The Australian, April 10, 2018, Robert Gottliebsen.
Australia has tried and tested state and Commonwealth public service rules and structures that serve the nation well. I believe if these rules and structures were introduced into the Australian tax collection system it would stop the worst of the current Australian Taxation Office (ATO) abuses of small businesses /investors and restore the credibility of our innovation encouragement programs.
One of the most stunning features of the ABC’s Four Corners program was that after two years of my revelations and the dramatic expansion of that coverage by the ABC and Fairfax the top officials at the ATO still don’t understand that they have a problem, let alone a chronic one.
In a subsequent media statement the ATO was still in denial.
Therefore the solution must be prepared by government (perhaps with the help of the opposition) and the ATO must be bypassed because if a body does not recognise its problem it can’t solve it.
A group of tax lawyers, who are equal to the best in the country, have anonymously prepared a detailed plan to rectify the abuses, under the umbrella of Ken Phillips’ Self-Employed Australia.
And the lawyers’ plan will, if anything, increase revenue because it will help restore faith in the tax system.
But before explaining how the lawyers’ plan works let me set out three “don’ts” for the government in changing the tax system:
* Don’t form a committee to look into the problem. Like other government departments the ATO is well schooled in “yes minister” public service techniques and will make sure its mates are on the committee and that it has wide a brief as possible so that will defer decision-making for a year or two.
* Don’t give the task of ending the abuses in small business taxation to the Inspector-General of Taxation. This was my original plan but I now realise that the abuse problem goes much deeper and is worse than I first thought and fundamental change is required.
* Don’t sack the tax commissioner Chris Jordan. All that is required is for him to change his role for small business so that he and his people in this area are no longer investigators, prosecutors, judges, appeal judges and sentencers. Victimisation of small business to raise money quotas will stop.
The lawyers point out that in other parts of the public service the protection of the people from bureaucratic abuse involves independent government bodies “cross-checking” each other’s actions.
For example, police must convince independent departments of prosecution of the police’s case against an accused. One bodychecks the other. This leads to better quality policing and limits abuse of police powers.
The process of challenging tax assessments has not undergone any significant reform since 1936 following the introduction of the first Income Tax Act. In the 81 years since, other areas of government decision-making have been reformed, but not the ATO.
Accordingly, the existing ATO should be divided into two separate authorities—one to collect tax and undertake audits and a second to manage taxpayers’ objections and appeals. And as part of that change the government needs to create a small business tax tribunal to provide small business people with a genuinely cheap, efficient, accessible and non-legalistic appeals process.
The small business tax tribunal would be set up as a low-cost, non-adversarial, independent, tax dispute-resolution procedure for small business people modelled on the first-tier immigration tribunal.
And so a small business tribunal determination would be required before a matter could go to the courts. Most importantly neither lawyers nor accountants can represent either the tax people or the small businessperson in any hearings. (That will cause howls of protest by the lawyers and accountants but it will work.)
The small businessperson would present his or her case and the tribunal would make a decision binding on the tax department, but if the small businessperson has the money he or she could appeal via the court system.
What an incredible difference that would make to entrepreneurship and employment creation in Australia. In turn it boosts revenues.
Surely we can get both major parties and cross benchers to agree,
The above measures would stop the current ATO power abuses whereby even if a taxpayer disputes a debt, the debt is at law immediately payable. And, as we all know, currently often the ATO enforces those disputed debts through garnishees and a writ for judgment. Such actions often destroy sound taxpaying businesses.
The new agency and the small business tribunal would be funded from the ATO’s existing budgetary allocation.
The new agency could be called the Commonwealth Director of Tax Disputation (CDTD) and be probably responsible to the attorney-general’s department But both the existing tax collection/ auditing body and the new body should to be structured along the lines of the Australian Competition and Consumer Commission, with separate “boards” to whom the CEO is responsible. The existing model of the ATO being headed by an all-powerful commissioner would be abolished.
Other recommendations by the lawyers include the introduction of mechanisms to put disputed debts on hold until they are resolved; penalties capped at 25 per cent unless there is independent approval and the ATO cannot act on an opinion of “fraud and evasion” without independent approval and judicial oversight.
In their detailed recommendations to government the lawyers also suggest clear rules on compensation and involvement in taxation matters of the state supreme courts given the tangle the Federal Court and Administrative Appeal Tribunal have created.
We have an urgent problem. Let’s get on with fixing it.