O’Dwyer announces snap investigation into ATO allegations

Kelly O’Dwyer, the Federal Minister for Financial Services, has announced a snap inquiry into the activities of the Australian Tax Office after a media investigation by Four Corners and Fairfax Media raised doubts about its approach to tax enforcement.

In the Four Corners show on ABC, two whistleblowers complained of a poisonous workplace culture in which vulnerable small businesses and individuals were unfairly targeted by the ATO to help meet revenue goals.

The informers outlined a range of unethical tactics used by their office, including the “hour of power” in which tax collectors were told to seize funds from the bank accounts of people alleged to owe money, regardless of their personal circumstances.

Ms O’Dwyer assured the ABC of her concern and said the allegations will be properly scrutinised.

“I have requested a thorough investigation of all allegations raised and the Government will be responding once it has had the opportunity to consider that investigation in detail,” Ms O’Dwyer said, adding that she wants the investigation to be completed as quickly as possible.

The ATO has defended itself in a press statement, suggesting that the cases highlighted in the media did not prove “systemic issues” within the organisation.

“The work we have done over the last five years reinventing the client experience and our culture means many of the allegations from these cases are not representative of today’s practices,” the statement said.

“Where we have made mistakes, we will apologise and seek to rectify the position and restore the relationship with the taxpayer.”

Opposition Leader Bill Shorten has also promised that Labor will investigate the issues raised and whether small businesses are being treated fairly by the tax authorities when the Federal Parliament returns to session in May.

“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.”

‘Judge, jury, executioner’

The media revelations triggered numerous tax lawyers, watchdogs, academics and peak bodies to urge the creation of new checks and balances to ensure the considerable powers of the ATO 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”.

The concept of splitting the tax office was floated in early 2013 by then shadow treasurer Joe Hockey.  However, despite his professed concerns at the ATO’s robust interpretation of tax law, Mr Hockey chose not to take action when the Coalition won power later that year.

The ATO was predictably reluctant to accept any change, warning it would only slow down appeals, and the Government instead announced a parliamentary inquiry into tax disputes.  The inquiry also fell short of calling for the ATO to be formally split in two, but instead 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 must obtain a higher standard of proof before launching debt collection action. Those recommendations were then rejected by the Government, although some changes were supposedly made to some internal tax processes.

It remains to be seen whether the new allegations will provoke fundamental change, or whether the move to launch yet another inquiry will only serve to take the heat out of the immediate controversy, allowing business as usual to resume over time.