ATO should have to prove tax debts in court, report finds

Parliamentary committee finds the onus should be on tax office — not the taxpayer — to prove debts before they become payable.

MP Jason Falinski says the onus of proving a tax debt should shift to the ATO. Picture: Adam Yip)

The Taxation Office should have to prove tax debts in court before they become payable, and the onus of proof should be on the ATO rather than the taxpayer, a parliamentary committee has found.

Liberal MP Jason Falinski, who chairs the House of Representatives Standing Committee on Tax and Revenue chairman, said the new report tabled in parliament today “highlights a number of legislative frameworks that the government should change in order to provide taxpayers with better service”.

The key recommendations were modelled on arrangements in the United States, Mr Falinski said, encoded in a new tax payer Bill of Rights which would give individuals “protection against what has become a very a powerful tax office”.

“These include upgrading the Inspector General of Taxation to an office modelled on the Taxpayer Advocate developed in the United States,” he wrote.

“Secondly, changes be made to legislation that gives taxpayers the same protections enjoyed by all other citizens when dealing with debts, namely it is not payable until it has been proved, and cannot be collected until that time. Further, the onus of proof should lie not with the tax payer, but with the ATO.”

Mr Falinski said “what we know of the US is when the taxpayer advocate sits in the IRS it reduced the number of disputes, the cost of collecting tax decreased and it improved the legitimacy and the trust they have in the system”.

“You can’t have an advocate without a Bill of Rights.”

The committee also recommended that the ATO “aligns the interest rate it charges taxpayers on any loans for tax liabilities, to the interest rate paid by the federal government”.

The report “strongly advocates” that the Tax Office’s business registry function should be upgraded.

“Reform in the business registry area would deliver significant productivity gains for working Australians,” Mr Falinski wrote.

“Registries, when modernised, could allow people to predict pheonixing rather than leaving it in the hands of departments and agencies to shut the gate once the horse has bolted.”

The ATO’s new Australian Business Registry Services will already bring together more than 30 government business registers through an ongoing program.

Among the 19 recommendations, the committee also said the ATO should become more transparent around its compliance activities and provide more detailed reporting on the types of complaints it receives.