Australia’s tax office nightmare

The Australian Taxation Office headquarters in Canberra.
The Australian Taxation Office headquarters in Canberra

It is anecdotal but I am being called by smaller and medium-sized businesses who are having a horrific time meeting their AUSkey communication obligations.

At the same time I am discovering that those who are applying for research grants are having an equally horrific time with email and internet communication.

For business, the problems with AUSkey – a secure login for using government online services – mean delays in group certificates and countless wasted hours by top people.

For some of our top innovators and research people it means being forced to print vast amounts of data and carrying boxes of papers to government offices. This is the disaster that Australian innovation has sunk to.

I believe the two situations are closely related. When I talk to those who are having difficulty trying to deal with tax people via AUSkey, I discover that a large part of the problem is establishing the identity of the person in authority. The smallest mistake means you have to start again and your employees don’t get their group certificate.

One business owner I encountered operates a global enterprise via a trust. Naturally he knew the name of the trustee but then he was asked to state the original name of the shelf company he bought 30 years ago. When he couldn’t recall the name he was abused and told he should have known. He was instructed to go back and do the whole thing again.

What we are witnessing is people who have become drunk with power and, as the judiciary complains, too many in the tax office regard everyone as a crook instead of as a customer to be helped.

Again, anecdotally, the Australian Taxation Office servers keep breaking down and can’t handle the number of queries. The instructions for some items do not correspond with the actual electronic tax forms. It is shambles. And we hear that there is going to be another attempt at AUSkey in a few months’ time……

In the case of innovation the sickening sight of our top young researchers being forced to print out their material and cart it in boxes is simply a result of the ATO deciding that their officials, and only ATO officials, should be the adjudicators of what is classed as research expenditure.

The ATO is actually trying to claw back the grants that have been made by the government’s innovation department and this has completely destroyed morale.

Normally in situations like this commentators call for the resignation of the relevant ministers. But I actually feel sorry for Innovation Minister Karen Andrews and the Taxation Minister Michael Sukkar. Both are victims of decisions made by previous parliaments to put tax officers above the law with almost unlimited power.

The idea at the time was that this would increase revenue. Of course as we have seen it has the reverse affect, because it destroys trust in the tax system.

Often the problem is not at the top of the organisation, but rather the sheer joy that those further down gain in exercising unlimited power. We have seen it in ABN number rejections, garnishee sprees, taking action against those appealing and so on.

That’s the main reason why Australian research is being destroyed and why AUSkey communication is becoming a nightmare to smaller businesses.

Australia is not alone in giving unlimited power to tax officials.

Indeed, the US did exactly the same thing and encountered exactly the same set of problems. But they have woken up and the US tax rules have been changed so that they are now fair and there is accountability.

And it’s been done with the support of both major American political parties—rare in the US.

Both parties realised that the US Internal Revenue Service (IRS) used its unlimited power to abuse small business in much the same way as in Australia. The US Taxpayers First Act has specific provisions to protect small business owners from IRS seizures of their bank accounts. The IRS has been wildly abusing its powers to seize bank accounts in cases where there was no evidence of small business taxpayers avoiding tax.

Other measures include:

* Greater access to independent review: Guarantees taxpayer access to an independent appeal on an audit decision. Before an appeal the IRS must hand over to the taxpayer the taxpayers case file.

* Limited seizure of property: Property seizure is limited to illegal cash transactions or concealing criminal activity. The US had Australian-style garnishee abuse.

* Listening to the taxpayer advocate. The USA has an independent taxpayer advocate (NTA), which is akin to Australia’s Inspector General of Taxation (IGT). The US law gives the NTA significant new powers to give the IRS enforceable directives.

* The IRS is required to adopt best practices of private sector customer-service providers. What a wonderful thing that would be for Australia.

* Easier settlement procedures: No fees by IRS if a settlement deal is done with the taxpayer.

* The IRS must notify a taxpayer before they make inquiries of a third party about your tax (eg) a customer.

We need to take a similar legislative stance to restore faith in the taxation system and make it subject to the law of the land. Our tax revenue base is now in grave danger because of ATO power abuses.

It is not just the ATO systems but the arrogance of too many of the people behind them.

Perhaps they too are just as frustrated as their customers.

Footnote: The revenue base is also endangered by the minimal tax being paid by the US tech giants. To be fair the ATO commissioner is right across that issue. See “Tech giants will have to pay full tax in countries where they operate” and “Deeming rate needed for global giants”.