Tax agent regulator gets more teeth in wake of PwC leaks
The regulator for tax accountants will be given its own budget while loopholes that allow deregistered tax agents to continue operating will be closed, in the federal government’s first response to the PwC leaks scandal.
The amendments to the Tax Agent Services Act, which will be introduced to parliament by Treasurer Jim Chalmers on Thursday, are the first tranche of recommendations from the 2019 independent review of the Tax Practitioners Board led by tax lawyer Keith James.
Treasurer Jim Chalmers: “We are taking seriously the recommendations of the review that the Liberals sat on and ignored.” Alex Ellinghausen
In other changes, Dr Chalmers will be able to amend the Code of Professional Conduct that tax agents must follow to address emerging problem areas, while deregistered agents will no longer be able to work with legitimate practitioners.
The amendments, which represent a small part of the changes proposed by Mr James, were considered by the Morrison government but not actioned after then assistant treasurer Michael Sukkar referred them for further consultations in 2020.
“We are taking seriously the recommendations of the Tax Practitioners Board review that the Liberals sat on and ignored,” Dr Chalmers said in a statement.
The 2022-23 budget provided the TPB with an additional $30 million in funding through the Tax Office to increase compliance investigations into high-risk tax practitioners and unregistered tax agents. It will now have its own separate funding.
“In addition to the legislation we’re introducing this week, we’re also looking closely at additional recommendations including strengthening TPB powers and tougher sanctions for those who breach their responsibilities,” Dr Chalmers said.
The government will seek public consultation on this second tranche of recommendations from the James review, which besides providing stronger sanctions powers for the TPB will widen its information-gathering powers and enable it to publish more detailed reasons for sanctions and terminations on the TPB register.
“These long-overdue reforms to the TPB are an important start but they won’t be the end,” Assistant Treasurer Stephen Jones said. “The previous government turned a blind eye. We won’t.”
The TPB reforms are part of the government’s response to its wider problems of dealing with outside tax consultants who breach confidentiality.
Last month the treasurer accused PwC of a “shocking breach of trust” after revelations by the TPB that it had deregistered PwC partner Peter Collins for two years and sanctioned PwC after certain partners and staff leaked confidential information obtained while advising the government on measures to combat tax avoidance.
Dr Chalmers said he was “absolutely furious, absolutely ropeable” over the PwC leaks to clients and had asked Treasury and Tax Office officials for “any additional steps that we should be taking to protect the integrity of these processes”.
“We want consultation to lead to better policy, not to lead to more profits for the people who are helping us with the consultation,” he said.
The TPB, which has limited powers to sanction large firms, ordered PwC to hold training sessions to help its operatives recognise conflicts of interest. By law, all reference to the PwC and Collins sanctions must be removed from the TPB register after 12 months.
The previous government’s 2020 response to the James review led by Mr Sukkar opposed any change to this 12-month limit because “maintaining time limits retains the right for a sanction to be spent after a reasonable time”. Last month Mr Sukkar dismissed calls for PwC to face tougher sanctions.
Dr Chalmers said: “Breaches in confidentiality completely undermine our efforts to bring people together to tackle the big issues facing Australians.”
Mr Jones said the industry was on notice that there “can’t be a repeat of the Peter Collins scandal”.
“We want to consult with the tax profession about improving the system,” he said. “We can’t do it if they use that information for commercial benefit.”
