Four Corners fallout: ATO under review from both sides of parliament, unions defend staff

By Stephen Easton

Wednesday April 11, 2018

Both the government and opposition have promised to subject the Australian Taxation Office to independent scrutiny once again following this week’s episode of Four Corners, while the agency itself and two unions argue the report’s presentation was unfair.

Minister for Revenue and Financial Services Kelly O’Dwyer has ordered Treasury to lead an investigation into the ATO that is “full, thorough and detailed” but also fairly quick, her spokesperson explained.

The Inspector-General of Taxation, Ali Noroozi, Small Business and Family Enterprise Ombudsman Kate Carnell and the ATO itself will all contribute to the review in some way. The Mandarin understands it will focus more on the broader allegations — that the agency consistently and perhaps systematically abuses its powers, and that avenues of appeal and oversight are inadequate — rather than individual cases from the report that have already been brought to bodies like the IGT.

O’Dwyer wants Treasury to finalise its report “expeditiously” and she is “deeply concerned” by the allegations raised by the ABC and Fairfax Media, according to a statement from her office. A government response will follow.

One clear option would be to reconsider the three-year-old recommendations of the parliamentary inquiry into tax disputes, which addressed these exact issues but were almost entirely rejected.

O’Dwyer also defended her party’s “strong record” of establishing mechanisms to protect and assist small businesses, listing the creation of the IGT in 2003 and a move to “boost its powers to provide taxpayers with more specialised and focused complaint handling for tax matters in the 2014-15 Budget” as well as the establishment of Carnell’s specialist ombudsman role in 2016.

O’Dwyer’s spokesperson argued it was the former Labor government that made the decision to cut ATO staff numbers with 4700 redundancies planned between 2014 and 2018, and said the actual workforce reduction so far was about 700 less than that.

Damage control

The ATO executive “strongly disagrees” with the thrust of the reporting but lead ABC journalist Adele Ferguson rejects this as damage control straight out of “the corporate scandal playbook” in a new article for Fairfax today.

“The media have taken a handful of isolated cases, presented only one side of the story, and then extrapolated these to suggest systemic issues with our administration of the tax and super systems,” the ATO statement reads.

“It is our view the coverage includes unbalanced commentary and opportunistic journalism, as well as ill-informed analysis of the facts. The truth is less sensational.”

The revenue agency says “several” of the cases in the episode are over five years old; Ferguson says there are plenty more victims of an overzealous agency with too few checks and balances on its extremely broad powers.

“Less than 0.1% of all interactions result in a complaint or an objection,” according to the ATO, which says there is “absolutely no evidence” behind Ali Noroozi’s estimate that it does something wrong about 5% of the time.

“In addition, no review, scrutineer or credible source has ever found a pattern of abuse towards small business owners by the ATO,” the statement adds.

The agency says it has worked hard on “re-inventing the client experience” and improving its internal culture in recent years and admits it makes mistakes. It says it apologises and tries to patch up its “relationship with the taxpayer” when this happens, in contrast to the claims that it plays hardball by default, even after accepting it has made the wrong call.

Ferguson also crticises the way the ATO handled her inquiries during her investigation:

“The reality is the tax Commissioner Chris Jordan was invited to give his side of the story as part of the investigation but he opted to pull out days ahead of the interview. Instead Deborah Jenkins stepped into the breach and then declined to speak about individual cases even though she knew in advance they were topics of the investigation.”

Jenkins, the deputy commissioner for small business, also issued a statement on Monday ahead of the program going to air, arguing the specific cases were “atypical” and that she received consistent positive feedback from small businesses and peak bodies, a claim repeated by the ATO after the broadcast.

The Australian Services Union’s taxation officers’ branch, which is absolutely enraged by Ferguson’s reporting, says Jordan’s hands are tied: “The real difficulty is that the Tax Commissioner can’t [publicly respond] because the secrecy provisions of the Tax Administration Act outlaw public commenting on the validity of these claims.”

The difficulty of challenging ATO assessments, decisions and compliance actions – even through the judicial system — and of obtaining compensation for defective administration, has been covered extensively by various academic researchers and the 2014-15 parliamentary inquiry. But the government has been reluctant to change much, as its reponse to that inquiry demonstrates.

One newer allegation raised by the journalists is that some debt collection teams see their budget forecasts more like sales targets, with their managers encouraging them to issue as many garnishee notices as possible, with no regard to the financial circumstances of the individuals in question.

Fears of the profit-focused culture of the private sector creeping into the public service are at least as old as the New Public Management doctrine that emerged in the 1980s, but could be another interesting issue for O’Dwyer to consider, given her other ministerial responsibility for the APS.

Who will stand up for the taxman?

Opposition leader Bill Shorten has also promised to investigate when parliament resumes in May, and has aready blamed staff cuts (which began under a Labor government), getting in early on Tuesday morning.

The opposition and the Community and Public Sector Union are at odds with O’Dwyer over staff reductions; both claim that 4700 jobs have been cut from the ATO under the Abbott and Turnbull governments.

Based on APS statistical bulletins the agency’s total headcount has reduced by about 4,441 between December 2013 and December 2017, and of course differ from average staffing levels forecast and reported in budget papers. Regardless, the Tax Office workforce reduction of recent years has been a bipartisan effort.

“Labor has announced additional resources for the Australian Tax Office as part of our tax measures,” said shadow assistant treasurer Andrew Leigh in a statement this week. “We are committed to appropriate resourcing for regulators and enforcement agencies.”

Meanwhile, both public sector unions are firmly standing up for ATO staff.

Unions are offended by the tone of the report, the strong language used by some interviewees, and the implication that the whole agency is motivated by malice or at least a callous disregard for citizens.

“The ABC and Fairfax Media have very publicly lied about tax officers over the last few days,” opens the strong statement from the ASU tax branch. “They have called us a mongrel bunch of bastards.”

Likewise, the CPSU argues the cases presented on Monday night “paint a misleadingly negative picture of the agency” and do not accurately represent its “respectful and ethical” culture.

Descriptions like “evil”, “malevolent” and “a mongrel bunch of bastards” also left CPSU members feeling “dismayed and hurt”, according to their representatives.

The ASU accuses the joint team of investigative journalists of making unfair generalisations about all ATO staff, says they “sought to sensationalise from a few self-serving cases and commentators” and demands an apology.

“Our members assume the taxpayer they are working with is honest unless there is clear evidence to the contrary. Tax Commissioner Chris Jordan insists we do this. But this is nothing new. Tax Commissioners D’Ascenzo and Carmody before him also insisted that we assume taxpayers are honest unless there was evidence to the contrary.

“The presumption that taxpayers are honest pervades the ATO. It is only when there is clear evidence that a taxpayer is misleading us that we might look more deeply into their tax affairs. This occurs in a very small minority of cases.”

CPSU secretary Nadine Flood took a similar line on Tuesday.

“Last night’s 4 Corners, and accompanying reports by the ABC and Fairfax, detailed some fairly disturbing decisions by the Tax Office, but the reports have also been incredibly one-sided in giving an entirely false and unfair impression that such problems are current and commonplace. The reality is that our members work very hard to make sure our tax system is fair.”

“We’ve sought feedback from our members on this 4 Corners report and they’ve told us that many improvements have been made since these cases emerged, to better assist and engage with small businesses to avoid debts being incurred at all.”

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