The Australian, January 25, 2018
The Inspector-General of Taxation Ali Noroozi has underlined a number of the dangerous Australian Taxation Office practices that are damaging the small business community in Australia.
And his revelations confirm why the current draft bill to give the ATO even greater powers must be amended or abandoned.
At its essence the ATO is a massive computer systems operation and we have seen lots of anecdotal cases where these systems are not working properly.
The Inspector-General of Taxation helps explain the breakdowns by revealing that the ATO uses two separate accounting systems to administer its PAYG operation.
Not surprisingly this is causing taxpayers to either not receive correspondence or receive correspondence that makes no sense. It also seems that in many cases these systems have to be reconciled manually.
The Inspector-General says there should only be one system and the ATO agrees. We can only wonder why somebody hadn’t thought of that five or ten years ago.
But the deadly sting in this crazy situation is that the Inspector-General has uncovered that the ATO is issuing incorrect assessments produced by the breakdowns to pursue taxpayers for debts they don’t owe.
If ordinary individuals begin action against a person or organisation for a debt and there is a mistake the system corrects itself very quickly. But an Australian tax office assessment has incredible power so when a small business receives one and the commissioner begins to pursue the debt it ranks above all other liabilities. If it is a large sum the small enterprise is effectively bankrupt, even though it is a nonsense claim.
That is why it is so important that the parliament does not simply give the tax commissioner the right to register amounts owing with credit bureaus because immediately that is done the business will have no chance of getting credit and will go out of business.
If we are dealing with a group that is simply dodging tax then that power can be quite useful, but it will be the height of parliamentary irresponsibility to give that power at this time when the systems of the ATO are in chaos. However if a proper appeal system was put in place, whereby taxpayers were told that they could dispute a particular claim, they could lodge that appeal with the Inspector-General of Taxation or some other independent body.
And there is absolutely no point in giving them the right of appeal to one of the ATO’s kangaroo courts because, like the systems, they are not working properly. This is the time to fix the taxation situation.
Once tax officers know that their actions can be vetted by a truly independent body (with no lawyers involved) with the power to overrule the assessment then those officials are likely to take a lot more care than they currently do.
But if the Inspector-General of Taxation is to be that body then it must have wider powers and take over a great deal of the so-called review functions currently undertaken by the tax office. The proposed legislation recognises that the Inspector-General of Taxation must be “consulted” but that is meaningless unless the Inspector-General of Taxation is to be completely revamped to cater for what will be a new role.
I might add that if the Inspector-General of Taxation doesn’t want that role then we have to have some other body set up or have a simplified court system.
The cavalier attitude that led to issuing false PAYG assessments is not confined to that area of the ATO.
But nowhere has it been more dramatic than in gold refining. We have seen an officer of the ATO prepare a report that affectively said the whole global gold refining industry was operating incorrectly and that the ATO, here in Australia, alone knew how gold refining should be undertaken. Huge assessments were issued and GST refunds were withheld. And then when the gold refiners case came up for appeal that person who made in report sat on the body that decided their fate.
And their fate was to be put out of business because the ATO believed there was a criminal conspiracy. Like all criminal matters that should have been decided by the Australian court system and not by an ATO kangaroo court.
And remember, in the case of the gold refining industry, many of the refiners actually believed there were criminal activities taking place to take advantage of a loophole in the GST act that had been exposed in 2003 in London.
The refiners warned the financial transaction monitor, Austrac, but it seems it was too busy chasing the Commonwealth Bank.
We are not Zimbabwe and whether it be PAYG or gold refining as a developed country we need a proper tax administration for smaller enterprises with a proper appeal body.