ATO fraud report: tax watchdog calls for improved transparency in wake of police investigation

By SmartCompany

Tuesday October 23, 2018

The inspector-general of taxation (IGT) has called for greater transparency and better management of potential conflicts of interest within the Australian Taxation Office (ATO) in a new report examining internal fraud risks within the organisation.

Outgoing IGT Ali Noroozi identified a “number of areas requiring improvement” in his review of the ATO’s fraud management processes, sparked by tax fraud allegationsuncovered by a federal police investigation earlier this year.

The report, which lays out 13 recommendations for improving the tax office, follows the ATO’s own review and calls for improved transparency on the conduct of senior officers.

Earlier this year federal police charged half a dozen individuals over alleged involvement in a tax fraud syndicate. The now-former deputy tax commissioner Michael Cranston was linked to the scheme but was not charged as a co-conspirator.

However, Noroozi said on Monday he had found no evidence of systemic internal fraud or corruption within the tax office.

“The ATO, generally, has sound systems in place for managing risks of internal fraud, however, a number of areas have been identified which require improvement,” he said.

Noroozi said the ATO has made “significant improvements” to its staff instruction and guidance in the wake of the federal police investigation, called Operation Elbrus, but believes further improvement is required.

“In determining whether conflicts of interest has occurred, the ATO should consider the nature of the interest, such as the closeness of the personal relationship giving rise to a potential conflict, the seniority of the officers’ roles and the nature of the official duties, such as relevant transactions or other responsibilities,” the report said.

Noroozi, who is slated to step down as IGT later this year, said in a speech several weeks ago the oversight of the tax office needs to be improved, amid concern power is too concentrated at the highest levels of the organisation.

The ATO has recently appointed an independent chair to its audit and risk committee, and has reinstated its integrity commissioner, two areas of improvement Noroozi identified.

Noroozi also made a series of recommendations regarding the conduct of senior officers, focused on improving transparency when senior officers intervene in cases.

“There should be periodic rotation of officers in senior management or higher risk roles and the induction of external senior recruits should be bolstered to focus on ethical standards and highest level of integrity,” Noroozi said.

‘Tick of approval’

The ATO said on Monday it had received a “tick of approval” from the IGT over internal fraud controls.

“While the report gives us confidence that we were already on the right track, we must always be looking for opportunities to refine and improve our processes,” ATO chief operating officer Jacqui Curtis said in a statement.

The ATO has agreed to implement, in part or full, all of the IGT’s recommendations which it has not already proceeded with.

Institute of Public Accountants (IPA) chief executive Andrew Conway welcomed the IGT’s report.

“The IPA welcomes any initiatives that improve the integrity of the system,” he said in a statement.

While dealing with internal fraud risks to the tax office, Noroozi also examined a range of external fraud risks facing the organisation.

He’s called on the government to commence a “broad review” of interagency collaboration for combating tax fraud, including whether the ATO should be allowed to use phone tap information obtained during joint investigations.

This article was first published by SmartCompany.

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