Preserving trust between tax professionals and the Australian Taxation Office (ATO) is necessary to provide the best outcomes for small business, accounting industry expert Tony Greco says, as the federal government chases the PwC tax leak scandal with a new legislative crackdown.
Treasurer Jim Chalmers will on Thursday table legislation granting dedicated funding to the Tax Practitioners Board (TPB), The Australian Financial Review reports, on top of the $30.4 million it is set to receive over four years through the ATO.
In doing so, the federal government will provide direct funding to the organisation responsible for policing the conduct of tax agents, and deregistering them in case of malpractice.
The legislation is also set to revise the code of conduct tax practitioners adhere to, and clamp down on the ability of deregistered tax professionals to carry on work alongside their registered colleagues.
Those expected changes come after the TPB’s January findings that Peter-John Collins, a former tax partner of Big Four accounting firm PwC, “made unauthorised disclosures” of confidential tax consultations with the ATO to other staff at PwC.
The watchdog claimed that PwC “failed to properly manage conflicts of interest”, as the private consultations focused on how the government could crack down on multinational corporate tax avoidance.
TPB deregistered Collins as a tax agent, banned him from practising as one for two years, and forced PwC to institute in-house conflict of interest training.
The findings also publicly infuriated Chalmers, who said the incident violated the government’s trust.
Now, the federal government wants to show “there are consequences” for sharing sensitive information, says Tony Greco, senior tax advisor at the Institute of Public Accountants.
The TPB has “been a little bit in the back, in the shadows of the ATO, but all of the sudden they’re the ones who have to beef up to counter what’s been happening,” Greco told SmartCompany.
And although the PwC scandal involves a Big Four firm primarily interested in multi-national corporations, Greco says the incident also has serious implications for small business.
The ATO engages with industry professionals through the National Tax Liaison Group on the creation and implementation of new rules and guidelines, using confidential meetings to hash out complex tax matters.
Greco, who serves on the liaison group, says it would be near impossible to advocate for policies that serve small businesses if the ATO could not trust its industry confidantes.
“If you do sign up as part of the consultation, it’s very hard for the government or the Treasury not to talk to practitioners in the industry, because they’re the ones that have the insight,” he said.
“So if you try to close or tighten the laws, you want [tax professionals] to provide the guidance on how to do it.
“They’ll be able to help the government or Treasury to design the rules to achieve whatever they’re trying to achieve.”
Chalmers agreed, telling reporters in January that consultations were not “possible without integrity and trust in the system”.
One recent example affecting small business is ongoing consultation around the new tax agent linking system — a measure the ATO says will improve data security, but which groups like the IPA fear will require small business owners to navigate a complex and arduous sign-up process.
“We don’t have an issue with the ‘why’, it’s a good example of administration,” Greco said.
“We get it. The ‘why’ is not in question. But the ‘how’ they have proposed is just a six-step [process], it could go to eight steps.
“It’s administratively cumbersome, it’s a big ask for the small end of the market to undertake all those steps.”
Tax professionals can put those influential meetings at risk by exploiting confidential knowledge for short-term gain, he adds.
“There are obligations on people like myself who participate in those confidential consultations,” Greco said.
“We understand you shouldn’t be applying that for commercial value, that’s a clear no-no.”
Greco says he is looking forward to reading the full text of the legislation, which is slated to act on the recommendations of a 2019 independent review of the TPB.
Recommendations of the report include significantly bolstering the TPB’s sanction powers, including permanent disbarment and external intervention orders.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
