Self Employed Australia

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ATO officially ‘unfair’ according to ATO’s own report

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An ATO survey of self-employed small business people who had been in dispute with the ATO during 2017 has produced an embarrassing result for the ATO. The survey, costing close to $1 million, assessed whether people had been treated fairly by the ATO.

The outcome is damning of the ATO’s treatment of the self-employed. If a private business were to receive results like this, heads would be chopped in the senior management ranks. Such results would demonstrate massive customer dissatisfaction. The business would quickly be out of business.

Of the 670 people surveyed:

  • 36% said that the ATO did not understood their point of view.
  • 51% were not well informed about the progress of their dispute.
  • 26% said that the process was biased and not independent.
  • 45% considered that the time taken for the final decision was unreasonable.
  • 31% considered that the communication was not straightforward or honest.
  • 53% said that the internal discussions were not transparent.

And, most significantly:

  • 61% said that the costs (time, money and resources) were unreasonable.

But the ATO is a monopoly and apparently considers the outcome to be quite good because it’s better than previous surveys.

This ATO survey confirms that the reports of ATO bad behaviour in the Four Corners program ‘Mongrel Bunch of Bastards’ (9th April)  were highly accurate. The ATO’s unfair behaviour is surely systemic given the survey results.

The survey reinforces the need for major reform of the ATO. We continue to campaign for a dedicated Small Business Tax Tribunal, external to, and independent of, the ATO. This is just one of the reforms that is sorely needed.

Our analysis of the ATO survey and the survey itself (obtained under Freedom of Information) are here.

Official government report confirms ATO has big problems

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The ATO has suffered another major hit to its reputation, this time (and again) from an official government investigation.

You may remember that following the Four Corners show ‘Mongrel Bunch of Bastards’ which exposed ATO abuse of small business people, the Minister, Kelly O’Dwyer, ordered a Treasury inquiry. Both the Small Business Ombudsman and the Inspector-General of Taxation (IGT)  were asked to participate.

The Small Business Ombudsman report (early July) said the ATO conducts “…fundamental denial of access to justice for small business.”

The Inspector-General of Taxation’s report has now been released. Normally the IGT uses cautious language, but this time the report is blunt. It is quite damning of the ATO’s treatment of small business, self-employed people.

Some of the things the IGT says about the ATO include:
  • Creates perceptions of bias in its processes.
  • Debt collection has been ‘random and ad hoc’.
  • Badly supervised junior staff who issue garnishees.
  • Compensation is just a token scheme and reform is required.
  • 86 per cent of debt actions are against self-employed people.
  • An independent review process is only available to the wealthy.
  • Community confidence and trust have been in decline.
  • The ATO’s media campaigns following Four Corners have damaged the ATO.

The full report is here. We’ve put together key extracts from the report for easier reading.

The Age and Sydney Morning Herald reporting labelled the ATO

The Australian’s headline said Tax office must beef up compo for victims.

The IGT also stated that since the Four Corners program it has received 178 complaints and the Small Business Ombudsman over 100. A total of more than 278 complaints. This is 4.5 times the number of complaints the Tax Commissioner stated in his evidence to the Senate Committee on 30th May 2018 (see second paragraph, page 7). The Commissioner said “…only 62 actual complaints have emerged since 9 April from all sources (IGT, ASBFEO and ATO).” This reinforces why we’ve said “Please Mr Tax Commissioner, get your facts straight”. It’s concerning when even Parliament cannot rely on the ATO to be factual.

At least we can say of the government and Minister O’Dwyer that they are prepared to be confronted by facts from independent sources. Whether the truth about the ATO’s behaviour leads to the sort of reforms we say are necessary is too early to tell. Here’s our reform report, An urgent but common sense agenda.

Government report says ATO denies “justice for small business”

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Following the ABC Four Corners program ‘Mongrel Bunch of Bastards’ alleging Australian Taxation Office abuse of small business people, the first of three government-ordered reports was released yesterday.

The report from Small Business Ombudsman Kate Carnel states that the ATO has “serious system-wide issues” that result in “…fundamental denial of access to justice for small business.”

The government report is a huge rebuke to the ATO that has consistently said ‘nothing to see here folks!’ and ‘it’s all a beat up’ and that the people profiled in the ABC show were stupid and suggesting they were tax cheats.

There was great scepticism that the reports ordered by the Minister for Revenue, Kelly O’Dwyer, would be a whitewash to protect the ATO. But no! The Minister deserves congratulations for allowing a genuine search for the truth.

The Small Business Ombudsman’s report studied the cases of over 100 small businesses who requested assistance. Based on this fact-finding examination of actual cases, the Ombudsman reports that the ATO:

  • Operates its systems to target revenue collection.
  • Can even (and does) take away ABNs, thereby stopping businesses from operating.
  • Raids people’s bank accounts even before taxpayers have any knowledge there is an issue.
  • Lacks true independence in terms of its internal review processes.
  • Does not provide adequate compensation for its own wrongdoing.

The Ombudsman talks of:

  • Abuse of ATO power.
  • ATO delays on decisions so that it can collect debt.

The Ombudsman’s report is totally consistent with the allegations we have been making against the ATO for more than five years.

The Ombudsman calls for major ATO reforms including:

  • The creation of a fully independent low cost external review mechanism that is binding on the ATO.

This is consistent with our campaign for a Small Business Tax Tribunal.

We need major reform to the ATO. But small business people also need effective capacity to defend themselves if they come under ATO attack.

We give the Senate evidence on ATO small business behaviour

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Quite recently (14 June) we were invited to give evidence before a Senate hearing on the behaviour of the ATO towards small business. This was done within the context of proposals to require government departments to comply with ‘model litigant’ obligations. That is, to behave fairly and ethically!

We made a detailed submission supporting the proposal and explained how the ATO regularly abuses self-employed, small business people.

Our evidence was supposed to go for 30 minutes but went for over 50 minutes under detailed Senate questioning. In part we stated:

  • Our observation is that if you are upright, honest and completely forthright with the ATO, you run quite a high risk of getting abused through the system
  • …the behaviour of the ATO I liken to what happens with the churches over the sexual abuse cases and with the banks over their behaviour. At all times, it’s ‘deny, deny, deny’.
  • The tax commissioner has the power of a dictator. If you have dictatorial powers, those powers will be abused.
  • …on the issue of fraud, the taxation office in our view concocts allegations of fraud and any such allegation becomes at law a fact and not merely an allegation, which the taxpayer then has to ‘unprove’.

Our assessment of the behaviour of the ATO was taken with great seriousness by the Senate Committee. The full transcript of our evidence is here (see pages 1 to 8).

Channel 10 News covered our evidence that night. See the news segment here.

And other media outlets also showed great interest:

Please, Mr Tax Commissioner, get your facts straight!

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In all our commentary on the Australian Taxation Office, not once have we personalised our criticisms.

Yes, we have said that the Tax Commissioner is a Tax Dictator. But that is a statement of legal fact. All tax power by statute is vested in the Tax Commissioner. And those powers make the Commissioner effectively policeperson, prosecutor, judge, jury and financial hangman. That is, the powers of the office holder of the Tax Commissioner are the powers of a dictator! Here’s what the Tax Commissioner can do to you.

Yet the current holder of the office, Tax Commissioner Mr Chris Jordan, seems so angered by our criticism that he has launched personalised attacks.

Under parliamentary privilege—that is, safe from defamation action—in evidence before a Senate Committee Mr Jordan has attacked Self-Employed Australia and our Executive Director Ken Phillips. It is fair enough that Mr Jordan seeks to reject our criticisms. But he should be factual. Here’s one example where he is wrong in his Senate ‘evidence’:

Mr Jordan: There was a person on Four Corners who said that the people at the ATO—he had a bit of a mixed metaphor here—slowly boil people until we roast them to death. I can cook, so I know you don’t roast when you boil, but nonetheless that’s what he said. So, yes, he said that, and that was on the ABC Four Corners program—entirely inappropriate—

The Tax Commissioners is entirely wrong. The transcript of my words on the Four Corners show, ‘Mongrel Bunch of Bastards’ on Monday 9 April 2018, reads:

“They play games with you. They just pull you in, and then they cook you slowly, effectively until you are roasted and you are dead.”

There was no mixed metaphor.

Mr Jordan is entitled to criticise or make allegations about us, even if he wants to move from policy to personal criticism. But what the community expects from the holder of arguably the most powerful public service position in the country is strict truth. Mr Jordan’s ‘misstatement’ is unbecoming of the holder of this important public office in our view.

Here’s the core point. We work hard to assist people under attack from the ATO. We find constantly that the ATO manipulates facts and does not tell the truth. This occurs as they oppress people such as those who appeared on ‘Mongrel Bunch of Bastards’.

The foregoing example of roasting/boiling is silly. But, if the Tax Commissioner himself cannot be relied upon to be factual, even before a Senate Committee, what does that say of the reliability of ATO facts when they prosecute small business people?

We will expose more and more serious ATO fact manipulation.

Is it any wonder that we have lost faith and trust in the integrity of the ATO?!

We’re not mongrels and we don’t cook people, says ATO boss

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Yesterday morning the head of the Australian Taxation Office, Mr Chris Jordan, denied that the ATO were a ‘mongrel bunch of bastards’. (See ABC report here.)

Mr Jordan was making a presentation to a Senate Estimates hearing and responding to the Four Corners show on 9 April ‘Mongrel Bunch of Bastards’.

Mr Jordan also rejected our comments in the show that the ATO “cooked people slowly, until you are roasted and you are dead”. Mr Jordan said: “People at the ATO do not get up in the morning thinking who can I destroy or boil to death.”

Mr Jordan denied that there are any systemic problems in the way the ATO treats small business people. However, he announced that the ATO has set up new processes to address any problems. That is, the ATO is addressing problems it says don’t exist.

Maybe we are starting to see some early results. We’ve been pushing for significant change in the ATO since 2015. Here’s our background activity. We want a small business tribunal. And recently we went into more detail about ATO reform. We want the ATO broken up. Details here. And we’re calling for a Royal Commission into the ATO.

The problem with the ATO’s doing internal reform is that it has promised this many times in the past. But its ‘reforms’ have not changed the bad treatment of self-employed small business people. Reform has to be imposed on the ATO by Parliament.

I discussed this on drive-time radio yesterday with Ross Greenwood of Radio 2GB Sydney. Yes, I was fairly ‘blunt’ in putting our views about the ATO. You can hear the interview at this link.

Like the banks, the ATO needs a Royal Commission

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We’ve come to the conclusion that the truth about the Australian Taxation Office’s bullying of self-employed people will only come out in a full Royal Commission inquiry.

We’ve been strongly prompted to this conclusion by an article in The Australian yesterday by the doyen of business columnists, Robert Gottliebsen. Robert is correct in his article ‘The ATO is repeating the hideous mistakes of bank boards’.

The ATO controllers are in denial about the ATO’s bad behaviour, just like the banks were with unfair contracts, including abusive customer treatment (and the churches also were on sex abuse!) Robert said:

“…bank boards were in total denial and did not recognise that they had created contracts that almost encouraged staff to treat small business customers badly.”

Robert points out that change is possible but legislation is required and he recognises our efforts to achieve change. He said:

“And the (bank) directors allowed it (abuse) to continue despite years of commentary from myself in The Australian and the efforts of many others, including Self-Employed Australia’s Ken Phillips to get legislation through Parliament to make directors do the right thing and construct contracts that were fair to both parties.”

Major reform of the structures and administration of tax by the ATO is essential. The ATO has operated as is since 1936. Reform involves breaking up the ATO into separate independent authorities and an independent small business tax tribunal. We’ve detailed this in our ATO reform agenda here.

Reform should proceed without delay, however. As Robert says:

“… like the banks before fair contracts, ATO officials have the power to do what they like. And, again like the banks, they will not be caught out until there is an ATO royal commission.”

We spent seven years campaigning for fair contracts. Our campaign commitment to ATO reform is also long-term. And we are proudly obsessive in our efforts!

Our next step is submissions to the Senate Inquiry into whether the Commonwealth (eg, the ATO) complies with its Model Litigant obligations.  At the public hearing on 14 June we’ll be saying that the ATO ignores its obligations. We’ll keep you informed!

PS: Robert Gottliebsen was recently inducted into the Australian Media Hall of Fame. Quite an honour!

Top (retired) Federal Court Judge blows whistle on ATO

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Since the Four Corners show ‘Mongrel Bunch of Bastards’, which exposed the abuse by the ATO of small business people, the ATO has been in denial mode. The ATO’s press release is essentially a ‘nothing to see here folks’ statement.

The Australian Services Union, representing ATO staff, has demanded that we at Self-Employed Australia apologise for ‘scurrilous’ accusations. It is outraged by our statements in our submission opposing the ATO credit agency report Bill. It’s pleasing to report that this Bill has now been put ‘on hold’ by the Minister, Kelly O’Dwyer.

But now something has happened that cuts through the ATO’s (and its union supporters’) hand-wringing!

Recently retired Federal Court Judge Richard Edmonds has spoken out. Edmonds is highly respected as one of Australia’s most knowledgeable tax jurists with 50 years’ experience in tax law. In a letter to the Australian Financial Review the retired judge said:

  • “I have never known … the ATO to apologise to a taxpayer where a court finds that the ATO wrongly assessed … in the collection process.”
  • “… the ATO has even taken the position, pending appeal, that it is not bound by decisions of a single judge adverse to the commissioner…”

The judge refers to:

  • “… the existence of a mentality, maintained by too many ATO officers for too long, that taxpayers on the whole are cheats and liars and anything the ATO does to bring them to account can be justified…”

That such an eminent ex-judge would speak out in this way is quite extraordinary. His comments add significant weight to the observation that there is a major problem inside the ATO, even to the extent that the ATO will ignore a judge’s ruling.

The retired judge made further comments to Robert Gottliebsen in The Australian reinforcing his AFR comments.

This is an ‘Australia: Wake up call’. The government and Parliament must surely take serious notice of such an eminent jurist. We say that the ATO needs urgent reform and not just more talk and investigations. Our ATO reform program is here.

Reforming the ATO. An urgent but common sense agenda

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If you watched ABC Four Corners last night, the evidence of the ATO’s abusing its powers against small business people was compelling.

However, it’s one thing to understand the abuse! It’s another thing to find solutions. That’s why we’ve put together, with considerable legal input, a reform agenda for the ATO.

Today we launch, The Power to Audit is the Power to Destroy.

The reforms we are calling for do not reduce tax collection powers. But they apply the principles of good policing to create checks, balances and accountabilities to ensure powers are used responsibly. Without checks and balances the ATO will continue to be abusive. The ATO has promised internal reform in the past but failed.

In summary we are calling for

  • The ATO to be divided into 2 separate authorities, one for tax collection and auditing, the other for objections and appeals.
  • The Commissioner with all powers concept be changed, so that each authority is headed by a CEO answerable to a board. (Similar to ASIC, ACCC, etc.)
  • A Small Business Tax Tribunal be established
  • Transparency be required on actual debt and prosecution management.
  • Disputed debts cannot be collected until disputes are settled.
  • Capping of penalties.
  • Judicial oversight of ‘fraud’ action.
  • Strengthen the Administrative Appeals Tribunal.
  • Use of State Supreme Courts for disputes.

Our position and discussion paper, The Power to Audit is the Power to Destroy, gives details and explains the reasons.

But we’re not naïve about the difficulty in having these reforms adopted. Plenty of parliamentary committees and previous government ministers have tried to reform the ATO but all have failed. The ATO is expert at stopping reform. The ATO’s well-placed ‘friends’ are already actively defending the ATO.

But, we’re determined. The ATO abuse will not stop without reform. It took us seven years of hard work to achieve unfair contract laws for small business people. On this tax reform issue we are in for the long campaign!

‘Mongrel Bunch of Bastards’ its viewable here on ABC iview.

ATO: Deny. Deny. Deny.

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ATO today released a Media Statement in response to the Four Corners show (‘Mongrel Bunch of Bastards‘) last night.

To our mind the ATO is in denial. But we will leave you to judge. Its release is below. Also, the ATO union—the ASU—has defended the ATO.

Again you judge!

 

Media statement 10 April 2018

ATO Executive statement on ABC/Fairfax coverage

The ATO strongly disagrees with the allegations and views put forward by Fairfax and the ABC in recent coverage about our administration of the tax and superannuation systems.  The media have taken a handful of isolated cases, presented only one side of the story, and then extrapolated these to suggest systemic issues with our administration of the tax and super systems.
It is our view the coverage includes unbalanced commentary and opportunistic journalism, as well as ill-informed analysis of the facts.
The truth is less sensational.
Several of the cases mentioned are more than five years old, and have already been subject to external review, including through the Inspector-General of Taxation.
The work we have done over the last five years in re-inventing the client experience and our culture means many of the allegations from these cases are not representative of today’s practices.
Where we have made mistakes we will apologise and seek to rectify the position and restore the relationship with the taxpayer.
The majority of our clients have a seamless positive engagement with us.
Of the almost 150 million interactions and transactions with have with taxpayers each year, almost all progress smoothly and well.
Less than 0.1% of all interactions result in a complaint or an objection.
There is absolutely no evidence that in roughly 5 per cent of cases the Tax Office gets it wrong. In addition, no review, scrutineer or credible source has ever found a pattern of abuse towards small business owners by the ATO.
We know the overwhelming majority of small businesses want to do the right thing and we are proud of the work we have done to improve the experience of small businesses, and the transformation of our culture to focus on client service and early intervention. In addition, our capability, resources and laws equip us to effectively administer the tax and super systems.
The feedback we 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. We are concerned this coverage serves only to create tension and worry for small businesses where it did not previously exist, and perhaps even stop people from coming to us to get things sorted. That’s the worst outcome for everyone.