The ATO saga continues.
“The tax commissioner has the power of a dictator, and if you have dictatorial power, it will be abused.” Such were the ominous words uttered by Ken Phillips, Executive Director of Self Employed Australia at the Senate’s Legal and Constitutional Affairs Legislation Committee in Sydney.
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’. Scandalous allegations revealed the ATO deliberately targeted small business and individuals to meet revenue goals through the collection and recovery of tax debt, while avoiding the affluent or big businesses with deep pockets more able to take matters to court. 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. Immense financial and emotional distress have been direct results of the ATO’s mistakes. “In dealing with the ATO, I’ve never come across such a mongrel bunch of bastards in my entire life,” the ABC reported of a business owner disputing a $250,000 tax bill.
Following this sensational news, Inspector-General of Taxation Ali Noroozi confirmed in a media release he was launching an independent review. “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. With the closing date of June 22 for submissions to Mr Noroozi’s review looming, this debacle is sure to continue.
The spotlight is shining on The ATO for the unfair legal advantage in targeting SMEs and less wealthy individual taxpayers. Liberal Democrats Senator David Leyonhjelm particularly noted in a statement the ATO wields far too much power. “As taxpayers we are at the mercy of an entity with unparalleled power to act as investigator, prosecutor, judge, appeal judge and sentencer,” he said. “There are too many stories of the ATO getting it wrong and leaving a trail of devastated businesses and individuals in its wake,” Senator Leyonhjelm declared, “and offering paltry financial compensation that is too little too late,” he said.
The ATO Claps Back
The ATO has denied it is anti-small business. Deborah Jenkins, Deputy Commissioner, Small Business of the Australian Taxation Office responded to the damning reports: “We are concerned this program will focus heavily on a very small number of atypical cases and extrapolate these across the entire system, alleging that the ATO is anti-small business, wields too much power or is solely focused on collecting revenue,” she said. “The feedback I consistently receive from credible sources – like small businesses themselves and their key industry associations – is positive about how we listen and respond to their needs. While we do sometimes make mistakes, we acknowledge those specific instances and we always welcome external feedback and constructive critique,” she said. Ms Jenkins was clearly concerned the report would “create tension and worry for small businesses where it did not previously exist — and perhaps even stop people from coming to us to have questions answered or issues resolved.” In their submission to the Senate inquiry, the ATO have declared “We would like to reiterate that no review, scrutineer or credible source has ever found a pattern of abuse towards small business owners by the ATO.”
Meanwhile, At The Senate Committee Hearing
The Senate’s Legal and Constitutional Affairs Legislation Committee hearing met to debate proposed legislation that would allow the Commonwealth Ombudsman to enforce model litigant obligations (MLOs) on government agencies. MLOs existing as guidelines for how government departments should act during legal matters, including codes of acting honestly, consistently and fairly without taking advantage of claimers. There are currently no appeals in place when these codes have been violated, and while Deputy Commissioner, Small Business of the Australian Taxation Office Ms Jenkins may feel there is exaggerated hype in this circumstance, the proof is looking to be in the ATO pudding.
Speaking at the hearing, Executive Director of Self Employed Australia Ken Phillips told senators the tax commissioner “has the power of a dictator”, equating the actions of the ATO to churches during royal commissions of “deny, deny, deny.”
“Our observation is that if you are upright, honest and completely forthright with the ATO, you run quite a high risk of getting abused in the system. Conversely, if you play shenanigans and have the intent not to pay taxes, you have a fairly high chance of getting away with it,” he said. Mr Phillips believes the ATO treats taxpayers as guilty until proven innocent with allegations of fraud and mischief treated as law.
“SME owners cave in, not because of the rights or wrongs of the case,” Mr Phillips told the Senate, “but because the ATO is a pack of bullies who can get away with it. By doing that, they’re breaking model litigant principles,” he said.
The fiasco continues – and we’ll remain observing from the sidelines.
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