Looking back on 2015–16, it was a year of solid and consistent performance for the ATO. We fulfilled our mission this year by implementing a range of strategies to foster willing participation in the tax and superannuation systems.
We delivered against our commitments to government and met all of our service commitments, at the same time as progressing our transformation program, Reinventing the ATO.
We improved the client experience by:
- making things easier to use and understand
- giving greater certainty with better guidance materials
- providing more support to help people get things right
- engaging early and 'upstream' more often
- making greater use of data and pre-fill, for both service and compliance purposes.
A number of our new and improved services were well received:
- the streamlined online tax return, with 1.8 million individuals using myTax, up by 725,000 over the previous year
- new features on our app, such as myDeductions and the Business performance check tool
- the ability to lodge activity statements and set up and manage payment arrangements online
- greater availability of alternative dispute resolution
- better website content, a web-chat facility and a virtual assistant
- tax governance guides for businesses
- 'Show me what, how and why' sessions in regional centres for small businesses.
While we delivered these new and improved services direct to clients, we also delivered improvements for the tax profession. The tax profession is critical to the effective and efficient administration of the tax and superannuation systems in Australia, and our service and support of the profession is vital to our success.
Over the past couple of years, there have been growing concerns about some of our services for the profession, so this year we invested in greater communications, connections and making improvements. We consulted extensively, including visits to many practitioners' offices, to understand their experiences and what we could do to 'fix' irritants; in particular, with the client correspondence list (CCL) and performance of the Tax Agent Portal.
We conducted 'show me what, how and why' sessions for agents to help them optimise the performance of the portal and their own technology, introduced a complex issue resolution service, eliminated irritants with the CCL and worked with software providers to build the new practitioner lodgment service (PLS) for Tax Time 2016 and beyond.
In the coming year, we will continue to improve the experience of the tax profession and will work collaboratively with them and software providers to bed down PLS, offer more online tools, and help create a joint future that provides 'value-add' services for Australians and businesses.
Over the past year or so, there has been much community, government and media attention on the tax behaviour of large corporates, especially multinational enterprises, and on those contriving structures in low taxing jurisdictions to avoid their tax obligations in Australia.
We have made many representations at parliamentary committees, in the media and other platforms to ensure the community and key stakeholders understand and have confidence in our approaches to dealing with these risks and issues. This has been an important commentary for us to make because we know that willing participation in our tax system is heavily reliant on the perceived fairness of the system and our administration.
Our engagement with large businesses focuses on a cooperative relationship, transparency, prevention before correction, early assurance and certainty for all parties. This approach is our starting position for working with all businesses and by far, the majority of businesses work this way with us.
Our tolerance, and that of the community's, for game-playing and tax avoidance has dropped considerably. We have been and will be very deliberate and strong in our messages and actions with those seeking to avoid their tax obligations. I have been very pleased with the compliance work of our International Structures and Profit Shifting Program, raising $1.2 billion in liabilities since the program started in 2013.
The introduction of the Multinational Anti-Avoidance Law, the transparency measures and the voluntary disclosure code are all tools to influence changes in the behaviour of taxpayers and I am grateful that we have such a strong suite of tools to draw on and use as necessary.
The investment in the Tax Avoidance Taskforce, announced in Budget 2016–17, was a welcome endorsement and vote of confidence in the work we have done to date in this area. Over the next three years, we will be undertaking significantly more work, reporting to the community regularly about our actions and results.
I would also like to acknowledge the work of the ATO in helping drive an international approach to dealing with the data leak from Mossack Fonseca, known as the Panama Papers leak. In April 2016, the ATO initiated a worldwide collaboration of tax authorities to deal with the phenomenon.
We continue to lead collaboration internationally via the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) Network, made up of 37 Organisation for Economic Co-operation and Development (OECD) member jurisdictions. We have successfully transformed the way we work with other jurisdictions by leading the expansion of this network and driving the international agenda through the coordination of joint projects. Here at home, as part of the Serious Financial Crimes Taskforce, we work with our partner agencies to bring to account those who use, or facilitate the use of, offshore entities, phoenix companies, trusts and complex corporate structures to undertake serious financial crimes. These crimes include the evasion of tax, the avoidance of corporate responsibility, and the laundering of the proceeds of crime.
Australians want to know we are doing what we can to level the playing field for businesses – with multinationals, the sharing economy, the cash economy and other risk areas. We will continue to use more sources and more sophisticated intelligence to target compliance action on those who warrant such attention.
We will, of course, protect the identity and information of taxpayers, but we will not be silent about our approaches and results. Nor will we let commentary or statements stand where they have the potential to undermine integrity or confidence in the system, or the ATO.
We expect that in such a large and complex system we will have disputes. Our intention is to resolve them as early as possible, in a way that is fair and respectful. On 1 July 2015, we moved all objections out of the Client Engagement Group into the Review and Dispute Resolution business line in the Law Design and Practice Group signalling a fresh, independent set of eyes for disputes.
We have been transforming the way we manage disputes. Our increased use of alternative dispute resolution, new settlement guidelines and the use of independent ATO facilitators to help achieve breakthroughs in disputes, has meant that in 2015–16 fewer cases went to litigation. Our approach ensures that we pursue the right litigation matters for the right reasons and has meant a success rate of 85%, with 77% of cases fully favourable to the ATO and 8% of cases partly favourable.
The reduction in litigation cases has largely been in the Administrative Appeals Tribunal (AAT) and while we have fewer cases that go through to the court, we have been successful in pursuing litigation for law clarification purposes, in administrative law challenges and in matters including fraud and evasion.
The number of appeals to the AAT against decisions by the Commissioner fell by 26% during 2015–16, further evidence of our success in achieving earlier resolution and our commitment to pursuing the right cases.
Despite a challenging environment, employee engagement, as measured by the Australian Public Service (APS) Employee Census 2016, has improved since 2015. This outcome maintains the ATO’s relatively strong employee engagement performance compared with similar APS organisations.
We continued to implement workforce efficiencies as part of the organisational realignment program, which was largely completed by the end of 2015.
This program has reshaped and rebalanced our workforce to reflect our business needs and provide the right skills and jobs to deliver a better client experience. Key outcomes have included:
- the removal of unnecessary layers of management to reduce red tape, empower staff and better reflect the accountabilities of leadership positions
- greater workforce flexibility through flexible job design and making the best use of available skillsets
- further investment in our staff to equip them with industry standard skills and qualifications, and securing the talent and capabilities we need for the future.
Building on the continuing program of work from 2015–16, we face new challenges and risks that have emerged over the past year, including:
- trends in use of technology that are difficult to predict but manifest in rapidly growing community expectations for digital services that are accessible, secure, easy to use and available 24/7
- increasing cybersecurity threats – to the ATO's systems and to the identity security of taxpayers
- mounting public concern with the impact of global economic forces on the integrity of the tax system
- new tax measures, including the extension of GST to consumer imports of digital services and low-value goods, and a simpler BAS
- further pressure to achieve more with less.
I am confident that we have the capability to meet these new issues.
As the next financial year gets under way, I thank my Executive team and staff at all levels for their commitment to our transformation and to delivering a better experience for the community.
I would also like to thank our stakeholders in the tax profession and colleagues in other agencies for their valued contribution to the design and administration of the tax and superannuation systems.
Thanks for a good year.
Chris Jordan AO
Commissioner of Taxation