Lessons for Tax Administrators for the Introduction of the OECD's 'Enhanced Relationship' Model: The Australasian Experience
25 Pages Posted: 24 Dec 2015
Date Written: December 24, 2015
The rule of law imperative, so often espoused by industrialised nations, is under siege as tax systems attempt to interface with an ever increasingly complex and globally focused business environment. Compliance by taxpayers and enforcement by the tax administrator has become progressively problematic.
Various policy responses have evolved. Attempts to rewrite and simplify taxation legislation have met with limited success. The development of tax intermediaries, an industry devoted to assisting taxpayers to comply has provided some relief. Novel approaches to tax administration have also featured.
A particular of approach that has been adopted by a number of industrialised nations has been to move the tax administrator from a command and control posture to a more sophisticated and responsive form of regulation. The OECD has recently endorsed such an approach terming it the “enhanced relationship” model. For the last decade a derivation on this initiative has been championed in Australasia under the banner of “responsive regulation”. Pursuant to this model, the administrators’ approach reflects the posture adopted by the taxpayer. Thus, the focus is on extending assistance to compliant taxpayers and punishing recalcitrant taxpayers. It is thought that this model most effectively encourages voluntary compliance by taxpayers and thereby enhances the efficiency of tax administration.
A feature of responsive regulation is for the tax administrator to form community partnerships with other stakeholders in the taxation system. Accordingly, tax administrators describe their relationship with intermediaries as collaborative or a partnership. An “enhanced relationship” in the OECD’s terms. This is in contrast to historical precedents where typically the relationship has been cast as adversarial.
The notion of tax intermediaries, or more particularly tax practitioners, forming a partnership or enhanced relationship with tax administrator presents theoretical concerns. In particular, issues relating to conflicts of interest, lack of transparency, consistency in application and regulatory capture are conceivable. These concerns have been borne out by research in the Australasian environment. Whilst the partnership or enhanced relationship approach to tax administration may be worthy of consideration by other countries in the region the model demands further development and, especially in the Asian context, may need to cater for cultural nuances.
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