with large companies in an attempt to repair bridges between the tax collector and the corporate community.

Under the proposed changes, outlined by Mr Carmody in a speech in Sydney last week, greater efforts will be made by the ATO to ensure that corporate audits are handled quickly and efficiently. This will entail the drafting in of technical experts early on in the audit process, while the audits themselves will undergo checks every six months.

In addition, business leaders will have the opportunity for twice-yearly meetings with the ATO to discuss tax compliance issues, while external tax experts will be retained by the tax office to advise on reviews and audits.

In another concession to businesses, the ATO will cap a 12% "general interest charge", which is added to a firm's final bill at the end of a dispute, for a maximum of two years.

Indeed, so keen is the ATO to wipe the slate clean with the business community that it even admitted that it had "incorrectly characterised" the extent of corporate tax evasion, and revised the figure down to A$3.2 billion from its initial estimate of A$4.8 billion.

It is hoped that the reforms will engender a greater spirit of cooperation between the tax office and the business community after a period in which the ATO has been severely criticised for its hardline approach to corporate tax compliance and for unnecessary delays in completing audits and resolving disputes.

Australian firms, which are subject to a self-assessment regime, have also been contributing substantially more tax revenue to the Australian Treasury compared to a few years ago, and last year paid a record A$46 billion in corporate tax - double the amount in 1998.

The proposals have been welcomed by the Corporate Tax Association executive director, Frank Drenth, who observed that:

"The Commissioner’s plan to engage with corporates in a more contemporary way should do much to improve both the relationship and the audit process."

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