Law Council of Australia calls for complete independence of TPB from ATO

In its submission to the review of TPB, the Law Council of Australia reiterated that the system can only work effectively if the TPB is independent from the ATO.

The Law Council said that threats to the independence of TPB arise both from the structure of its relationship with the ATO and its dependence on the ATO for resources, adding that while these threats have always existed "they have recently become more apparent".

"After eight years of operation, the review presents a timely opportunity to reconsider the independence of the TPB, particularly in the light of current and perceived threats," the Law Council of Australia said. 

The council explained that the TPB is the agent of the taxpayer and not of the ATO, and that its role is not to protect tax revenue.

"This can be misunderstood by the ATO, which often assumes that the tax practitioner has a duty to protect the revenue and looks to the TPB to bring this about," the Law Council of Australia cautioned. 

"So, there is an inherent tension between the differing roles of the ATO and the TPB, compounded by the facts that the ATO provides all the staff of the TPB and that the budget of the TPB is a subset of that of the ATO."

It emphasised that the need for the TPB to be, and be seen to be, independent from the ATO is essential to public confidence and, in particular, to the confidence of tax practitioners who are subject to its regulation.

The Law Council of Australia further explained that because the ATO is in the unique position of confronting tax practitioners in the course of its administration of the tax laws, there is a public perception that the ATO has an unfair advantage in being able to put pressure on tax practitioners by the threat of referral to the TPB for disciplinary action.

"While this may be a perception, rather than a reality, it is yet another reason why the TPB should be totally independent of the ATO, including having its own staff and not ATO staff on secondment," it said.

To achieve independence, the Law Council of Australia recommended that legislation be enacted to require that the independence of TPB be monitored on a regular basis, at intervals of not more than three years, by the IGT. Moreover, the council asked that the TPB have its own budget and premises completely separate from the ATO, that its chair be a full-time independent appointee and that all its employees be independent of the ATO. 

"Because the TPB now regulates over 80,000 practitioners, with the possibility of many more being added (in accordance with the IGT report), it must now be, and be seen to be, an independent stand-alone agency – in order to satisfy all stakeholders and the public that it is truly fit for purpose in 2019 and beyond," said the Law Council of Australia.