The Sydney Morning Herald has reported that:
The Australian Taxation Office wants to allow big business to oversee its own tax returns, internal documents reveal, despite the potential for conflict of interest, greed and even corruption.
The Tax Office has been working on a "transformational" plan to fundamentally change Australia's corporate tax system with companies allowed to use their own accountants to sign off on their tax bills, effectively outsourcing tax oversight to the private sector.
No, this is not April Fool's Day. The suggestion is, apparently, that KPMG, PWC, EY and Deloitte (and others, no doubt) should audit their own client's tax affairs and agree them on behalf of the state for tax purposes with the goal of 'saving money' even when, no doubt, many of those tax returns will include tax planing schemes sold to them buy those same firms.
It is, quite literally, an insane idea.
Wait for it to be copied here, soon.
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On one page you say that HMRC isn’t working, they have seen this and decided on a new way. If you cant beat them, and the govt cant, then join them.
Sickening. Totally and utterly insane and attributable to corporate capture of the state.
Quis custiodet ipsos custiodes?
Has absolutely nothing been learned from history!
I sure I’m being too optimistic, however I wonder if this could be adapted to make the big 4 accountancy firms liable for the tax avoidance schemes they sell. As ultimate responsibility for tax collection and law interpretation rests with them. And they also advise on making the laws in the first place. How could they then not be considered ultimately liable for underpaid tax?
This is just Self-Assessment, as we’ve had for years, extended slightly.
All you need to make it work sensibly is to have HMRC carry out random audits, and perhaps raise the bar for “careless mistake” higher the larger the advisory firm is. Then if HMRC find any errors they can collect a guaranteed penalty (careless and prompted), and give the companies the right to recover said penalties from the advisors (which in their shoes I’d want built into the engagement letter anyway).
The company pays a bit more to the advisors but gets an assurance that they’ll have lower enquiry costs, and HMRC’s risk in not enquiring into returns is then passed on to the advisors who endorsed them. The advisors get rewarded for assuming that risk, and penalised if they don’t do a good job. Sounds good to me.
We’re already half-way there with HMRC’s risk-based assessment.
Utter and complete nonsense
Please do not make yourself look stupid
OK, so what’s the difference between this proposal and self-assessment?
It is wholly unlike self assessment
It is self approval
It is utterly different as a result
PS That’s why we have LBS – because we do not trust self assessment by large business
Self-assessment for large businesses:
– Company prepares tax computations
– Company passes to tax advisor for review
– Advisor makes recommendations
– Company considers advice, adjusts if apropriate, and submits
– HMRC enquires if it sees fit to do so
This proposal:
– Company prepares tax computations
– Company passes to tax advisor for review
– Advisor makes recommendations
– Company considers advice, adjusts and submits with advisor sign-off if apropriate, or submits wihout adjustment or sign-off if it prefers
– HMRC enquires if it sees fit to do so
The only difference I can see is that the advisor would be taking on some responsibility to the tax authority when it signs off the return, and so could reasonably be penalised if it gets things wrong.
I don’t know how much of the ATO proposal you’ve read, but the ECAP system is talking about the advisor doing “basic assurance”, not about ATO abdicating all responsibility for checking things.
I’m quite happy with the idea of tax advisors sharing the burden of poor advice. Well, not entirely “happy” with it, as it might happen to me, but I think it’s the right thing to do.
I repeat: only a fool would give the big forms of accountants responsibility for checking client tax positions
It is the ultimate in corporate capture of the state because what is very clear is that it is being done to reduce the number of audits
When that capacity and competence has gone – as it will – the aim of self-non-asessment that is behind this plan will have been achieved
I presume you share that goal
I have no problem with giving anyone the right to do anything, if there is appropriate oversight.
If I were in HMRC’s shoes, I would be quite happy if I knew the taxpayer’s advisors had a vested interest in ensuring that the tax positions adopted were unaggressive. That way I can stand back a bit and let them get on with it while I do something more productive. If I can give them that vested interest by imposing a tax-geared penalty, then so be it.
That would allow HMRC to deploy LBS teams on checking a few returns routinely, and spending most of their time looking at areas they’ve identified as high-risk, rather than spending most of their time on routine checks and only part of it on the high-risk high-value cases. This is of course exactly the LBS strategy at the moment, and the whole thinking being “low-risk” status and so on.
If the taxpayer is paying for HMRC to get this advantage, by paying increased fees to their advisors for the assurance, then so much the better for HMRC.
My goal, as a tax advisor, is to make sure my clients pay the right amount of tax – not too much, if they don’t need to fall into one of the myriad pitfalls, but certainly not too little. If HMRC is spending time on technical areas rather than routinely sifting through capital allowances claims to see if there are integral features in the general pool, then excellent, that’s exactly what I want them to be doing. The more they ensure that all taxpayers pay the proper amount of tax the better, say I, because then the playing field is level for mine.
I don’t care about “corporate capture of the state”, because in my experience it doesn’t exist. Have you ever actually been in a meeting with LBS and a blue-chip company? I have, both on the company side and on the advisor side. LBS certainly do not act in any sort of tame or captured way.
Anyone who thinks corporate capture of the state does not exist has not looked at the composition of HMRC’s board
Please stop posting crass comments
“Then if HMRC find any errors they can collect a guaranteed penalty (careless and prompted), and give the companies the right to recover said penalties from the advisors…..”
The trouble is Andrew, this appears to be following the route adopted for banks, where the fines don’t hurt and eventually just become a cost of doing business. The state effectively turns a blind eye, because it is controlled by these large “corporate” interests.
HMRC penalties do hurt (or so clients tell me), and the model I propose could hurt advisors badly if they cock up. Even if it’s only 10% of the tax lost (which is low for modern penalties), that would almost certainly outweigh the fee for the advisory work.
A business model which consists of taking on bigger liabilities than your income is’t going to last long: they’d have to minimise the liabilities, and the best way to do that is to be very prudent and unaggressive in what you sign off on.
Oh come on – if you knew anything about big business tax you’d know penalties do not usually apply
Can my clients and previous employers have their cash back, then? You want to talk to the CIS team, they’re all over the penalty regime.
My whole point was to make the penalty system clearly apply to the advisors signing off on the returns. Al you’d need to do is add a new criterion to the existing penalty regime: say raise the standard of “reasonable care” to exclude anything that has been signed off on.
So an “error despite taking reasonable care” attracting no penalty would become “careless” and therefore get 15-30%, simply because the advisor had formally signed off on it.
Taxpayer pays more for assurance, but gets less in enquiry costs.
Advisor gets more fees, but is on the hook for penalties if they’re aggressive.
HMRC gets fewer but bigger penalties, more assurance that returns are correct, and can focus on more valuable areas.
Win for HMRC, draw for the others. I’m happy with that.
I am glad that there are wiser heads that disagree with you
Too few will be in the tax profession. On that I can agree with you
Disagree with me? The only suggestion I’ve made here is one I came up with today during this discussion, so unless you’re counting yourself as “wiser heads” then no-one’s had a chance to express an opinion on it!
The only other suggestion is one that ATO came up with a month or two ago that is still under discussion with no conclusions yet (although I think it could have merit if done right).
I wonder if it is a coincidence that the Director of Enforcement and Compliance in HMRC is from Australia ?
Good point