In our experience, the Australian Taxation is often slow to take members’ Office (“ATO”) action with businesses that fail to meet their tax obligations, to the detriment of other creditors. The ATO will enter into repayments arrangements with businesses that are close to, or already, insolvent unfairly extending a operation to the detriment of its – business’ other creditors. This is particularly unfair as the ATO would be privy to information that the general trade creditor would not and thus other creditors are making uniformed decisions about continuing to offer credit during this extension of operations. In our submission we have consistently stated that it is important that companies demonstrate good corporate governance, and this includes compliance with their taxation obligations. There needs to be appropriate balance between the ATO allowing viable businesses an opportunity to repay their debt by entering into repayment arrangements, and taking action to wind up unviable businesses in a timely manner. We note that the ATO states that it performs viability assessments before entering into payment arrangements. However, the large number of recoveries of preferential payments made by liquidators from the ATO would indicate that payment arrangements are occurring while the company or debtor is insolvent. We note from the Inspector General in website Taxation’s (IGT) that the approach to debt collection will be being ATO’s considered as part of the 2014 work program.Question IGT’s 38 Are there any other potential or existing barriers to – business closure? ARITA refers the Commission to our Policy Positions Paper at Appendix A and to our precursor discussion paper “A Platform for Recovery 2014”. Question 39 Given that governments use support and – subsidies to meet particular policy objectives, what processes could be used to examine less distortionary alternatives? Are there approaches that could apply greater transparency to the use of government support and subsidies and their broader costs and benefits? ARITA does not have knowledge in this area and is unable to comment on the matters raised in the issues paper. Attitudes to risk and innovation Key Point 7A: Entrepreneurism should not be at the expense of good corporate governance and good lending practices
In our members’ experience, the Australian Taxation Office (“ATO”) is often slow to take action with businesses that fail to meet their tax obligations, to the detriment of other creditors. The ATO will enter into repayments arrangements with businesses that are close to, or already, insolvent – unfairly extending a business’ operation to the detriment of its other creditors. This is particularly unfair as the ATO would be privy to information that the general trade creditor would not and thus other creditors are making uniformed decisions about continuing to offer credit during this extension of operations. In our submission we have consistently stated that it is important that companies demonstrate good corporate governance, and this includes compliance with their taxation obligations. There needs to be appropriate balance between the ATO allowing viable businesses an opportunity to repay their debt by entering into repayment arrangements, and taking action to wind up unviable businesses in a timely manner. We note that the ATO states that it performs viability assessments before entering into payment arrangements. However, the large number of recoveries of preferential payments made by liquidators from the ATO would indicate that payment arrangements are occurring while the company or debtor is insolvent. We note from the Inspector General in Taxation’s (IGT) website that the ATO’s approach to debt collection will be being considered as part of the IGT’s 2014 work program.Question 38 – Are there any other potential or existing barriers to business closure? ARITA refers the Commission to our Policy Positions Paper at Appendix A and to our precursor discussion paper “A Platform for Recovery 2014”. Question 39 – Given that governments use support and subsidies to meet particular policy objectives, what processes could be used to examine less distortionary alternatives? Are there approaches that could apply greater transparency to the use of government support and subsidies and their broader costs and benefits? ARITA does not have knowledge in this area and is unable to comment on the matters raised in the issues paper. Attitudes to risk and innovation Key Point 7A: Entrepreneurism should not be at the expense of good corporate governance and good lending practices
sub031-business.docx