Introduction
Treasury convened a consultation meeting with representatives from the tax industry, business and community groups (see attendance list at Attachment A). Australian Taxation Office's Second Commissioner Jennie Granger also attended. The agenda for the meeting is at Attachment B.
Rob Heferen indicated that this meeting was the first of a revived program of high-level stakeholder consultation meetings, to engage the taxpayer community in a wider conversation about strategic tax policy issues. This program would supplement, not replace, tax consultations on specific measures. High-level consultation meetings would occur every six months.
Rob Heferen also indicated that Treasury was conducting a strategic review, aimed, among other things, at enhancing Treasury's understanding of various issues concerning business, including how businesses (and individuals) responded to tax changes and what motivated their decision making. Noting the various policy interests of stakeholders present, the Treasury's role was to ensure that the tax law accurately reflected the policy intent, and implementation arrangements allowed for efficient and effective revenue collection.
Revenue and fiscal outlook
An overview of the revenue and fiscal outlook was provided, outlining the $37 billion deficit and anticipated surpluses for 2012-13 to 2014-15 as reported in the 2011-12 Mid-Year Economic and Fiscal Outlook. There was discussion around the contextual environment in which Treasury operates, and the challenges this can pose in relation to policy development.
There was some discussion of retrospective legislation and the circumstances in which it is considered appropriate. Rob Heferen said that where something occurred which had the potential to cause serious risks to the revenue, retrospective legislation would be considered but only as a last resort.
A number of stakeholders noted that, while recognising various constraints, like the Budget process and confidentiality issues, greater transparency, particularly in relation to costings, would improve the consultation process.
There was some commentary around the assumptions underpinning revenue forecasts and their applicability in the real world. However, some stakeholders felt that consultation, such as in this meeting, would assist the tax policy process more generally.
Rob Heferen noted that while Treasury would continue to work on systems and processes regarding transparency, it was inevitable that some confidential consultation would be required in some cases. Treasury's desire for fulsome engagement with stakeholders will have to have regard to tight resource constraints.
Revenue Group consultations
Gerry Antioch led a discussion on Treasury's approach to tax consultation. The Treasury model for consultation was set out in the Treasury's Second submission to the Board of Taxation's review of the Report on the Tax Design Review Panel in September 2011 and circulated to attendees prior to this meeting. This presentation outlined the objectives of consultation, as a process of discovering information, disseminating policy objectives, and deepening relationships with stakeholders.
Yasser El-Ansary from the Institute of Chartered Accountants opened the stakeholder response to Treasury's approach to tax consultations, noting that it was important to minimise the risk of consultation failures impacting policy and the business community.
Overall, the stakeholders' reaction to Treasury's consultation model was positive, with stakeholders noting an increased willingness from Treasury to consult. However, stakeholders were dissatisfied with the timing of some consultations, particularly when they encompassed significant holiday periods. This issue was raised again later in the meeting, in relation to the Business Tax Working Group and the Not-for-Profit consultations. Rob Heferen noted these concerns, but added that sometimes the timing, while unfortunate, was necessary to meet a tight legislative program. Stakeholders also commented on the resourcing problems they face in adequately responding to Treasury consultations.
Some stakeholders voiced a concern about the relationship between the ATO and Treasury and whether that could be strengthened. Greater insight into the advice the ATO provides Treasury, and ATO sign off on legislation, were suggested as possible enhancements to current arrangements.
Rob Heferen stated that relations between Treasury and the ATO have been very good overall although on occasions there have been some tensions around minor operational matters. He said the Treasury and the ATO were working to redress these issues and that agreement on legislative policy intent was a first priority.
Business Tax Working Group
Christine Barron gave an update on how the Business Tax Working Group (BTWG) came to be established and its work over December and January. There was positive feedback from those BTWG Panel members present on the inclusiveness of its membership and the work of the Group so far.
Rob Heferen explained the scope of the Group's terms of reference and that the focus will be on corporate tax issues, particularly on longer term company tax options including if and how an allowance for corporate equity would work in practice. There was a general discussion on options for losses and savings, the trade-offs involved and the incentives for taxpayers to give up concessions.
Not-for-Profit working group
Paul McBride noted the various streams of work under way in the Not-for-Profit (NFP) sector, including the statutory definition of charity and review of NFP concessions. The compressed timeframe was also discussed.
Stakeholders present supported the policy directions of these reforms, but questioned the speed with which it was happening, the timing of the consultations and expressed the view that, for quite profound changes, it might be a case of too much at once. Concerns were raised about the ability of smaller organisations to adapt to the proposed changes. Some stakeholders suggested that consideration should be given to implementing reform so that only a small number of larger organisations were impacted.
Tax Studies Institute
Gerry Antioch advised that Treasury would be holding a consultation meeting on the establishment of the Tax Studies Institute on December 14 and stakeholders were invited to contact Treasury if they wished to know more about the proposal.
The pace of change
Robert Jeremenko from the Tax Institute gave a presentation on the 'pace of change' which centred on issues around the uncertainty of the timeframes and certainty in relation to consultations, such as when exposure draft legislation might be anticipated after a consultation paper is released. He noted that while there are standard steps in the policy/legislative process, in the real world particular processes are not always orderly and it is not unusual to encounter bottlenecks. Greater emphasis on indicative timelines for consultation and policy implementation would increase certainty for business. In this respect, Treasury's trust law reform paper was commended as a model consultation as it set out transparency as to the broad timelines the Government was aspiring to and clearly informed stakeholders of the next steps in the process.
Next steps
Stakeholders were informed that Treasury would endeavour to publish a record of the consultation meetings on its website within a month of the meeting occurring. A draft version of the record of the meeting would be sent to attendees for their comments before it was published. However, it was recognised that the December/January holiday period would delay publication of this record.
The next consultation meeting is expected to be held after the 2012 Budget.
Tax System Division
The Treasury
31 January 2012