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Terms of reference finally unveiled in ATO probe

Terms of reference finally unveiled in ATO probe

The long-awaited investigation into claims of ATO bullying and misconduct towards SMEs has finally begun, with its terms of reference announced by the Inspector-General of Taxation.

“As the Taxation Ombudsman, I have a duty to independently investigate these allegations to restore public confidence,” the Inspector-General, Ali Noroozi, said in a statement.

Mr Noroozi will cast a close eye over the issuing of garnishee notices, in response to claims they have been overused by the ATO as a blatant cash grab against SME operators.

“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,” he said.

“The ATO has the vital task of collecting government revenue and recovery of tax debt is an important part of that task, however, it must be done equitably, taking into account the particular circumstances of each taxpayer whilst ensuring a level playing field is maintained.”

The full terms of reference of the inquiry will explore the ATO’s:

1. strategies to manage tax debts by way of garnishee notices;
2. policies and procedures for issuing garnishee notices, including how the ATO considers circumstances of taxpayers, such as vulnerable small businesses and individuals;
3. mechanisms to ensure staff adherence to its garnishee notice policies and procedures;
4. Key Performance Indicators (KPI) with respect to both tax debt collection and staff performance;
5. specific communications to staff regarding the use of garnishee notices and associated KPIs at each location of its debt recovery units; and
6. other relevant concerns or potential improvements identified during the course of the review.

Investigation a long time coming

Mr Noroozi noted that despite recommendations made by his office in 2015 that the ATO “have regard to taxpayers’ circumstances and take proportionate action”, debt-related complaints still make up more than one in five complaints it receives, and that garnishee notices are in the top three issues raised.

Yet he told My Business that it had taken three years for an investigation to be launched because the ATO needed to be given time to implement the recommendations and see their effect.

“None of these allegations have been substantiated yet – they may well have implemented these recommendations and they may be working well, and these may be just a few isolated cases; we don’t know that yet. We need to investigate to find out whether they have been adhered to,” he said.

“Also, it’s not that it’s taken so long. What I’ve said is, is that we have had complaints about this, and I have said if they persist then we will do possibly targeted reviews in specific aspects of debt collection. The review we did in 2015 was a very broad review.”

He also added that the media coverage surrounding the issue has brought the matter to the attention of the public, and that there is now a need to “restore public confidence”.

Commenting on the announcement, a spokesperson for the ATO said “We note the IGT has announced an investigation into the ATO’s use of garnishee notices and, as always, are committed to cooperating fully throughout the process.”

The tax office has previously denied the allegations of impropriety.

The investigation comes more than five weeks after the allegations were first aired by a joint ABC/Fairfax investigation.

Confidentiality of submissions

However, it is unclear what, if any, evidence will be officially provided to the inquiry, given the reluctance of business owners and their accountants to go on the record for fear of retribution.

“Imagine if tax agents could speak freely. More than few truths would come out,” said one My Business reader.

“Taxpayers don't want to speak out about ATO tactics due to fear of retribution,” commented another.

My Business has been directly contacted by the former spouse of one alleged victim of ATO bullying and victimisation, who attribute their marriage breakdowns and financial ruin directly to the relentless pursuits against them by the ATO. Again, they feared identifying themselves for fear of retribution.

Comments have even been made to other media outlets attributing suicides to ATO actions.

Allaying these fears, Mr Noroozi insisted that while specific complaints require personal information in order to be directly investigated, submissions to an inquiry such as this investigating systemic issues are entirely confidential, and can even be made anonymously.

“If you come to me and say you have a problem with the ATO, if you want me to address that specific complaint, I will need your consent to disclose your information. But if it’s to a submission and you just want to share general information and you want to remain absolutely confidential, then that is totally respected,” Mr Noroozi told My Business.

“You can lodge your complaint as per usual [as part of this investigation], but you’ve just got to make it clear whether you’re just sharing this information confidentially for the good of the review or if you want your complaint addressed.”

Clarifying this, though, Mr Noroozi said that even anonymous submissions need to provide enough information to be useable; “they cannot make unsubstantiated claims” or simply say “the tax office is very bad”.

“By all means, if you want to remain anonymous, remain anonymous, but at least lead me to what I need to investigate,” he said.

Mr Noroozi added that “in any event, we would never disclose anything without talking to the person”, noting that by law, his office is not able disclose any information provided without express consent — including to the ATO — and is not not subject to Freedom of Information requests.

Plea to come forward

In launching the investigation, Mr Noroozi made a plea for impacted business leaders to come forward, stating that the more evidence brought forward, the better the results for the entire SME community.

“Over 25 per cent of all our complaints come from small business — that’s a substantial number,” he told My Business.

He added that of the individual taxpayers making complaints, some of those are sole-traders while are others are made by tax agents, meaning the overall proportion of complaints relating to SMEs could be substantially higher.

More information on the investigation, including details of how to lodge a submission, can be found on the Inspector-General of Taxation (IGT)’s website.