The Board of Taxation explained

Garreth Hanley:
This is With Interest, a business, finance, and accounting news podcast brought to you by CPA Australia.

Jenny Wong:
Welcome to the With Interest podcast. My name is Jenny Wong and I'm the tax lead at CPA Australia. And today, I'm going to introduce you to Paul Korganow, the secretary and tax counsel at the Board of Taxation. We're very fortunate to have Paul with us today. Paul started with the Board of Taxation early this year after working with the Tax Office for a number of years in international tax structuring and BEPS, as well as a two-year stint in Paris and the Australian delegation to the OECD.

Before that time, he was also in private practice for 17 years. Paul will break down for us who the board are, what they do, who they represent, and what their focus areas are, as well as what they're working on. By way of introduction, the Board of Tax provides the Australian government with advice on improving the design and operation of tax policy from a business and tax community perspective. It is made up of 10 members who have extensive experience in tax from a practice and government point of view and includes the tax commissioner and the secretary to the Treasury. Welcome to the studio, Paul.

Paul Korganow:
Thanks, Jenny. It's good to be here.

Jenny Wong:
Paul, I have to ask you this question. We just had the 2024 Paris Olympics. I was wondering if there was a moment in time that filled you with a sense of nostalgia. Is there something memorable you could share during your time on secondment to the OECD in Paris?

Paul Korganow:
Yeah. Look, definitely, Jenny. I think I could fill a whole podcast series about my time in Paris, but I did watch the Men's Road race the other day and it reminded me, I'm a keen cyclist, so it reminded me of lunchtime rides I had out to the Versailles, the palace, up in the hills and just along the Seine on the way back. We lived a couple of blocks from the Eiffel Tower, so very fond memories.

Jenny Wong:
I was actually listening to a podcast the other day, and I learned that the Olympic villages in France were unique in that you could get a baguette any time of day. The athletes have to bring their own air conditioner. They get sparkling water on tap and Michelin star chefs make their own sweet treats in the village.

Paul Korganow:
I definitely missed the baguettes there.

Jenny Wong:
Anyway, let's get right into it. The Board of Tax, an advisory body, it was established in 2000 as a key recommendation from the Ralph Review of business taxation and a time of significant tax reform in Australia under the Howard government. Since its establishment, I think the board produced something like 50 reports on tax issues that affect individuals, welfare organisations, small and large businesses.

Some of the significant events that follow the board's recommendations include the repeal over 4,000 pages of inoperative tax law, reform of international tax arrangements, the establishment of the office of Inspector General. Paul, the board of tax plays an important role in shaping tax law in Australia. Could you share with our listeners some of the recent activities of the board and their key recommendations to government?

Paul Korganow:
Definitely, Jenny. And it's good that you touched upon how the board was established, because I think it's good for the listeners. So as you mentioned, it stemmed from the Ralph Review. And the Ralph Review identified a lot of frustration in the business community about little and really not much opportunity at all for the private sector to engage in formal consultations with government agencies responsible for developing tax policy and law.

To address the frustration in the business community, the then Howard government established a non-statutory advisory body, obviously the board, as a way to get effective community input into the development of tax policy and on a more transparent, systematic and ongoing basis. There were a couple of benefits of this in the board's creation. Firstly, it was really for the ATO and Treasury to better understand how the business community operates and hear business concerns and issues. That's a large part of our role, getting that intel, I guess, from that community, and for the private sector to get a better appreciation of the policy and administrative dimension of the tax system. Knowing coming from the private sector before, early on I guess I had no clue how policy was made and the whole process. Unless you've been there, it's very hard to understand. Now it's 20 years since and we're still going strong. Just going on to I guess some of the board reviews, which may have been of interest, our most recent review was on digital assets and transactions in Australia, or more commonly known as the crypto report.

That quickly became a hot topic for stakeholders and advisors alike. The crypto review was part of the board's formal review agenda, meaning the board was asked by the treasurer at the time to undertake a review with prescribed terms of reference and report back by set date with a final report with a series of recommendations, observations. The report is finalised. It was handed to the government early this year. It has not yet been made public. It's timing for release being a matter of government. The crypto review is just a great example of how diverse the topics that the board looks at and how flexible board members and the secretariat need to be. I know at the beginning of, I guess, that journey, the board members probably weren't experts in crypto. But by the end of the review I think they knew far more than the average advisor. There are other examples of the board's work which are recent, and I guess they highlight the broad spectrum of topics that we touch upon.

They range from the dual agency administration of the R&D incentive, corporate tax and individual residency, CGT rollovers, small business tax concessions. And I know in the past I got involved in the hybrid reviews, which are I guess those tax nerds amongst you, a very complex area of the law. So quite often it's probably good for the listeners to know that we get asked by stakeholders when a report will be released by government or when the recommendations put forward by the board will develop into measures and be implemented. There's often a sense of urgency or perceived urgency. It's important to remind stakeholders that the board's reports are designed to have a long shelf life. The board's chair, Rosheen Garnon, has expressed this view previously noting that transformative changes do require time.

And if we look at those reports, over the past couple of years, the former government has made significant announcements drawing on the board's previous work, including things as diverse as exempting capital gains on granny flats, things like providing greater flexibility and financial security to older Australians, contemplating the next phase of their lives as well as those with disabilities, reducing red tape for fringe benefits tax record keeping requirements. We know this is an area that many businesses tell us is one of the biggest irritants when employing staff in Australia. And finally, I mean there's many, there are things like the adoption of the loss carry back for small businesses, which provided much needed cash flow relief, particularly when we had a little pandemic.

So I mean these are the examples of the important role the board plays in advising government how to improve the design and operation of tax laws, not only in the current environment but in the future as well. Another of the board's success stories is being responsible for the development of the Voluntary Tax Transparency Code, something that is close to my heart, and yours, I think too, potentially. As many of your listeners might know, the code is all about greater transparency and public disclosure of tax info by businesses and was developed by the board at the request of government. The board works on this code continually. It's a business as usual, meaning that the code is something that the board manages and maintains on a regular basis.

Jenny Wong:
How is the board appointed and how do you decide what issues to review?

Paul Korganow:
Yeah, really good questions. Probably, if I start, I'll just briefly talk about the board's charter. So the board is governed by a charter, and that outlines things like the board's mission, membership, function, and relationship with other bodies as well as the role of the secretariat. The treasurer is responsible for appointing the private sector board members under the charter, and that's usually for up to three years, sometimes longer.

I think the longest current private sector board member started in 2017. And then we've got a chair, I mentioned Rosheen Garnon. She's chosen by the treasurer from amongst those board members. Board members are appointed on a part-time basis. So most of the board members have day jobs and a few, in fact quite a few also have non-executive directorships. In determining the mix of the board, I mean the treasurer decides, but there's a lot of things that go into that equation. Things like business experience, skill set, gender, geographical diversity are all important, and even things like looking at our future work programme. For example, when we had the crypto report, we did have someone on the board who is more au fait with those technical areas. So it's important the board brings a broad range of perspectives to the table. Currently, the board has six private sector members. And collectively, the private sector board members are nearly 200 years of experience in the tax field.

In addition to the private sector board members, we've got three ex officio members. We've got the secretary of the Department of Treasury, the Commissioner of Taxation and the first Parliamentary counsel, they're all ex officio members of the board. And the work of the board is also, last but not least, it's supported by a dedicated full-time secretariat, and that's where I and my team come in. My formal role, as you mentioned is the secretary and tax counsel of the board, essentially I lead the work of the secretariat, which what I like to call at least is the board's engine room. The secretariat is based in Treasury and currently consists of Treasury staff, and we do get a lot of ATO secondees. We particularly choose those ATO secondees depending on their technical abilities and what we are looking at, at the time.

The second part of your question was how does the board decide which issues to review. And before I touch upon that, it's probably worthwhile just quickly understanding how we work. First and foremost, collaboration is at the heart of what we do. While the board is independent, and I do emphasise that, we're definitely not part of the ATO, we're not part of Treasury. We're not solely about providing an alternative perspective to the government, but work very closely with the business community, ministers, Treasury, and the ATO to collectively improve the design and operation of the tax system. And in delivering our work, I guess you can say that there are two streams. First I guess it's what you see out there. There's the formal public-facing reviews. And secondly, the behind-the-scenes work we do in a more of a trusted advisor capacity, so I'm going to talk about that first, trusted advisor capacity. Then I'll discuss the formal reviews and how topics for review are determined.

So in that role of trusted advisor, this has evolved over time based on the expectations of governments as they come and go. So while continuing to do formal technical reviews, we've transitioned to providing more strategic real-time input into contemporary tax policy issues and exploring options for medium and longer-term reform. This is where we act more as a trusted advisor to ministers, but as well as Treasury and the ATO. And we share our expertise and feedback received from stakeholders to, as I mentioned, shape the policy and legislative design and the administration of the Australian tax system.

This is the behind the scenes work that our stakeholders are not commonly aware of. Then we've got our formal reviews. You can go on our website. There's a whole list of the reviews since we've done since our inception. And that includes, we previously mentioned, things like the crypto report, CGT rollovers, corporate tax transparency. There's been international tax and other things in the past. In recent times, our formal reviews have been carried out over a time period of about six to 18 months, and it depends on the complexity of the issue. The second part of your question, Jenny. How does the board decide which issues to review? Traditionally, the board's forward work programme is developed in conjunction with the treasurer's office, so I mean that's the formal way of doing it.

Topics for review may be requested by the treasurer or the assistant treasurer or self-initiated by the board. One of the very important aspects of determining which issues we work through and which we review is through stakeholder engagement. So stakeholder engagement plays a large part in the board's work programme. And it's important for many reasons, but mainly for the board to hear from business. And not just business, the wider tax community about what issues are impacting them. This includes both our, we've got targeted and themed stakeholder engagement, and the regular engagement we have, for example, with peak industry and professional bodies. I don't think there's a week that goes by if I don't have any engagement with some external stakeholder. CPA is one of those key stakeholders. I know that we met last month in Sydney and we did listen to the value input that you had. So that's how it goes into developing the work programme.

Jenny Wong:
Yes, I think in the stakeholder meetings when you met with us, CPA Australia's top three issues were the ATO payment plans, this is in the small end of town, making instant asset write off permanent feature of the tax system and improving the ATO's call centre performance service levels as well. So they were bugbears of our members.

Paul Korganow:
Yeah, we've definitely noted those and we always pass things onto the ATO. And it does also telegraph that we're not just about the large end of town, we look at small business, we look at I guess a whole spectrum of the tax community out there.

Jenny Wong:
Can listeners influence what issues the board will review or the issues that are currently under review?

Paul Korganow:
Yeah, no they certainly can. I mean, we welcome it. We obviously welcome that engagement. So one of the biggest way listeners can influence what issues the board reviews is to engage with us obviously either via, we've got a Sounding Board + platform on our website or through involvement in our consultation process, whether that be formal reviews and other targeted engagement. Let me talk a little bit about the Sounding Board +. It's an online platform that the board maintains on its website where shareholders can basically upload ideas directly to the board on how to reform the tax system. We get those on a real-time basis.

So it provides members of the community with a voice and an opportunity to be part of the conversation around improving the tax system in Australia. The board always looks for ideas, various ideas, ideas that reduce red tape, result in compliance, savings, and/or remove ambiguity uncertainty. I could give examples like streamlining tax registration thresholds, redrafting complex provisions we often get that, make things more simple, provide more clarity, and also removing unnecessary sections from the tax return or some administrative things for the ATO. We collect the ideas under five categories, which sort of sound a little bit weird. So the first ones, we call it sweating the small stuff. So things like typos and slip-ups, things that are easy to change.

What were they thinking? Clarifying the policy. Sometimes we think that, "What was the original policy behind these provisions? Does that need clarification?" Too, taxing, that's a very common one. It's basically reducing red tape. I think I spoke about the FBT previously. Can government fix it? They’re direct policy type issues, which we need to discuss with Treasury often and tell it to the tax office. Administrative fixes, we often get a lot of those. Sometimes a lot of those should really be targeted at the tax office, but we're always willing to be a conduit. You can see really there's a category for everything. So the board loves to hear those ideas and we take them seriously. All ideas submitted on the Sounding Board + platform are discussed at our regular board meetings.

We have six regular board meetings around the country. And the board has ongoing discussions with the ATO on ideas that are raised to make sure laws and their administration are operating as they should. So the Sounding Board + is a really easy way for members of the community to contribute to the board's work as these ideas are taken into account when we look at our future project ideas. And for those reviews that are currently underway, the board provides a number of ways that the public can also comment on issues being reviewed either in the formal review process through attendance at public consultations.

When we have a formal review, we have plenty of those. Or providing written submissions to reviews. Details on how to participate are always on our webpage. You'll look at each review and there's always some contact details. We really strive to ensure that there's a full and effective community consultation. We want to hear from as many people as we can in industry, and our mission is to represent the community and bring the community views to the table.

Jenny Wong:
I believe you mentioned earlier on the Voluntary Tax Transparency Code was an initiative of the Board of Taxation. Could you talk a bit about the code, what it is, what is it trying to achieve and the benefits of companies publicly disclosing their tax affairs?

Paul Korganow:
Yeah, no, definitely. I could chat about this one in length. I guess if we go back in the 2015-'16 budget, they then treasurer asked the board to lead the development of a new voluntary code. It's all about greater disclosure of tax information by business, particularly at the time, large multinationals, and that took about nine months. The board developed the Voluntary Tax Transparency Code, I'll call it Code, in conjunction with a working group made up of reps from, it was at the time, business, professional, firms, civil society, peak bodies, academia, Treasury and last but not least, the ATO.

I say that because I was on the working group. The board completed its report to the government on 16th of Feb 2016. Later in the year in May, the government released the board's final report on the code and endorsed the code as part of the 2016-'17 budget announcements. So just going on for listeners about what is the code and what it's trying to achieve, it's a set of principles and minimum standards to guide businesses as to the types of tax information that should be disclosed for them to be transparent about how they pay tax.

And the code was developed well for a multitude of reasons, but primarily in response to community concerns and expectations for businesses, particularly large multinationals, to take the lead to be more transparent about their tax affairs. I guess if you look at the other side, it's also to educate and enhance the community's understanding of the corporate sector's compliance with Australia's tax laws, which is always important from a compliance perspective. And notwithstanding that the code is voluntary, I mean it's at the beginning of the title, there are community and government expectations that responsible large and also medium businesses operating in Australia adopt it.

Jenny Wong:
I know we've had a conversation about harmonisation of the voluntary code, particularly in light of mandatory tax transparency rules and public C-by-C [country by country] that's about to come into effect. I think there are opportunities to update Australia's voluntary code to remove any overlap with the new mandatory standards or disclosures, and perhaps even consider whether there should be optional extras to supplement the mandatory components. So for example, Australia's heading down the path or mandating what's called the Global Reporting Initiative 207-1 on public disclosure of a group's tax strategy. But it's also what they call GRI 207-2, which is about tax governance, and GRI 207-3, which is about stakeholder engagement. And there's an opportunity to add those optional extras too in the voluntary code, I think.

Paul Korganow:
Yeah, look, that's right. I guess I mentioned before that the board has an ongoing role in relation to the code. We help develop it. So I guess it's dear to our heart. And we know that a lot has happened in the transparency space since the board developed the code. There are various mandatory and voluntary disclosure regimes around the world, and also in Australia as you'd know, the government, as part of its election commitment platform. And now it's multinational tax integrity packages to address the tax avoidance practices of MNEs and improve transparency through better public reporting of MNEs tax info.

And as part of this Australian significant global entities, SGEs, for some of your listeners who might not be familiar, basically their large MNEs with a global income of 1 billion or more. Soon, they'll be subject to mandatory transparency rules around public disclosure of a group's tax strategy and country-by-country reporting. So look, for businesses that are not covered by this multinational tax integrity package, they're still able to use the board's code to guide how they make disclosures regarding tax transparency. So as previously mentioned, one of the board's ongoing roles is to meet with stakeholders, to hear from them about what issues are impacting them and their market sector.

And one of the topics that we regularly receive feedback on, as we have now, and I know we've discussed this in the past, is transparency. And I think I mentioned this as well, we're really proud of the code, the contribution that the code has had on shining a light on corporate tax transparency. And as part of the board's responsibility for the ongoing management of the code, we are keen to understand stakeholder concerns in this area and particularly how the new measures may interact with the code. So our doors are open and we welcome engagement on this topic.

Jenny Wong:
The board has, from our perspective, had a bit of a lower profile in recent years. Could you talk about the current strategic direction of the board?

Paul Korganow:
Yep. Yeah, look, I'd love to. I'm obviously very new to this role, but it's a very exciting time for the board right now, and particularly exciting time for me to have started in this role. The board has recently appointed two new board members, Andrew Mills and Judy O'Connell and we have a new commissioner of taxation, one of the ex officio members, Rob Heferen. So we have members who've been around for a while, but a lot of, I guess, new blood. And the board meetings I've attended, which has only been two so far, have been full of energy and robust discussion and extremely productive.

We've also launched a new and exciting stakeholder engagement strategy. We've looked how we've engaged in the past and thought how we can do things better. And we're changing the way how we interact with stakeholders and how we gather ideas from them and gather a really important intelligence. The goal here is to meet with stakeholder groups that can provide a diverse range of insights to support the board's work. How we are achieving this as by organising stakeholder events based on themes which are held around Australia these meetings. For example, in February, the board focused on tax transparency in Sydney is that tax transparency gets another guernsey. And in May, this was my first board meeting, members from the small business community met with the board in Canberra.

I know you've mentioned that before, Jenny, and the ideas that your members provided. And last month in Adelaide, there was a theme about private wealth. The board also has many more stakeholder events planned for the future. We're mapping out our year. Next week for example, I'll be in Sydney, and we've got a meeting with academics. We really want to figure out what academics are working on, the projects, various ideas, how we can maybe partner with them. So I think that'll be a really interesting meeting. Early in September, the board will be in Perth. I'm really looking forward to that one because we are meeting with two very diverse groups. We are meeting with indigenous communities and businesses and stakeholders from the resources and energy sector. We deal with a lot of the tax community.

And we've got more events planned later in the year for Brisbane and Melbourne. So we believe the benefit of, I guess, this new approach, structuring our stakeholder engagement in this way is to provide various groups and market segments an opportunity to engage, and engage, I guess, more deeply with the board. Personally, one of my goals for my role is also to be more proactive and help the board develop a pipeline of work, both short, medium, and long-term. Tax reform can be contentious. There's a lot of lobby groups. And the key to success is often picking when the timing is right and often when the stars are all aligned. It's a task that requires both planning and a lot of patience.

And it's something that I like to get across to your listeners and also people when they engage with us, there are many good ideas, but it's not always their time. When it is, though, we have them catalogued and ready to go. It's otherwise too late to start from scratch. So when you engage with us, bring all of your ideas whether they're short or long-term. And the last thing probably to say about what we are doing, we've undertaken various refreshings. So we've got a redesign project to update our logo, website, branding materials. And we've also got, we will refresh and reinvigorate our communication strategy. So I guess it's one of those. I'm three months in the role, but it's watch this space.

Jenny Wong:
As someone deeply passionate about tax reform and improvement, I'm really interested if you could share what are some of the board's future work activities? What are you working on now and what's on the agenda for the next 12 months?

Paul Korganow:
Look, that's a really good question. As mentioned earlier, the board's forward work programme is developed in conjunction with the treasurer's office. So in the normal course of events, this usually involves the treasurer, writing to the chair of the board to let them know of areas or topics for the board to review. And most of the time they present themselves as formal reviews published on the website, transparent with consultation conducted in the public arena.

This is where formal reviews differ from informal reviews. We discussed that earlier. And an informal review, or self-initiated review, is one where the board will look at a topic based on its own merits. The end result is generally not a final report, but in most cases, the end product is a letter or correspondence between the chair and the treasurer on the findings of the board. This then may lead into more work for the board or some other form of action. While the board doesn't currently have any formal reviews on foot, I can say that we've been out and about meeting with stakeholders. And there are a couple of suggestions for the board's work programme that keep arising. We're working on something internally at the moment, so I can't say too much publicly just yet. I can say though, our themed stakeholder events are also sources for our future work programme.

These themed events allow us to explore a variety of targeted issues in some depth. There's always ideas that we take away and analyse and look to take forward. For example, I mentioned our small business stakeholder engagement in May in Canberra. This has led to several potential areas of reform that are worthy of further exploration. We did ask the participants at the end of the session to provide their suggestions for three key measures that could be implemented to assist small businesses. Jenny, you provided, I guess, CPA's three ones and we had a wealth of responses there.

I can't say whether any of these will make the final programme, but I can say that we're likely to reengage with this group very soon. So you can expect to see and hear a lot more from the board. We're working on increasing our profile and overall presence in the business and tax community and hope to engage with many of listeners over the coming months and talk about a forward work programme.

Jenny Wong:
Before we wrap up, how can listeners connect and engage with the board?

Paul Korganow:
There's several avenues where the broader tax community can engage with us and contribute to our activities and get involved in our work. We're constantly looking for ways to engage with stakeholders and hear what they say in various different forms. Some of these I went through before, but some of these include participation in formal board consultation sessions, submissions to board discussion and working papers, membership of board working groups when we have a formal review, and contributing tax system improvement ideas by the board's Sounding Board + platform. Subscribing to the board's website.

I can provide details on that later. And tuning into other channels such as the CPA podcast series. The board also maintains a LinkedIn account where we provide our followers with updates on the work of the board and upcoming consultations and reviews. And we also reach out to the community through the publication of it's previously a quarterly newsletter. I think we'll try and increase the cadence of that and reformat that. And we encourage people to subscribe to receive the latest info on our activities. We've got many other ideas in the pipeline for stakeholders to hear more from the board and to engage with us, so watch this space. For those listeners who like to engage with me or the board members more directly, they can contact us via the board via our email. And that's at [email protected]. And similarly the website, put it in your favourite search engine will come up, but it is taxboard.gov.au.

Jenny Wong:
Some really good insights there. Thank you for joining us today, Paul.

Paul Korganow:
Thank you. It was a pleasure to be here.

Jenny Wong:
For more information about the topics covered in today's episode, don't forget to check the show notes, where you'll find links to additional resources from CPA Australia and the Board of Taxation. With Interest is a regular podcast. If you like today's show, you can subscribe on your favourite podcast app by searching for CPA Australia's With Interest. And until next time, thanks for listening.

Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover With Interest by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in the latest finance, business, and accounting news. To find out more about our other podcasts and CPA Australia, check the show notes for this episode. And we hope you can join us again for another episode of With Interest.