- It’s early on in her five-year appointment, but Karen Payne FCA, Australia’s new inspector-general of taxation and taxation ombudsman (IGTO), has changes in mind.
- The IGTO is an independent statutory agency that conducts investigations on systemic tax issues but also engages with the Australian Taxation Office (ATO) on behalf of individuals and business.
- Payne’s relationship with the ATO is pivotal to the effectiveness of her role.
By Deborah Tarrant
It may still be early days in her five-year appointment as Australia’s inspector-general of taxation and taxation ombudsman (IGTO), but Karen Payne FCA, in the dual role since May, makes it clear she has changes in mind. Individual taxpayers, businesses (large and small), tax practitioners and accountants should expect to be hearing from the office of the IGTO on her watch, she says. Not in a bad way, mind you.
It’s more about profile, the universality of taxation – it touches almost every Australian – and what Payne believes is a surprising lack of awareness about what the agency she heads can do.
“Everyone knows about the Tax Office and that they have to pay tax, but not everyone knows about us – and not everyone knows how we can assist taxpayers,” says Payne, a former board member and CEO of the Board of Taxation, tax partner at law firm Minter Ellison, and tax accountant at Ernst & Young (now EY).
“Not everyone knows about us and not everyone knows how we can assist taxpayers.”
“I’m as guilty as everyone else. It probably wasn’t front of mind for me when I was in practice what it is that this agency, and this role, does. Fundamentally, it’s a very important role in the tax administration system.”
Raising the public profile of the inspector-general office
In short, while the taxation ombudsman deals with complaints about tax matters privately, the inspector-general of taxation conducts investigations on systemic tax issues, which result in observations and recommendations that are reported publicly. On top of this, the office – with a staff of 32 including Payne – also makes submissions to parliamentary inquiries and lodges submissions in the consultation phase of new tax reforms.
While not a regulator, the IGTO is an independent statutory agency that represents members of the community and, of course, interacts with the Australian Taxation Office (ATO) on behalf of members of the community. It makes recommendations that are typically on matters of fairness, efficiency or transparency. Payne’s new job has serious clout, but she wants to improve the office’s level of community engagement to redress a critical statistical imbalance.
“When I look at some of the tax complaints in the system, they are largely from individuals, not entities, and whilst individuals pay the lion’s share of tax, tax practitioners and advisers and business, in particular small business, need to be aware of how we can help in the system.
“In the 2019 financial year, the office received some 2700 complaints, 80% from unrepresented individuals.”
The reason is partly evolutionary. The ombudsman’s role was only transferred to the agency in May 2015. “There’s a lot of room to improve the breadth of our community reach,” Payne says.
Prepare for more targeted reports
In the bigger picture, with Payne heading IGTO, we can expect its reviews of tax system issues and trends to be more tightly targeted and timely. Reports need to hit the market when they still have relevance, she says.
“In the past with the review process, there’s been an area of concern identified and the review might take 12-18 months to complete, so when you deliver the report the system has moved on,” notes Payne.
Clearly, she sees room to improve scoping and reporting for reviews. For instance, when pressed on its The Future of the Tax Profession report about the impact of digitisation, undertaken at the request of Australia’s tax commissioner Chris Jordan, she says: “I think some people might find that it’s hard to make anything pragmatic or practical out of the recommendations. It’s a good example of a review I’d like to do in a more targeted way.”
What is the cause of most complaints?
The biggest number of complaints received by the tax ombudsman, by far, concern debt collection. It’s a hot topic for taxpayers, the ATO and, therefore, the IGTO.
Payne gives a thumbs up to the IGTO’s 2015 report on debt collection (the ATO has adopted almost all its recommendations), but says the focus of its 2019 report on the ATO’s use of garnishee notices was widely misunderstood.
That review came in the wake of Fairfax/Four Corners investigations in 2018, aired as “Mongrel Bunch of Bastards” on the ABC, in which the ATO was alleged to have taken a heavy-handed approach to collecting tax debts from small businesses.
The terms of reference for the review were very narrow, exploring whether the particular instances highlighted by Four Corners constituted an abuse of power by the ATO – “whereas the community thought [the review] was about how garnishees were used more broadly as part of the debt collection process,” Payne says.
It was another case where more effective communication could have helped. So will tax debt collection be a topic she zooms in on? Right now, she’s planning a “thought leadership” article that, among other things, shows how Australia compares internationally.
“For the most part, we are in sync with the rest of the world. In some parts of the [tax] debt collection system, we’re probably ahead. [But] I’m not saying our system is perfect or there isn’t room for improvement,” she says.
Payne’s office also has a watching brief over the Tax Practitioners Board (TPB), which is currently the subject of a review into its effectiveness. The profession is watching this review closely, amid suggestions the TPB has become too aggressive, too ATO-driven and lacks an appreciation of the real world in which tax agents operate.
The findings of the review, being led by Hall & Wilcox consultant Keith James, aren’t due for release until 31 October. However, Payne can report her office has recorded year-on-year increases in complaints about the TPB – up from 53 in the 2017 financial year to 88 in the 2019 financial year. Complaints predominantly concern the TPB’s findings of breach of conduct.
Talking with the ATO
Pivotal for its effectiveness is the inspector-general of taxation’s relationship with the ATO. Payne’s predecessor, Ali Noroozi, who left the role in November 2018 after 10 years, alluded to tensions between his office and the ATO. One that went public was the ATO’s handling of the Fairfax/Four Corners exposé.
During Noroozi’s tenure there were a number of proposals, including for an appeals group within the ATO for tax disputes and an oversight board to sit above the ATO, prompted by his concerns that the Tax Office has too much power concentrated in its commissioner.
Noroozi also questioned having both the ATO and the IGTO reporting to Treasury.
Payne herself previously has identified the need for an overarching guardian for the Australian taxation system to ensure it’s fair and fit for purpose. She now seems to have landed if not that exact role, then the closest position the system has to it. Payne, however, does not identify stress between the two offices.
“I think the relationship is very good. It’s constructive, professional, respectful. I’ve had a successful working relationship with the Tax Office throughout my career. I think the team here also have very constructive relationships.
“I would add it’s important that, as an agency, we are seen to be impartial as well as independent and acting with integrity when we’re doing reviews, so we have both the respect of the community and also the agencies we’re investigating.”
A long association with the tax commissioner
Payne has a long association with the ATO’s Chris Jordan. When she was a Minter Ellison partner she was on the expert advisory panel of the Board of Taxation; Jordan, then a KPMG partner, was also a member. Jordan worked on a number of the reviews Payne participated in, including those into managed investment trusts, venture capital funds, limited partnerships, and the arm’s length debt test.
Jordan was a member, then deputy and then chair of the Board of Taxation, and later as tax commissioner was an ex-officio member, at the time that Payne became its CEO.
So does that make her current role easier or harder? “I think it helps that he and I have had a constructive professional relationship before I have taken up this role, and I hope that continues,” she says. “Chris would also know I am a thorough professional and I intend to do a good job, and I hope he would respect me for wanting to do that.”
It takes a suite of skills
Picture: Karen Payne FCA.
Payne’s latest role is yet another pinnacle in a career that began as an accounting cadet in the mid-1980s at Ernst & Whinney (one of the foundation firms that later merged to form Ernst & Young) while she studied for a Bachelor of Commerce at the University of NSW and graduated in 1986.
“The whole time I was thinking about doing my professional year and getting chartered qualifications,” recalls Payne. A career in advisory and audit soon gave way to a specialisation in tax. Subsequently, Payne took time out to study law full-time.
Law is a fine complement to accounting, Payne says. “Tax work is an amalgamation of all your commercial and legal skills,” she says. “When you’re working with clients trying to solve tax problems, you’re dealing with not just tax law, but with their cash flow, property law issues, administrative law. It’s an opportunity to use the suite of skills you’ve accumulated, and because of that it’s also very varied in terms of what you’re doing day to day. I found that attractive.”
Ambition drove her choices, too. “My decision was a little bit strategic because I thought in the firm [she returned to work for Ernst & Young in 1994, after her legal studies] I would get to do the interesting, bigger-deal work.” Doubtless it provided further impetus for her to land a role that makes her a key influencer at the top of both professions. That all sounds high-powered, but it brings with it ample practicalities to manage.
“Given that we have both a complaints and a review function, our resources are more constrained,” Payne says. “I want to ensure if we’re doing reviews that’s not at the expense of delivering an effective complaints service and our team is not overloaded to perform those functions.” It’s a juggle.
Connect with the Inspector-General of Taxation and Tax Ombudsman
The Inspector-General of Taxation and Tax Ombudsman’s (IGTO) services are free to all taxpayers – unrepresented individuals, tax practitioners, directors and businesses – either directly or through their representatives.
As the new head of IGTO, Payne has prioritised improved communications as a way to ramp up services. These include basics such as a website redesign focusing on user experience, improved access for culturally and linguistically diverse taxpayers online (IGTO’s brochures have now been translated into 54 languages), and an enhanced social media presence via Facebook, LinkedIn, YouTube and Twitter.
Given the crucial role tax practitioners play, Payne and her colleagues welcome opportunities to speak to them directly, either via discussion groups, industry and professional seminars or other events.
Find out more at igt.gov.au
Does the ATO have too much power?
When Australia’s former inspector-general of taxation, Ali Noroozi, left the post, he shared his thoughts on the position with Acuity.Read the Ali Noroozi interview