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The recommendation to pass the bill comes despite concerns over hefty new promoter penalties and a push to separate its PRRT provisions.
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Committee approves PwC reforms, downplays concerns of ‘chaotic’ agenda
13 May 2024
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The senate economics committee has recommended passing a bill that cracks down on tax adviser misconduct by increasing penalties for tax promoters 100-fold and overhauling secrecy provisions in response to the PwC scandal.
The recommendation from the committee’s report into the Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023, handed down on Friday, comes despite concerns raised about the “highly disproportionate” scale of the promoter penalty provisions.
The Coalition has also accused the government of having a “chaotic legislative agenda” after controversial changes to the Petroleum Resources Rent Tax were attached at the end of four schedules addressing the PwC response.
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The report said: “The committee believes that schedules 1-4 are important to ensure that tax practitioners are deterred from abusing confidential government information.”
“The committee further believes this bill will introduce appropriate measures to respond to tax practitioner misconduct, to protect whistleblowers bringing misconduct to light.”
It also downplayed concerns about addressing both PwC and PRRT in one bill, saying “The committee notes the calls from industry for these reforms to pass the parliament quickly to provide the sector with certainty and greater stability.”
Draft legislation containing the Treasury’s PwC reform package was released in September and introduced into the House of Representatives in November as part of a bigger bill that amended several acts.
The reforms seek to overhaul promoter penalty provisions to ensure they are an adequate deterrent to tax practitioner misconduct and account for bespoke and complex promoter activity across multiple jurisdictions.
In its report, the senate committee responded to 15 submissions from a range of key stakeholder groups, organisations and individuals.
It said it was satisfied from submissions that the 100-fold increase in maximum penalties for advisers and firms that promote tax avoidance schemes (from $7.8 million to over $780 million) would be an “effective deterrent against tax adviser misconduct.”
It also welcomed the ATO’s submission that “the extended investigation and enforcement powers support the application of the promoter penalties.”
Tax whistleblower protections would be extended under schedule 2 of the act and the burden of proof for certain claims of protection would be reversed to encourage disclosures “without fear of detriment”.
“The committee welcomes evidence heard that these whistleblower protections will remove barriers for people thinking of disclosing information, and will provide clarity around what protections they have available,” the report said.
For schedule 3’s reforms to the TPB, the committee said it heard from witnesses that the reforms would “enhance public confidence in tax professionals by extending timelines for investigation and publishing misconduct on the register”.
It said testimony given during committee hearings evidenced how publishing information about misconduct for five years would help increase deterrence and how extending TPB investigation timelines would enable more complex investigations.
Finally, it said it was assured that information-sharing provisions under schedule 4 would help prevent another PwC scandal from happening when relevant protected information was not shared between government entities.
“The committee heard from submitters and witnesses that this schedule strikes the right balance between sharing protected information with government entities without mandating disclosures of this information.”
A dissenting report from Coalition senators recommended the provisions be subject to a post-implementation review to identify any “unintended consequences” caused by a “highly disproportionate scale of the proposed new promoter penalty provisions”.
It also accused the government of carrying out a “chaotic legislative agenda” by combining two distinct issues into one bill.
“The government’s decision to attach two unrelated measures to one bizarre piece of ‘wedge-isolation’ demonstrates the seriousness with which it approaches these issues,” it said.
The Greens supported schedules 1-4 but said the measures “did not go far enough”.
“To brand schedules 1, 3 and 4 as a response to the PwC matter is misleading – these measures do not go far enough to address the shortfalls revealed by this scandal and do not directly address the shortcomings in our regulatory system.”
“However, this is a missed legislative opportunity to crack down on promoters of tax avoidance schemes and increase the powers and discretion of the Tax Practitioners Board,” its dissenting report said, calling for the board to be separated from the ATO.
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