Opposition Leader Bill Shorten says Labor will investigate reports that the Australian Tax Office (ATO) is pressuring employees to use heavy-handed debt collection tactics on small businesses.
Former ATO staff have told a joint Four Corners and Fairfax Media investigation that they were pressured to hit revenue targets and to take action against individuals who were still appealing alleged debts.
The alleged tactics included an “hour of power” in which tax collectors were instructed to seize funds from the bank accounts of taxpayers assessed to owe the tax office money, regardless of their personal circumstances.
“The whistleblowers have drawn the nation’s attention to something that a lot of businesses and people have been concerned about,” Mr Shorten said.
It looks like people’s genuine concerns have some basis in fact.”</p> <p>
Mr Shorten said Labor would investigate the allegations when federal Parliament returns in May.
The joint investigation has prompted tax lawyers, watchdogs, academics and peak bodies to warn the ATO needs new checks and balances to ensure its powers are not abused.
“The problem here is that you’ve got tremendous power invested in an organisation which can effectively act like a judge, jury and executors rolled up into one,” tax lawyer Graeme Halperin told Four Corners.
Former chairman of the Australian Competition and Consumer Commission, Allan Fels, said the Government should consider splitting the ATO’s administrative and policing functions to create an extra level of scrutiny within the organisation.
“The problem stems from the very great power of the Tax Office to make big decisions affecting people’s income and lives,” Mr Fels told the ABC.
“Normally when such powers are given to someone, we have certain checks on the exercise of that power but for various reasons various governments have let that power go unchecked [at the tax office]”.
The idea of splitting the tax office was floated in early 2013 by then shadow treasurer Joe Hockey, who was concerned about the ATO’s aggressive interpretation of tax law.
But Mr Hockey didn’t introduce the reform when the Coalition came to power later that year.
The cost of taking on the ATO
Small businesses and individuals are paying a high price for fighting back against the Tax Office.
The ATO was opposed to the reform – warning it would slow down appeals and be ineffective – and the Government instead announced a parliamentary inquiry into tax disputes.
That stopped short of calling for the ATO to be formally split in two, but called a new second ATO commissioner to handle appeals and ensure businesses were being treated fairly.
It also called for the burden of proof to be reversed so that the ATO needed a higher standard of proof before launching debt collection action.
Those recommendations were rejected by the Government, although some changes have been made within the Tax Office.
Peak body calls for change
When Mr Hockey floated the idea, industry groups like the Institute of Chartered Accountants adopted a watch-and-see approach, saying commissioner Chris Jordan had only just been installed and he should be given time to make changes.
But now, five years later, it is calling for change, with one senior official at the rebranded peak body describing the Four Corners report as “harrowing”.
“Many chartered accountants would agree with sentiments expressed on the Four Corners program about the ATO’s powers, particularly their impact on individuals and small business operators,” said head of tax at Chartered Accountants Australia and New Zealand Michael Croker.
Where a taxpayer is trying to do the right thing in a complex, self-assessment tax system, heavy-handed approaches can jeopardise what should be a good working relationship with the ATO.”
Mr Croker has also supported inspector-general of taxation Ali Naroozi’s call for small businesses to be given stronger appeal rights.
If you run a large business – with an annual turnover of more than $250 million – you can request a review by someone within the ATO who wasn’t involved in the initial audit.
But if you run a small business, you can only access in-house mediation.
“The small business group within the ATO should include some wise heads, or some former practitioners, that can look at some of these emerging issues and assure the commissioner they’re being dealt with appropriately, and consistently,” Mr Crocker said.
Liberal Democrat Senator David Leyonhjelm said he would support reversing the onus of proof and ensuring more oversight of ATO decisions.
“Almost every government agency has to prove its case first, that’s the normal way the law works,” Senator Leyonhjelm told the ABC.
ATO: We welcome constructive criticism
The Tax Office is yet to respond to the Four Corners report, but has moved to assure taxpayers and small businesses that it is listening to industry concerns.
“While we do sometimes make mistakes, we acknowledge those specific instances and we always welcome external feedback and constructive critique,” ATO deputy commissioner Deborah Jenkins said.
Ms Jenkins said she was concerned some business might feel discouraged from seeking help from the ATO after watching the program.
“That’s the worst outcome for everyone,” she said.