The government will introduce reforms in the regulatory framework that cover three priority areas
The government has committed to implementing the "biggest crackdown" on misconduct committed by tax advisers.
The move comes in response to the PwC scandal that revealed deficiencies in regulatory frameworks. The government aims to restore public trust in the tax system and capital markets by addressing misconduct and ensuring fair contributions from multinational corporations.
The government said it is acting to restore public confidence by increasing penalties, giving regulators "stronger teeth" to investigate and prosecute perpetrators and boosting transparency, collaboration, and coordination within the government.
The reform covers three priority areas: strengthening the integrity of the tax system, increasing the powers of regulators, and strengthening regulatory arrangements to ensure they are fit for the purpose.
Legislation to strengthen the integrity of the country's tax system and increase regulators' powers will be introduced this year, with consultation on the reforms beginning shortly. The government emphasised the recent actions taken build on the work already underway to improve government processes in the wake of the PwC tax leaks scandal.
The proposed reforms intend to hold tax agents and advisers accountable for aiding clients to evade Australia's tax laws. Penalties for promoting tax exploitation schemes are set to significantly increase, from $7.8 million to over $780 million. The reforms also expand tax promoter penalty laws, making them easier to apply and extending the time limit for initiating legal action.
Regulatory bodies will be granted greater authority to identify and discipline those who violate tax laws. The proposed changes will remove limitations in the tax secrecy laws that served as barriers to regulators acting in response to PwC's breach of confidence. Furthermore, the reforms will enable the ATO and the Tax Practitioners Board to refer ethical misconduct cases to professional associations for disciplinary actions. Whistleblower protection will also be boosted to encourage the reporting of tax agent misconduct.
The PwC scandal underscored the inadequacies of certain regulatory frameworks. A comprehensive review of consulting, accounting, and auditing firms' regulations will take place to ensure they are fit for purpose and effectively prevent misconduct. The Treasury will coordinate a government-wide response to address systemic issues highlighted by the scandal.
Overall, the government said these reforms respond to specific challenges posed by the PwC scandal while addressing broader issues concerning the integrity of taxation systems and capital markets. The Parliamentary Joint Committee on Corporations and Financial Services and the Senate Finance and Public Administration References Committee are also undertaking inquiries into issues related to the PwC matter.
