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Review of Tax Office management of Part IVC litigation

A report to the Minister for Revenue and Assistant Treasurer

28 April 2006

Table of Contents

Chapter 1: Introduction

Chapter 2: Overview, summary and key recommendations

Chapter 3: Nature and circumstances of tax litigation

Chapter 4: Tax Office’s philosophy on and approach to litigation

Chapter 5: Tax Office’s internal policies and procedures in respect of litigation

Chapter 6: The test case litigation program and other Tax Office funding arrangements for cases

Chapter 7: Tax Office’s application of the outcome of finalised decisions

Appendix 1: Terms of reference of review

Appendix 2: Conduct of review

Appendix 3: Commissioner’s response to review

Appendix 3A: Tax Office’s detailed reply to Chapter 2

Appendix 3B: Tax Office’s detailed reply to Chapter 3

Appendix 3C: Tax Office’s detailed reply to Chapter 4

Appendix 3D: Tax Office’s detailed reply to Chapter 5

Appendix 3E: Tax Office’s detailed reply to Chapter 6

Appendix 3F: Tax Office’s detailed reply to Chapter 7

Appendix 4: Opinions from Solicitor-General and Australian Government Solicitor’s Chief General Counsel on the application of precedent to tax cases

Appendix 5: Commonwealth’s obligation to act as a model litigant — old and new versions

Appendix 6: Further information regarding the extent of tax litigation

Appendix 7: Examples of possible breaches of the model litigant guidelines raised in submissions

Appendix 8: Practice statements

Appendix 9: Current management structure for Tax Office’s in-house legal area

Appendix 10: Case management procedures where a court or tribunal decision is handed down

Appendix 11: Numbers of cases funded under the test case litigation program or on another basis

Appendix 12: Cases identified as test cases or as Tax Office funded cases in material published by the Tax Office(a)

Appendix 13: Bibliography

Appendix 14: Abbreviations

Telephone: (02) 8239 2111
Facsimile: (02) 8239 2100

Australian Government - Inspector-General of Taxation crest

Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001

18 May, 2006

The Hon Peter Dutton MP
Minister for Revenue and Assistant Treasurer
Parliament House
Canberra ACT 2600

Dear Minister

I am pleased to present to you my report on findings and recommendations in respect of the Review of Tax Office Management of Part IVC Litigation. The report has been prepared under section 10 of the Inspector-General of Taxation Act 2003 (the Act). The report also includes my evaluation of the test case litigation program in response to a request made by your predecessor. The review was conducted pursuant to section 8 of the Act.

I have provided the Commissioner of Taxation with the opportunity to respond to the report’s findings and recommendations. The Commissioner’s full response, including his covering letter, is in a set of appendices to the report. In finalising the report, I have fully considered the Commissioner’s response.

The Tax Office agrees with most of my recommendations. There are, however, some recommendations where the Tax Office has indicated a less than full endorsement of implementation.

Part of the Tax Office’s response in the late stages of the review was to seek and to share with me important advice from the Solicitor-General and Australian Government Solicitor’s Chief General Counsel on what constitutes good administrative practice when the Tax Office decides to challenge a finalised court decision. In my view, this advice is in itself a significant contribution by the review process to improved tax administration in the future. With the agreement of the Commissioner, a copy of the advice is included in the report.

I offer my thanks to the support and contribution of many government bodies, professional bodies, business groups and individuals to this review. The willingness of many to provide their time in preparing submissions and discussing issues with myself and my staff is greatly appreciated.

Yours sincerely


David R Vos AM
Inspector-General of Taxation

Review team:

Helen Warner and Tasos Mihail

© Commonwealth of Australia 2006

ISBN 0 642 74330 4

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth.