Indirect Tax Consulting Group by afr15630


									Indirect Tax Consulting Group
Indirect Tax Consulting Group Pty Ltd ABN 57 062 955 220                                  GST • FUEL GRANTS
Level 9, 37 Bligh Street, Sydney NSW 2000                             R&D INCENTIVES
Tel (02) 9221 2888 Fax (02) 9221 7222 Email                        PAY-ROLL TAX

9 August 2007

General Manager
Tax Systems Review Division
The Treasury
Langton Crescent

                                     PRIVATE AND CONFIDENTIAL

via email:

Dear Sir


We are writing to you to provide our comments regarding the exposure draft of the Tax Laws
Amendment (Tax Agent Services) Bill 2007 and its impact on our business and industry. We are
concerned that the proposed reforms will adversely impact on consumer protection and
competition. We request that you treat our comments as confidential and they not be made public.

We respectfully request that the Government takes notice of our firm’s concerns and
recommendations in relation to the proposed draft legislation designed to reform the registration
and regulation of tax practitioners.

Our submission relates to the provision of indirect tax services and we note that the draft Bills and
EM, including the Transitional provisions, make no direct reference to them.


Our firm commenced in early 1994. Most of our professional staff held senior positions within
the Australian Taxation Office (ATO) in sales tax then within indirect tax sections in the large
public accountancy firms prior to us commencing our own practice. We all hold various tertiary
qualifications, including accountancy, law and economics. Some of us are members of either of
the two main professional accounting bodies, but we neither hold, nor are we required to hold
public practice certificates.

The firm practices primarily in the area of what can be defined as indirect taxes, as our name
implies. We will explain this term and what we believe it encompasses in more detail later in this

submission. We are one of many such private practices throughout Australia and you may well
receive submissions from some others.

Our practice generally does not prepare and lodge Business Activity Statements (BAS) and never
lodges income tax returns. We provide our professional services for a fee.

Background of our Firm

Our firm has operated continuously since 1994 providing high level advice to corporate taxpayers
and Government departments, primarily on a range of State and Federal indirect taxes, including
(historically) sales tax, GST, State payroll taxes, Wine Equalisation Tax (WET), Luxury Car Tax
(LCT), fuel tax credits and prior to this current scheme the diesel fuel rebate schemes, as well as
research and development tax incentives, such as grants and concessional deductions.

Indirect tax consultants like us continue to advise and educate a network of traditional direct tax
firms such as accountants and legal firms, and professional bodies who are not sufficiently
specialised to advise on many complex indirect tax scenarios. These direct tax practitioners refer
many indirect tax matters to us to resolve issues for their clients and recognise our specialised
experience and knowledge in these disciplines. We have over 400 accountants in public practice
who refer us indirect tax matters for resolution. We provide a valuable and professional service
both to them and their clients.

Based on our understanding of the proposed reforms it seems possible that our firm may be unable
to advise in many of these indirect tax disciplines should the proposed tax agent registration
regime become law in its current form.

Historically, membership of the TIA appears to have provided our firm with the ability to advise
in these areas. However, the proposed reforms in their current form have the propensity to close
our long standing business if we are ineligible to provide our professional services. We would see
this as being a restraint of trade and the ability to derive our livelihoods.

Evolution of Indirect Taxes

Indirect taxes have evolved and changed especially over the last 7 years. In particular, GST has
replaced sales tax, also the fuel schemes have changed with revenue authority responsibility also

Industry, professional associations and Governments need to understand that indirect tax
consulting is a profession in its own right.

Over many years we have advised numerous large corporations, Government departments and
professional associations on a range of State and Federal indirect taxes for which historically there
has been little or no tertiary education available e.g., prior to 2000 there were no GST courses
leading to indirect tax qualifications. This was also the case with sales tax, and it equally now
applies to WET, LCT, fuel tax schemes, as well as R&D and payroll taxes.

Tax agent history has primarily focused on direct income tax as the foundation for registration.
The tax consulting profession has changed due to the range and impact of indirect taxes. Note the
amendments to the Taxation Administration Act 1953 from 1 July 2000 to specifically define

“indirect tax” and “indirect tax law” to mean GST, WET and LCT, and more recently from 1 July
2006 it added “fuel tax credits”.

We believe that there are numerous indirect tax consultants who are neither “tax agents”, “BAS
Service Providers”, “legal practitioners” nor “customs agents”.

The typical indirect tax consultant has significant ATO experience and tertiary qualifications, but
no “tax agent” or “legal practitioner” status, and is not a regular bookkeeper type “BAS service

Further, most voting membership criteria for Recognised Professional Associations (RPAs) do not
officially acknowledge any status for specific “indirect tax consultants” experience. This is
notwithstanding we have acted for such RPAs over many years on particular issues and provided
training to their members. Indeed, Stephen Baxter of our firm is representing the Institute of
Chartered Accountant (ICA) in discussions with Treasury regarding GST on residential property
transactions. He also heads the ICA’s GST In Practice Discussion Group in Sydney.


We provide professional advice in the following disciplines:

•    Goods and Services Tax (GST);
•    Sales Tax (only historically);
•    Research and Development (R&D) – tax concessions and commercial ready grant
•    Fuel Tax Credits (FTCs) and the preceding schemes;
•    Export Market Development Grants (EMDG);
•    State and Territory Payroll Taxes;
•    Wine Equalisation Tax (WET); and
•    Luxury Car Tax (LCT).

We now comment in brief detail on some of the above disciplines in relation to what each covers
and to whom it is provided, rather than the technical workings of each one.

•    GST

We have provided extensive advice to large corporations, including dismantling sales tax and
assembling and implementing GST, voluntary disclosures as to underpayments and overpayments,
and prudential GST reviews, making representations to the ATO, preparing objections and general
compliance consulting. This is both with our historical large client base and our referral network
of accountants, law firms, customs brokers and other business advisors.

Most specialist GST advisors were formerly sales tax consultants or ATO officers and are not tax
agents, BAS Service Providers or general tax practitioners.

•    R&D

This discipline essentially involves two Federal Departments as it is co-administered. These are
AusIndustry, which essentially assesses R&D eligibility and administers the registration process,
and the Taxation Office which assesses the quantification of expenditure and claims in an
applicant’s income tax return.

The eligibility part of the scheme does not require knowledge or expertise in taxation law. There
are no known tertiary subjects or courses to train professionals in this area. It is a highly
specialised discipline where we provide advice direct to potential and actual claimants. We are
also referred many clients by public accountants, because they do not have the necessary
experience or expertise to provide their clients with such a professional service. They are in this
position mainly because of the infrequency of having to give advice in this area.

The same comments apply with commercial ready grant applications, where there is no direct
interaction with the Australian Taxation Office.

Ultimately, under either a tax concession claim or grant the end result will be reflected in a
company’s income tax return. This is an area of specialisation beyond the scope of most public

Many R&D advisors are either engineers, technical specialists or were formerly in government or
were customs or sales tax consultants and not tax agents, BAS Service Providers or general tax

•    Fuel Tax Credits (FTCs)

We have practised in this discipline since we commenced business. The earliest version of this
scheme was contained in the Customs Act, and until relatively recently, it was administered by the
Australian Customs Service. It is now within the administration of the Taxation Office and claims
are made in an entity’s BAS.

This is a specialised discipline where we provide professional services both direct to clients and
through referrals by public accountants.

In most cases FTC claims are straightforward and generally we do not prepare such claims. Our
involvement in this discipline is with much larger and complex claims, where a considerably
higher level of expertise is required. This is also a discipline where there are no tertiary courses or
subjects offered and our expertise is accumulated through experience. To our knowledge, there is
not even a professional discussion group in this discipline and it has not been incorporated into the
major accounting bodies’ CPD programmes.

Most FTC advisors were previously customs or sales tax consultants and are not tax agents, BAS
Service Providers or general tax practitioners.

•    EMDG

It is arguable whether the preparation of EMDG claims would be covered by the Bill in question,
as it is not covered by a Taxation law.

We include it to demonstrate the fact that it, like many of the disciplines above, is not usually
provided by public accountants as it is an area of specialisation.

•    WET & LCT

Wine Equalisation Tax (WET) and the Luxury Car Tax (LCT) stemmed from the old sales tax law
which was the origin of our main discipline when we commenced practice. They are very
specialised fields and our experience is longstanding.

Most WET and LCT advisors were previously sales tax consultants and are not tax agents, BAS
Service Providers or general tax practitioners.

Interaction with the Tax Agents Services Bill

Our research and discussion within our industry, professional bodies of which we are members
and tertiary institution academics would indicate that indirect taxes are not specifically considered
and covered by the Bill. This of course could have the effect, as we have stated earlier in this
submission, that perhaps it may be an unintended consequence, but it could be a restraint of trade
for our company and industry, be anti-competition and reduce consumer protection.

We note subsection (iv) of section 602–5 of the Bill makes a concession for licensed customs
brokers. We believe and argue that a similar concession should be extended to “indirect tax
consultants”, however that term may be defined.

The Bill in its current form excludes providers of primarily indirect tax advice from its ambit.
This effectively would exclude a whole (private) industry from practising and would negate
proper competition.

It is true that a significant portion of indirect tax advice is provided by the large public accounting
firms. We would presume that they would continue to practice in indirect taxes under the cover of
the overall firm’s tax agent’s eligibility. The ability of the large public accounting firms to
continue to provide indirect tax advice, if small independent firms cannot, is an inequity and
negates competition. We have similar tertiary qualifications and comparable, if not greater,
experience to deliver these services than the major accounting firms, yet we are restricted from
delivering professional services in our chosen disciplines because of the way the Bill is currently

We perceive no problem in indirect tax providers meeting the proposed registration requirements
(section 602-30(3)), nor the code of professional conduct (section 604-10), nor satisfying the need
for professional qualifications (section 602-40) as contained in Schedule 4 of the accompanying

However, because in many Recognised Professional Associations (RPAs) voting membership is
restricted to the more income tax and accounting backgrounds “indirect tax consultants” would
appear to be excluded and therefore are disadvantaged competitively.

In addition, we are more than “BAS Service Providers”, but carry out all similar duties of tax
agents except we only advise on “indirect taxes”. Therefore registration is needed as an “indirect

tax agent” or “indirect tax consultant”. For example, a BAS service provider may not be able to
prepare an objection or act for the client with the ATO, whereas a tax agent is able to do so. This
anomaly needs to be acknowledged and rectified.


We recommend another type of “tax agent” should be allowed to register, viz an “indirect tax
consultant” or “indirect tax agent” based on experience and tertiary qualifications, because it is an
established but separate specialised discipline to that of income tax. Conversely, you may
consider excluding indirect taxes from the application of the proposed law as a solution.

We request that Treasury advocates for the inclusion of the category of “indirect tax consultant”.
We argue that the definition of indirect tax consultant includes the following disciplines at the
very least:

•    GST
•    R&D
•    FTCs
•    WET
•    LCT

Many specialised firms have invested considerable time and effort to become corporate indirect
tax experts in providing high level advice on a range of such disciplines over many years and
significant changes.

We submit that the proposed reforms do not cater for many of these specialised firms such as ours
that have arisen due to demand from business to advise on the increasing range and complexity of
indirect taxes and regular changes to certain taxes e.g., GST, WET, LCT, fuel tax credits, payroll
taxes, etc.

A concession has been extended to customs brokers and we strongly believe that a similar one
should also be extended to indirect tax consultants. We are an industry numbering in the hundreds
of professionals in private practice around Australia and to alienate us would create not only an
iniquitous situation, but also deny many businesses and public practitioners of our professional
expertise and services.

Indirect taxes are a vital part of the overall “tax industry”. They are not traditionally learnt
through tertiary study like mainstream income tax etc. It is mainly through long years of
experience and self education that practitioners well versed in these disciplines emerge. They
must deal with many Government departments outside the Australian Taxation Office e.g.,
AusIndustry with the R&D Schemes.

As the Bill stands, we believe it represents a policy failure. The Bill fails in its attempts to further
consumer protection and competition. Surely consumer protection and competition is enhanced if
taxpayers are encouraged to seek the advice of specialists rather than attempt to meet their tax
responsibilities without seeking advice. Surely consumer protection and competition is enhanced
if specialists are allowed, indeed encouraged, to be able to provide specialist advice. Surely
consumer protection and competition is diminished, if general tax practitioners are permitted to

advise on complex areas of indirect taxation law that they rarely encounter where pure indirect tax
specialist firms cannot advise in those areas.

We provide a vital service to taxpayers and public practitioners and to exclude us from continuing
to provide our professional services would create enormous problems for taxpayers and
accountants and be anti-competitive.

Please contact myself, Steve Baxter or Steve Callanan, on 02 9221 2888 or by email if you would
like to discuss any of the matters raised in this submission. If you see a benefit in us meeting with
you at your offices to discuss these issues we would be prepared to make the effort. We look
forward to your positive response.

Yours sincerely

John Walden

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