It's The ATO & The Small Business Situation Part 2: The Taxation Ombudsman is launching an independent review into the Australian Taxation Office’s misuse of garnishee notices for raising revenue.
The Story So Far
In our previous blog The ATO & The Small Business Situation, we commented on the joint findings of the ABC’s Four Corners and Fairfax Media's sensational report ‘A Mongrel Bunch Of Bastards’. Incredibly damning, the scandalous allegations revealed the ATO deliberately targeted small business and individuals to meet revenue goals through the collection and recovery of tax debt, all the while deliberately avoiding the affluent or big businesses with deep pockets more able to take matters to court.
The incriminating articles confirmed what we had been suspecting for some time; that these were “errors and actions by the ATO which led to small businesses and individuals being financially crippled.” Allegedly, standard garnishees were being issued on every case possible – a practice the government itself noted should be used only as a last resort but one the ATO clearly saw as a way of raising revenue.
Issuing garnishees goes against the grain of any reasonable use which they had initially been created for. But then again, the government has been creatively looking to fill the coffers the last two budgets, including introductions of Tax Clearance Certificates, the Netflix and Ebay Taxes, and more recently, the crackdown on the Black Economy with a dramatic change to our progressive tax system.
Bowing before such inflexible proof of allegations made by two whistleblowers from within the system, the government announced within days they were launching an investigation. While this announcement may have been met with much scepticism the current government would act at all, Revenue & Services Minister Kelly O'Dwyer told the Australian Associated Press a probe headed by Treasury would be launched into the matter.
IGT Launches Investigation
Meanwhile, Inspector-General of Taxation Ali Noroozi has confirmed in a media release he is launching an independent review of his own. “The allegations about the ATO’s inappropriate use of garnishee notices is of serious concern and, if not addressed, can affect community confidence in the administration of the tax system,” Mr Noroozi stated. “As the Taxation Ombudsman, I have a duty to independently investigate these allegations to restore public confidence,” he said.
Garnishee Notices are court orders allowing the ATO to legally recover a debt through the intervention and taking control of a taxpayer’s bank account, directing any money to the tax office when the account receives a deposit. And this all occurs without the taxpayer being able to do a thing about it. The expected and disastrous outcome is a clear effect on the cashflow of vulnerable affected businesses and individuals; what the ABC and Fairfax were quick to point out as a ‘cash grab’ by the ATO.
“Cash flow is the lifeblood of small businesses,” Mr Noroozi announced in his release to the media, “and, if inappropriately disrupted, can have an unjustified and devastating effect on them.” Mr Noroozi promised his investigation will examine any truth to these allegations alongside the complaints to his office “with the aim of finding improvements where necessary and restoring confidence in the system,” he said.
He also specifically made references to the Four Corners’ allegations about the ATO inappropriately using garnishee notices as set targets for staff that also evaluated their performance based on the debts collected. Mr Noroozi acknowledged “the ATO has the vital task of collecting Government revenue,” but he also noted this had to be done “taking into account the particular circumstances of each taxpayer whilst ensuring a level playing field is maintained,” he said.
You're Only As Good As ....
Mr Noroozi noted in 2015, the IGT had released a report with 19 recommendations for improvements in the recovery of tax debt. But he acknowledges in 2017, his office continued to find more than 20% of all complaints centred on the ATO’s shocking form of recovering tax debt, with garnishee notices consistently raised as one of the top three issues. In 2018, we can only hope the powers of might combined from the Taxation Ombudsman and the Treasury will result in something positive for small businesses and individual taxpayers. But if by all accounts the ITG report from 2015 hasn’t instigated many changes, do we dare hope this one might?
We’re certainly living in interesting times when ‘issuing garnishee notices’ acts as a substitute for ‘collecting revenue’ with the ATO. It’s better known as ‘making sales’ for transactions between clients and companies in the business world, though Sales Key Performance Indicators would be on a far different scale to the ATO’s KPIs focus on tax debt collection and staff performance. Welcome to the brave new world of the Australian Taxation Office, where you’re only as good as issuing your last garnishee notice.
The closing date for submissions to Mr Noroozi's review is June 22, with the full release from The Inspector-General of Taxation’s media release available >here<.
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