New ATO compensation scheme demanded by wronged taxpayers
Business owners are demanding replacement of a compensation scheme, administered at the discretion of the Commissioner of Taxation, for victims of wrongful assessments. This is concurrent with their condemnation of draft legislation allowing the Australian Tax Office (ATO) to notify credit-reporting agencies of alleged debt.
Representatives of the business community have told the Federal Government the ATO, being the sole judge of the fairness of its own actions was like “Caesar judging Caesar”. A new compensation scheme should therefore be established, run by an external agency to check validity of the ATO’s debt claims, and to rule on compensation for taxpayers wronged by erroneous allegations of debt.
The issue has been brought to a head by Inspector General of Taxation Ali Noroozi who, in a damning submission to former Treasury Secretary John Fraser, said “trust and confidence need to be restored in the ATO’s approach to debt collection”.
Background to the controversy
Mr Noroozi points out the ATO’s existing scheme for victims of poor administration paid out an average of only $484 in the financial year 2015-16. “So it is understandable that many aggrieved taxpayers view such low compensation offers as demonstrating lack of a genuine attempt to indemnify them for what they’ve suffered”.
The Inspector General made the submission at the request of Mr Fraser following the start of Treasury’s investigation into the ATO’s harsh treatment of small businesses claimed in an episode of the ABC’s Four Corners.
Macks Advisory understands that following a Freedom of Information request Mr Noroozi’s submission was placed on his website.
In the submission he tells Mr Fraser that because people’s reputations and businesses are being seriously harmed by some of the ATO’s decisions about tax debts, a dedicated dispute forum is needed to help vulnerable taxpayers, especially those not represented by business organisations.
It stated: “trust and confidence need to be restored in the ATO’s approach to debt collection”, especially in the light of media allegations about so-called “cash grabs” by tax officers.
If this restoration is to happen, Mr Noroozi says the ATO must be less defensive in response to criticism and “must show care and compassion for the public it serves, both in words and actions”.
Concern about garnishee notices
In the months since Mr Noroozi made his submission, the ATO has announced a pilot program that increases taxpayers’ abilities to appeal against its allegations before formal assessments are made.
However this does little to ease concerns of businesses about the ATO also ruling on appeals, or on taxpayers counter claims regarding decisions on which the formal assessments are eventually made.
Business owners assert it’s a state of affairs made worse when tax officers can instigate, unchallenged, garnishee orders that are financially crippling and destroyers of personal reputations.
Accordingly Mr Noroozi has launched an investigation into the use of garnishee orders to recover tax debts from taxpayers’ bank accounts.
He’s called the current system “an abuse” of taxpayers’ rights”, and says there’s therefore urgent need for a new review system that’s independent and targeted to test the ATO’s allegations of debt.
Where these allegations are shown to be false, the review system should then be empowered to determine the extent of abuse involved and order appropriate remedial action.
Mr Noroozi claims that unless allegations of debt are independently investigated there is no possibility the ATO can regain community trust lost, not only as a result of ill treatment of a disturbing number of debtors, but also because of “other matters”.
Concern about “other matters”
These, he says, have combined to further reduce confidence in the integrity of tax officers, and “include IT outages, Operation Elbrus and claims of tax fraud that may be linked to abuse of position by a public official”
Operation Elbrus is a continuing Federal Police investigation into an alleged $165m tax fraud at Plutus Payroll, so far resulting in charges against 15 people -- including former Deputy Commissioner of Taxation Michael Cranston, alleged to have used influence and ATO information to benefit his son Adam.
Police have accused Adam of being the ringleader of a scam that relied on information supplied by his father.
