United Nations Public Service Awards Case Studies

On 1 July 2000, the Australian government introduced a major taxation reform program known as the New Tax System. This change program represented by far the biggest taxation reform in the country’s history and included the introduction of a broad based Goods and Services Tax as well as major changes in a wide range of other taxation laws.

Both the Tax Office and the business community faced major challenges in establishing the new tax regime and the Tax Office came under heavy criticism from tax agents and from media commentators due to perceptions of a lack of an effective audit program.

The Australian Taxation Office, like most tax administrations, had traditionally been reluctant to share details of its intended forward audit program with the community. It was recognised, however, that the Tax Office needed to change from a risk-averse culture to an open and transparent approach if it was to maintain community confidence in its administration of the tax and superannuation systems.

The big step in this direction was the decision to publish our annual forward Compliance program which sets out the risks we see in the system and how we intend to respond to them.

This initiative was originally seen as high risk by many of our staff because it lifted the veil of secrecy surrounding our compliance approaches and activities. However, the Compliance program has quickly been established as the flagship communication product for our compliance activities and our commitment to publish it annually has taken our reputation for openness and accountability to a new level.

Underlying the publication has been a radical change in the way we manage and assess risk.

By being open and accountable about the risks we see and our intended responses we aim to both influence compliance behaviour and to build community confidence in our administration. We are also seeking to ensure that our staff, the community, key intermediaries such as tax practitioners, and media commentators all have an appreciation of the complexity of the risk environment that we manage the breadth and depth of our responses to those risks, and the balance we seek to achieve in our responses.

Providing help and information and making actual compliance easier, cheaper, and more personalised are our starting point for compliance in a system that relies on the cooperation and support of taxpayers and their agents. This is complemented by a risk management approach that drives our compliance verification work. The program is aimed at helping stakeholders understand how we make informed choices about where to direct our resources.

What is the initiative about? (the solution)
Our Compliance program has contributed to the significant improvement in community confidence in our administration of the tax and superannuation systems. A 2006 community perceptions survey found that 73% of individuals think that the Tax Office is doing a good job. A 2007 business perceptions survey found that 86% of business operators agree that the Tax Office is doing a good job. Tax agents have also responded very favourably with a recent survey showing 75% of respondents believed that publication of the program had improved voluntary compliance. The publication of the program has also improved our relationship with the media by providing a readily accessible and up to date description of our focus on risks. It has also provided an ideal tool for ensuring that all of our staff understand our overall program and objectives and the role they have in delivering these. The Compliance program is one key element of a broader engagement strategy with the community. However, as our flagship communication product, it allows us to inform the community of the risks we see and how we intend to respond. It also provides a report back each year on our previous year’s commitments. Qualitative feedback from stakeholders on our approach and our willingness to be open and accountable is very positive. Our surveys are conducted and analysed independently, with detailed statistical reports on movements across years and longer term trends. Our survey results are regularly reported and reviewed through our agency governance arrangements and are included in the performance measures in our collective bargain agreements with staff, and in our formal Annual Report to the parliament. We also monitor and report on our delivery of specific commitments included in the program. To determine how well the Compliance program publication was meeting its aims, we conducted independent research on the 2005-06 edition to get feedback from key stakeholder groups: • Three out of four (76%) agents who responded to the survey indicated they used it as a source of information when dealing with their clients. [This was equivalent to around half (53%) of all tax agents]; • Around half (46%) used it as a reference for their personal tax affairs (a third of all tax agents); • Around a third (36%) used it as a source of training and dissemination within their businesses (one in four of all tax agents); • Three out of four (72%) [half of all tax agents] supported the view that publicising Tax Office activities had resulted in greater tax compliance in the community. Our Compliance program has also been instrumental in increasing the understanding of key journalists and other commentators of the scale and complexity of our task. Its annual release is a key focus of media attention in the days and weeks following its launch. The extent of media coverage of our annual Compliance program indicates that we have been very successful in advising the community how we approach our task and the range of assistance available to them.

Who proposed the solution, who implemented it and who were the stakeholders?
Our Compliance program is developed under the leadership of our Second Commissioner, Compliance, and is managed through our Compliance Executive which comprises all of the senior Compliance business managers. The draft program is presented to the ATO Executive for endorsement prior to publication. This approach ensures that the program is developed as a part of normal business and is understood and supported by all of the key leadership team. We have a number of performance indicators that we use to monitor our success. These include regular surveys of the community, business and tax practitioners on how they perceive our performance. We also liaise closely with business, industry, professional and community groups through over 50 joint consultation forums. We have also conducted specific reviews of the process to develop the program and its use by practitioners and the media. We identified a broad range of client groups to whom the program was directed: • Government – we want to ensure that the government are aware of the scope of our activities and our broad approach to maximising voluntary compliance. We are looking to maintain our reputation as a reliable delivery agency and, importantly, to ensure they are kept informed of the risks in the tax and superannuation systems and how we are managing them. • General community – we want to help them understand how we approach our task and the range of assistance available to them. For the community we have two objectives: o to promote their confidence in the health of the tax system by transparently explaining our different approaches to different risks o to positively influence their own compliance behaviour by making information readily accessible about the help available for those who want to comply, and the risks involved in choosing not comply – usually through media coverage and tax practitioner awareness. • Media and other commentators – we are seeking to increase the understanding of key journalists and other commentators of the scale and complexity of our task and to influence media coverage of issues in a way that achieves a reasonable balance. • Tax practitioners – we are seeking to ensure that they have a full understanding of what we are concerned about in the taxation and superannuation systems and how we intend to respond. We also want to ensure that they have a full understanding of the balance in our compliance program across help and advice activities on the one hand and enforcement actions on the other. • Tax Office staff – we want to help them understand the full range of our compliance activities and to appreciate the role they play personally in the delivery of our business objectives. The annual Compliance program is effectively our core compliance business plan, providing the framework for the work of over half the Tax Office.

Describe how and when the initiative was implemented by answering these questions
a. What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The Compliance program is unique – no other country publishes its forward compliance program in such detail. Among OECD countries, Australia is acknowledged as a world innovator in the development of compliance approaches. Many other tax administrations have adopted our approaches. There was a clear need to better engage the community in the improvement of our tax and superannuation systems. The best way to do this was to demonstrate an open and accountable approach and a willingness to listen and actively co-design the systems to our mutual advantage. We wanted to take our relationship with the key identified stakeholder groups to a new level and to effectively engage them in the co-design of the system. Our aim is to ensure that the community accepts the tax and superannuation systems as its own and views our administration as world best practice. The commitment to publish our Compliance program to achieve improved client satisfaction put a lot of pressure on the organisation to change in fundamental ways as well as deliver on a significant new initiative. The vision to deliver improved compliance through the development and dissemination of the Compliance program was articulated by the leadership team in terms of its accountability obligations to the community and the need to explain how we apply our scarce resources. Stakeholder satisfaction is high on our agenda and we conduct a range of processes to obtain feedback. Internally, all senior managers receive a hard copy of the program while all other staff have access through our intranet. Regular dialogue is conducted to ensure that managers and staff understand our priorities and the risk process that leads to the final decisions on where we will focus in a particular year. External stakeholders are regularly surveyed and we seek more targeted feedback through our consultative forums. The publication itself includes an invitation and pathway to provide feedback. We review the process for development of the program each year and identify and implement process improvements. We also seek feedback from external stakeholders through direct consultation and through a range of independent surveys. The breadth and scope of our work and the complexity of the law meant that while the primary audience for these products was taxpayers and their advisers, the products have proved very popular with our own people because we put significant resources into ensuring the language and readability was as plain and simple as possible. Our approach has been to engage an external professional writer to ensure that the program is written from a user friendly perspective and is not clouded with organisational jargon.

b. What were the key development and implementation steps and the chronology? No more than 500 words
The Compliance program is developed annually as an integral part of our planning and governance arrangements. The process commences with an environment scan that considers the broad risk environment and involves both Tax Office and expert external industry and academic representatives. We then develop detailed assessments of the risks for our key revenue products (Income tax, Goods and Services Tax, Superannuation and Excise) as well as assessments of enduring key focus areas such as cash economy, aggressive tax planning, international issues and crimes against the tax system. These are managed through formal committee arrangements. These risk assessments form an integral part of our corporate planning process which of course includes a broader consideration of announced government policies and budget constraints. Once our priorities are determined we appoint senior officers to translate the issues into a market segment based views of risks and responses. Our market segments are micro business and individuals, small to medium enterprises, large businesses, government and the not-for-profit segment. This approach ensures that the Compliance program is developed as a natural output of our planning and governance processes, rather than as a separate product. Each year we monitor the movement in our key risks and our delivery of our commitments in the program through our regular formal governance arrangements. We review our performance against commitments in the program three times a year. While the program is effectively a plan that is open to modification during the year to accommodate emerging issues, we try to follow through on our commitments wherever possible and report back to stakeholders on our results in the following year’s program. A formal working party is established each year to manage the development of the program. Formal content sign-off by nominated market and focus area sponsors is required at all stages of the process with appropriate version control procedures. At the completion of the process each year, a review of our experience is conducted to identify potential improvements. We conduct formal internal and external reviews of stakeholder experience, we invite comment from users of the publication through our website, and we liaise closely with stakeholders through our many joint consultation forums.

c. What were the main obstacles encountered? How were they overcome? No more than 500 words
The Tax Office is the first, and only, tax administration in the world to publish in detail its annual forward compliance work program detailing the risks confronting our tax and superannuation systems and what we propose to do about them. Our Compliance program describes how we go about achieving high levels of voluntary compliance with Australia’s tax and superannuation laws. Each year, the program also provides a preliminary picture of the results of the previous year’s planned activities. This initiative was originally seen as high risk by many of our staff and external commentators because it lifted the veil of secrecy surrounding our compliance approaches and activities. Conversely, external stakeholders were initially sceptical about our preparedness to be genuinely open and honest about our planned activities and doubted our ability to follow through on our commitments. However, the Compliance program has quickly been established as the flagship communication product for our compliance activities and our commitment to publish it annually has taken our reputation for openness and accountability to a new level. Underlying the publication has been a radical change in the way we manage and assess risk. By being open and accountable about the risks we see and our intended responses we aim to both influence compliance behaviour and to build community confidence in our administration. We are also seeking to ensure that our staff, the community, key intermediaries such as tax practitioners, and media commentators all have an appreciation of the complexity of the risk environment that we manage the breadth and depth of our responses to those risks, and the balance we seek to achieve in our responses. Providing help and information and making actual compliance easier, cheaper, and more personalised is our starting point for compliance in a system that relies on the cooperation and support of taxpayers and their agents. This is complemented by a risk management approach that drives our compliance verification work. The program is aimed at helping stakeholders understand how we make informed choices about where to direct our resources. The Compliance program has been partly responsible for the significant improvement in community confidence in our administration of the tax and superannuation laws, which is critical to maintaining high levels of voluntary compliance. The publication of the program has also improved our relationship with the media, providing a readily accessible and up to date description of our focus on risks. It has also provided an ideal tool for ensuring that all of our staff understand our overall program and objectives and the role they have in delivering these. Our approach in publishing the program has been enthusiastically endorsed by leading local tax practitioners and by the OECD as a major innovation in good tax administration.

d. What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
In developing the Compliance program it was necessary to completely re-think how we approached risk management and how we organised ourselves. We identified better ways to organise the business as well as new practices and business processes. The leadership team led a re-structure to align the organisation with our new approaches. The Compliance program is the flagship communication product for our compliance activities and, as such, is a significant focus of the ATO Executive. The project timeframe includes several points at which formal progress reports are required to the Compliance Executive and the ATO Executive. The final draft is endorsed by both of these executive groups before submission to the Commissioner for final approval. These milestones are deliberately positioned as an integral part of the Tax Office’s normal planning and governance arrangements. The arrangements are sponsored by the Second Commissioner Compliance, and managed through the Compliance Executive group. This group approves both the working party and the market chapter sponsors and monitors progress against milestones. The development of the program is a significant logistical exercise and requires tight management. However, by integrating the development of the program into our normal planning process we have actually reduced the effort involved in developing our final business plans. We have consistently met our timeframes and delivered a high quality product. The staff that have a leading role in the development of the content for the program have a corresponding role in our risk identification and risk assessment processes and are generally the most senior leaders in our compliance structure. They are therefore ideally placed for making key decisions on any potential changes to improve the process. Net costs are limited to the cost of engaging an external professional writer ($65,000 in 2007) and to the cost of printing and publishing the final product ($26,500 in 2007). Printing and publishing costs are minimised by printing only a limited number of hard copies for distribution to key external and internal stakeholders, and making an electronic version of the program available to all other interested parties on our internal and external web sites.

Is the initiative sustainable and transferable?
The Australian approach to publishing its forward Compliance program is currently unique – but it is one that is eminently repeatable by other administrations that are prepared to embrace the same level of transparency. The approach was put into practice using normal project management methodology and is now embedded as an integral part of our normal planning processes. The main challenge is to manage the potential for internal and external suspicions around the approach, and to maintain a commitment to follow through on commitments made in the program. An important step in the process, once the program is finalised each year, is to make a significant effort to brief key tax practitioners, industry representatives and media in advance of publication to ensure that the purpose of the publication and the priority focus areas are well understood. A strategy to help our people understand the changes was implemented across the organisation. A key part of the vision that was promoted with our people, and one that resonated through organisational conversations between managers and staff, was the concept that the Compliance program could influence decisions people make in their approach to meeting their tax obligations. We set up electronic mailboxes and sought feedback on our aim and approach. We consulted with an array of stakeholders, briefing them on the progress and what we were finding. An implementation strategy involving the key leaders in the Tax Office was put into place with milestones aligned to the key events in our annual planning cycle (eg environment scan, development of our risk assessments, government budget time deliberations etc). The project plan aimed to have the program published as early in the financial year as possible to address stakeholder need for timely information. The Compliance program has driven a more robust yet flexible planning process and has provided greater rigour around our governance systems and processes. It has improved our organisational agility in responding to a continually changing external environment, and has assisted us to build higher levels of capability to manage increasing complexity. Each year we have refined our process for developing the program. The planning and governance arrangements are reviewed to ensure that we properly align with the broader planning and governance approaches in the Tax Office, and to ensure that the resourcing of the process is appropriate. The Compliance program has been endorsed by the OECD as a clear example of international best practice of openness and transparency in striving to improve compliance.

What are the impact of your initiative and the lessons learned?
The Compliance program 2007-08 is our sixth annual edition. Our willingness to share with the community the risks we see in the system and how we intend to respond to those risks has been welcomed across the board. Our various stakeholders now have a much better understanding of the scale and complexity of the issues and risks we manage and there has been a marked reduction in the level of negative comment on our administration. In particular, taxpayers and the broader community now accept that we are a responsive organisation that is prepared to assist anyone who makes a genuine attempt to voluntarily meet their obligations under the tax and superannuation systems. They also acknowledge that we are effective in identifying and dealing with those who choose not to comply. These sentiments are confirmed through our regular independently conducted surveys of tax professionals, business taxpayers and the broader taxpayer community We obtain qualitative feedback on stakeholder satisfaction levels through our many consultative forums with business, industry, tax practitioners and community groups. Quantitative feedback is obtained through regular independent surveys conducted for community, business and tax practitioners. We measure our performance in terms of trends over time and against established benchmarks for similar administrations to our own. Our results have consistently trended up since we commenced publication of the Compliance program. We have equalled or exceeded the relevant industry benchmarks for our professionalism and our stakeholder satisfaction survey results are at an all time high. Our Compliance program has helped drive innovation and shaped organisational change within the Tax Office. It has led to a more holistic view of the tax and superannuation systems. We have reduced the development time of the program by changing our management processes to be more dialogue based, and have freed up the time of our senior leaders to focus more on the strategic issues and priority setting. We have also refined our approach to publishing the preliminary results of the previous year’s Compliance program in response to stakeholder feedback. We are using the experience gained through this process to improve our other major information products within the Tax Office, such as our Annual Report.


Institution Name:		Australian taxation Office
Institution Type:		Government Agency
Contact Person:		Sharon Wright
Title:		Compliance Programme Co-ordinator
Telephone/ Fax:		+ 61 (0)2 62162952
Institution's / Project's Website:		+ 61 (0)2 62161222
E-mail:		sharon.wright@ato.gov.au
Address:		2 ConstitutionAve
Postal Code:		2601
City:		Canberra
State/Province:		ACT
Country:		Australia

The Problem

Solution and Key Benefits

Actors and Stakeholders

(a) Strategies

(b) Implementation

(c) Overcoming Obstacles

(d) Use of Resources

Sustainability and Transferability

Lessons Learned

Contact Information