Sanction regime changes to bolster TPB’s armoury, says IFPA
The IFPA has welcomed measures to enhance the TPB’s sanctions regime but says harsher civil penalties should be reserved only for the most recalcitrant offenders.
The Institute of Financial Professionals Australia says the proposed reforms to enhance the Tax Practitioners Board’s sanction will help curtail inappropriate behaviour in the tax profession.
In mid-December, the government released a consultation paper reviewing the sections regime administered by the TPB as part of its response to the PwC tax scandal.
The consultation paper has proposed reintroducing criminal penalties for unregistered prepares and broader and increased civil penalties in the TASA.
It also proposed introducing enforceable voluntary undertakings with tax practitioners and introducing contingent and interim suspension.
The IFPA said the introduction of criminal penalties will be an effective measure for deterring unregistered preparers.
“It is urgent and essential that unregistered preparers be removed from the tax system,” the IFPA said in a submission to the consultation paper.
The IFPA said individual taxpayers often don’t understand the difference between a registered and an unregistered tax practitioner.
“As such they are easy targets for unregistered providers hawking their services on mobile marketplaces and other online platforms,” the submission said.
“When it all goes wrong it is the ‘tax adviser’ not the ‘unregistered tax adviser’ that is blamed, casting a dark shadow across the whole profession.”
The IFPA calls for the penalty unit amount to be set at 300 penalty units (currently $93,900) where an unregistered practitioner provides taxation services for a fee.
For unregistered practitioners who advertise for tax-related services, the fee should be 50 penalty units which is currently $15,650, the submission said.
For tax practitioners who allow unregistered prepares to perform tax services on their behalf, the IFPA advised that the penalty should be 25 penalty units and for second-time offenders, 300 penalty units.
“The impact of unregistered preparers on the system cannot be understated or over penalised,” the association said.
However, the IFPA said there should be “intentional disregard” by the preparer for criminal offences to be applied.
“Care must be taken to ensure that criminal penalties are only applied to those unregistered preparers who demonstrate an intentional disregard for their legal obligations,” it said.
“For example, an otherwise registered and compliant tax preparer who, for serious family reasons, misses their TPB renewal deadline but prepares tax returns after their registration lapses, should not face criminal penalties.
“In such cases, at first instance, a caution may be appropriate, and even a caution may be too harsh depending on the preparer’s particular circumstances.”
The IFPA also said the broader and increased civil penalties proposed for tax practitioners and unregistered preparers who make false and misleading statements to the Commissioner and TPB are appropriate and will help curtail unacceptable behaviour.
However, the association warned that every case – particularly concerning individual offenders – should be considered on its merits.
“Penalties such as $782,500, and soon to be $825,000, for individuals should be a last resort to correct recalcitrant behaviour, lest we risk the actions of a few inappropriately imposing potentially practice ending penalties on otherwise compliant preparers,” the submission said.
The IFPA said that unregistered preparers providing tax agent services for a fee or reward, or falsely representing to others that they are a registered practitioner, and registered tax practitioners who make false or misleading statements to the Commissioner, employ or use the services of individuals or firms that have been deregistered by the TPB, or sign off on documents that have not been prepared by them should face the harshest penalties.
In regards to the introduction of contingent and interim suspensions, the IFPA said these should only be used in very limited circumstances.
“Interim suspensions pose “the risk of unfairly damaging careers and livelihoods of tax practitioners if used inappropriately or incorrectly,” the submission said.
“The fact that the interim suspension is a reviewable decision does not necessarily overcome this issue as the reputational damage may have already been done. Therefore, it is essential that interim suspensions only be used in very limited circumstances.”
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