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‘Taxpayers need more protection’

Summary

Rulings – both public and private – have been a feature of the tax system when there are gaps in the tax law and they also allow for interpretation of complicated tax issues.Leibler, a senior partner at Arnold Bloch Leibler, made the comments on Wednesday delivering Melbourne Law School’s annual tax lecture. In the case of complex business transactions dealing with uncertain areas of tax law, the only real way of achieving certainty in Australia is to obtain an early ruling. In that way, the Commissioner essentially acts as a lawmaker, Leibler noted.“If the taxpayer disagrees with the Commissioner’s position, they must accept it or resort to protracted and expensive litigation. Of course, many taxpayers decide not to, or simply cannot afford to pursue that avenue,” he said in the speech.However he warned there remain “significant questions” about whether a taxpayer who has followed an interpretation previously accepted by the tax commissioner is protected when those issues come to the attention of the ATO after the change of interpretation in the context of an audit, even an audit on other issues. “It is necessary for continued clarity, confidence and trust in the tax system – ultimately for the rule of law – that taxpayers be relieved from tax shortfalls, penalties and interest. By providing protection in legislation there can be no question of the Commissioner exceeding his remit,” he said.“Without that protection, despite the Commissioner’s power to allocate resources, issue rulings or provide minor relief by legislative instrument, taxpayers would be at the mercy of the Tax Office which could, perhaps even must, immediately issue assessments according to their current, albeit new, interpretation of the law, no matter the care taken by those taxpayers”.“This serves no purpose to our society and is antithetical to the rule of law”.Leibler was one of the advisers heavily involved in a tax office initiative “Project Do It” which ultimately gave taxpayers an amnesty if they voluntarily disclosed offshore interests that had not previously been declared. At the time taxpayers were given protection – unless there was criminal activity – in exchange for declaring their overseas assets. By the end, some $6.7bn of previously undisclosed assets were brought within the Australian tax net. Leibler said that program was a “pragmatic and efficient use of the power to compromise” which he argues benefited the tax system as a whole.He said the ruling system still remains an important mechanism for providing certainty to taxpayers and a valuable means of dealing with issues as they arise without having to resort to kneejerk legislative fixes, which risk unintended consequences or, alternatively, drawn-out legislative reform.Despite the value of rulings, particularly public rulings, there is a risk overuse at the expense of a proper process of considered legislative [email protected]

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