Tax commissioner Chris Jordan has welcomed the Inspector-General of Taxation’s finding that the Australian Taxation Office did not embark on a “cash grab” using unfair garnishee notices.
Jordan says he prefers to see himself “involved in a noble function of democracy” rather than as a tool of state oppression, unsurprisingly.
The IGT review followed the April 2018 episode of the ABC’s Four Corners entitled A mongrel bunch of bastards, which aired serious allegations that the ATO had used garnishee notices inappropriately. The allegations were based heavily on evidence provided by former staff member Richard Boyle, who now faces 66 charges in what could be a landmark test-case for the whistleblower protections of the federal Public Interest Disclosure Act.
McLoughlin investigated claims the ATO “gave directions to staff to issue standard garnishee notices in every case as a ‘cash grab’ towards the end of the 2016–17 financial year” and that it “set targets for staff and assessed their performance based on the level of debt collected” as the program alleged. He found no systemic scam.
“The review was extensive, with the IGTO investigation team using our strong investigative powers to go to operations sites in Melbourne, Penrith, Parramatta and Adelaide, to see firsthand ATO system operations and personally interview over 50 ATO staff during the investigation, as well as access ATO systems, information and records,” said McLoughlin, who was deputy IGT for 10 years and recently took on the top job after Ali Noroozi departed and became a tax partner at PwC.
The inspector-general found there were problems — especially in Adelaide, where Boyle worked — and noted that some small business owners were harshly affected by inappropriate garnishee notices. He observed “it is very important that the system demonstrates care for disaffected taxpayers especially the more vulnerable” but didn’t find any evidence of a large-scale, systemic rip-off by the agency.
“The Report concludes problems did arise in certain localised situations for a limited period, particularly so at Adelaide’s local ATO site, but those problems were anticipated and addressed by management once they became aware,” the IGT said in a statement, much to Jordan’s relief.
“The allegations that there was an ATO direction for a ‘cash grab’ on small business or that debt staff personal performance were set on amounts collected – are not sustained.”
The tax commissioner welcomed the report in a speech to the Tax Institute’s national conference in Hobart yesterday. Below is an excerpt from the speech.
Commissioner of Taxation Chris Jordan:
A healthy tax system which people have confidence in contributes to the stability and prosperity of our country.
We are currently operating in a regulatory environment where everything is under scrutiny, and where it’s more important than ever that we are seen to be fair, open, communicative and responsive.
Everyone is a stakeholder in what we do.
We, at the ATO, want to be seen to be working with the community, regardless of the market segment, from the smallest earner to the biggest multinational, and every business and individual in between.
As tax officers, we are keepers of knowledge – a huge body of knowledge about tax laws, rules, rights and processes – that we share so that taxes are collected in a fair, equitable and lawful way for the good of our community.
With a Federal Integrity and Corruption Commission on the cards – integrity is everything.
Off the back of the Banking Royal Commission’s recommendations, Burgess singled out the ATO.
She commended “(our) no-nonsense approach” saying we have “worked hard and continuously on finding the right balance between its iron hand and velvet glove”, and that we “may well be the most successful of the economic regulators.”
This was, unsurprisingly, very pleasing to read.
Speaking of iron hands and velvet gloves, when my young son asked me recently, “Dad are you the Chief Tax Collector?”, as a classmate of his had said, I told him – “well, I guess I am.”
As we had been reading Robin Hood a couple of weeks before (and yes, I still read bedtime stories) he then asked whether I went knocking on doors to take things from poor people like the Sheriff of Nottingham’s soldiers.
I said that while some people may wish to portray me that way, I would like to think I’m more involved in a noble function of democracy, not the strong arm of an oppressive state. His eyes glazed over.
Perception is critical – about which I will say more shortly.
But I’d like to start with a story about the importance of getting advice, and the ATO’s commitment to providing good advice to all our stakeholders.
Good advice means better outcomes: supporting small business to thrive
I was recently in Perth speaking with staff working in our Small Business team.
They shared with me a good result they’d had with a local owner of two cafes who had got into difficulties with her businesses.
Of course we have changed some of the specifics of this example to protect the taxpayer’s identity. The business operator found herself with a $200,000 GST debt. She had suffered from an illness and had some difficult family issues which meant she fell behind in tax as well as other business matters.
The team, I was pleased to hear, explained in detail what needed to be done to get back on track, and put an agreed payment plan in place that allowed the business to continue operating while the debt was recovered over time.
For me this is a simple example of working with a business to support them to continue to operate, providing advice on tax obligations so we can perform our duty not at the expense of clients, but with them. Particularly when they are going through difficulties in their personal lives.
In this case it turned out that the business owner was, surprisingly, unrepresented – she did not have a tax agent, and came to our attention via the Curtin University Tax Clinic.
At the advice of clinic volunteers, she enlisted a tax agent, who has subsequently ensured that the business has the right systems in place to continue to be viable.
It reminded me of when I was at law school in the ’70s, in Sydney, where I helped set up the Redfern Legal Centre.
Based in a then low socio-economic area of Sydney, to this day the centre has a focus on social justice and human rights for vulnerable people and communities. While people came into the centre because they were in trouble with the law, I soon recognised there were often deeper reasons behind why they were really there.
Needing a lawyer was just one of many problems they were facing and accessing legal advice was a vital first step in turning things around.
As a young law student, this was a formative moment.
Getting the right advice at the right time can make all the difference.
For Redfern clients, legal advice could prevent their lives spiralling into debt, incarceration, family breakdown, the lot.
For tax clients – sometimes it’s not so different. Problems in non-payment of tax are often symptomatic of other issues in people’s lives.
Knowing where to go, and when, to get the guidance you need is critical.
Feeling you can reach out, and will be listened to and supported – is also critical.
As part of this, anticipating and addressing problems before they escalate is one of the key objectives in the ATO’s regulatory activity.
And while the ATO can’t be the provider of all the services people need, we’ve been working long and hard on a suite of reforms to build that focus on the whole client into our systems and culture, to help build trust and confidence.
By changing the culture of how we do business we are seeing some outstanding results across all markets – as people, small business and large corporates, feel more confident about their dealings with us, making it better for everyone.
That’s also why much of the media commentary of 2018 was so disappointing. While we have done much to build trust and confidence in the system and in us, to reassure people it is OK to come and talk to us about their problems before they get out of hand, some media was doing the opposite. Particularly the Four Corners report on the ATO, containing allegations about inappropriate use of ATO powers to issue garnishee notices and extract payment, especially from small business taxpayers.
Small businesses are a very important market for the ATO.
We’ve been focused for some time on working closely with them to help them to get it right. We have worked hard to build a relationship of trust and openness with this market and our Small Business Stewardship Group plays a fundamental role in this.
So of course allegations of cowboy cash-grabs on small business and that debt staff were rewarded for amounts collected, as well as suggestions of systemic reckless and disrespectful conduct toward Australian taxpayers, are particularly concerning.
This is why I was delighted to see that just yesterday, the Inspector General of Taxation released his report on his investigation into these allegations.
And this review has found that the allegations are not substantiated.
The review found no evidence that management had given directions to staff to issue standard garnishee notices as a cash-grab.
It found that it is ‘very clear’ that staff issuing garnishee notices applied due process in a manner that had regard for the taxpayer, and acted entirely within the objectives of the overall ATO administrative policy in issuing garnishee notices.
I quote: “In the IGTO’s view, the requirement for staff to exercise their own judgment and not issue enduring garnishee notices in most or every… case was not only ATO endorsed policy but was also understood by DBL (Debt Business Line) staff, as a whole.”
The review also makes it very clear that:
- ATO staff followed the guidelines on garnishees, keeping the taxpayer first in their considerations
- There was no monetary collection target for staff
- Staff did not believe they had a revenue or volume KPI overriding any of their normal processes.
A fundamental aspect of the Four Corners show, and more recent media, has been these garnishee allegations.
It is these allegations about garnishee practices that have now been refuted after exhaustive investigation. A proper investigation by the Inspector General has found them to be false.
I believe that people genuinely want their institutions to be reliable, moral and community focussed.
People want the ATO to be doing its job properly and to see that being done, and to have confidence that it is the case.
And while the ATO is not perfect, when mistakes are made, we should own them and, if necessary, implement improvements.
In fact we have been pushing through significant reforms to the tax system to make things work better, specifically for small business.
We’ve introduced or enhanced a range of services aimed at earlier and fair resolution of disputes for small business, including In-house Facilitation, Dispute Assist, ATO Test Case Litigation and Fast Intensive Triage.
And a new Government initiative this year is the expansion of the Tax Clinics program.
Based upon the Curtin Tax Clinic, which I touched on before, the tax clinics are independent from the ATO and will assist unrepresented taxpayers to understand and comply with their tax and super obligations.
The new tax clinics will soon enter pilot phase in 10 universities across the country and are set up to fill a niche gap in the market for unrepresented individuals and small businesses.
They are for taxpayers who may not be able to afford professional advice and representation.
While the ATO doesn’t play a direct role in the running of the clinics, it’s a great mechanism for taxpayer support, alongside our ATO officers and Tax Help volunteers, who have helped thousands of Australians for over 30 years.
From 1 March 2019, there is a new small business division at the Administrative Appeals Tribunal, offering a low-cost avenue for small businesses who dispute our assessment of their tax position. Generally these hearings will be without lawyers, but if lawyers are required, the ATO will cover the cost of equivalent legal representation for the small business.
Applicants will also have a case manager to support them, pay a reduced application fee and, after the hearing process is concluded, decisions will be finalised within 28 days.
But of course if we can work with small businesses earlier to improve their cash flow, record keeping, identify mental health challenges and understand why they are finding it difficult to comply, then that is even better.
To this end e-invoicing is another initiative we believe will make a difference in the lives of small businesses by saving them time and money, cutting business costs and improving their cash flow.
These are just a few of the many examples of our commitment to supporting small businesses.
I welcome the Inspector General’s report on our use of garnishee notices, and I feel optimistic about the future and our work with the small business community – to make tax quick and painless for honest business owners.
The full transcript of the speech has been published on the ATO website.