The Tax Practitioners Board is aggressively targeting 2000 accountants who overclaimed more than $1 billion of work expenses for their clients last year, TPB chairman Ian Klug said.
In a stinging address to the Tax Institute, Mr Klug, who took over as Board chairman in January, said 1600 “high risk” tax agents had filed alarmingly high work expenses claims for 2.9 million clients in 2018, with the focus now widened to 2000 agents.
“The very people given the position of trust in the system are those abusing it, deliberately or otherwise,” Mr Klug said, noting Tax Office research that 78 per cent of tax returns by tax agents included incorrect claims, against only 57 per cent errors in self-prepared returns.
He signalled a tougher line by the Board, which was set up in 2010 to take over administration of close to 80,000 tax agents from the state-based Tax Agents’ Boards.
Mr Klug cited the savage criticism for the corporate and prudential regulators by the Hayne royal commission, which found “too little attention has been given to regulatory, compliance and conduct risks”.
“We need to be mindful of the intense public examination this sector is subject to now,” Mr Klug said. “Although registration of tax practitioners will always be a central function of the [Board], our attention and focus is moving more into the regulatory space.”
In 2018-19, the Board applied 749 sanctions against rogue tax advisers, a 200 per cent increase over 2017-18. “We expect to see this trend continue upwards into the future,” he said.
Over the past two years, a decrease in work-related expense claims has lifted tax revenue by an estimated $560 million. If the so called “tax gap” for individual taxpayers had been completely closed in 2018-19, Mr Klug said, ATO figures suggest the federal budget would have been in surplus by $8 billion.
Late last year,the Board wrote to 6000 tax agentswho had not filed tax returns for themselves or owed tax debts.
“[We] saw in a space of only six weeks – as a result of one letter – some 2000 agents voluntarily paid almost $40 million in tax debt and updated around 6000 lodgements.”
The move by the Board to seek a wider role in overseeing tax accountants, replacing smaller industry bodies to reduce the compliance burden, comes as former deputy chair of the Board of Taxation, Keith James, and former president of the Tax Institute, Neil Earle, are finalising an independent review of the Board and the Tax Agent Services Act.
Mr Klug said the review supports a recommendation from the Hayne royal commission that information sharing between agencies should be formalised through legislation to make it mandatory rather than discretionary.
The review also suggests expanding the Board register withfurther details of tax practitioners, including detailed reasons for any sanctions or terminations, reasons for rejections of renewal, and a list of known unregistered providers.
“We’ve got a new strategic direction, a renewed energy and a common goal to work towards – which is protecting consumers and ethical practitioners by strengthening the Board as an efficient and effective regulator,” Mr Klug said.
The Board is pressing for wider disciplinary powers as it focuses on the 2.5 per cent of tax agents labelled high risk. This was “a group that has significant leverage, often as the drivers or initiators of illegal tax schemes.
“Tax practitioners who are involved in the black economy and related activities such as phoenixing are clearly at the more extreme end of the misconduct scale.
“At the pointy end are those advisers involved in tax crime, evasion or avoidance. And in the middle is a graduated mix of practitioners who display low-to-high risk behaviours.”