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“Reform the ATO”, says Senator. An important speech!

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There has been a major development in the last days of Federal Parliament for this year. For the first time a parliamentarian has made a clear call for reform of the Australian Taxation Office.

Liberal elder statesman Senator Eric Abetz is a former senior minister and government leader in the Senate. Last Wednesday (4 December) he delivered a punchy speech in which he demonstrated why the ATO needs to be reformed. He also outlined a model for how that should be done.

The Senator’s five-minute speech can be viewed here. It’s short but significant!

Senator Abetz referred to

“…the heavy-handed, non-transparent way in which the ATO is treating too many self-employed Australians.”

He added that reform is needed that will “…hold the ATO to account”. And he pointed to the USA’s tax administration laws as a model where, for example:

“… a tax debt … can only be collected once appeals have been exhausted, rather than as soon as it is claimed …” (as happens in Australia)

Senator Abetz’s speech is important because this is the first time in the Federal Parliament that someone has clearly staked out the need for reform of the ATO. It’s a sign that our parliamentarians are becoming sick of constantly hearing stories of the ATO’s abuse of taxpayers and that they want to see the ATO fixed.

We will keep you informed of developments.

Explosive, gobsmacking statements by Tax Commissioner raise serious concerns about democracy, the rule of law and cover-up

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Perhaps we thought we’d seen just about every ‘trick’ by the ATO, but the statements by the Tax Commissioner to the Senate on Wednesday (23 October) go to an entirely new level. The ATO ‘battle bar’ has just been raised, big time!

What has motivated the Commissioner is the ‘Right to Know’ public campaign being conducted by a large coalition of Australian media interests against the government’s suppression of free speech. This week ‘Right to Know’ released its first television/on-line advert. The opening ‘punch’ in the advert asserts that the ATO can take money directly out of people’s accounts “but you’re not allowed to know…”

The Tax Commissioner denies that the ATO does this. He said to the Senate  “We use garnishees and other firm actions only after these attempts to engage the taxpayer have failed.”

We can advise Senators that this statement by the Commissioner is wrong and misleading.

We have firm, documented evidence of at least one occasion where the ATO emptied someone’s bank account without telling that person. The person did not even know that the ATO had raised a debt against them. The person did not receive notice from the ATO until ten days after the ATO cleaned out their bank account. This evidence has been supplied to a formal government investigation into the ATO.

The Tax Commissioner went further. He attacked the two public ATO whistleblowers. He divulged highly personal information which, in the case of Richard Boyle, is subject to criminal court proceedings.

The printed version of The Commissioner’s statement is here. An online video version is available here. You can access the key comments in the video by going to the following time-marks:

(duration time) 01:03:00 — Commissioner denies Right to Know allegation of ATO taking money without people knowing.
(duration time) 01:06:30 — Commissioner begins attacking Richard Boyle.
(duration time) 01:15:20 — Commissioner claims IGT report cleared the ATO. (Note: This is untrue.)
(duration time) 01:22:00 — Commissioner finishes opening statement.
(duration time) 01:25:30 — ALP Senator Katy Gallagher asks questions.
(duration time) 01:28:30 — A shocked Senate Committee suspends proceedings to privately consider what to do.
(duration time) 01:37:45 — The hearing restarts. Centre Alliance Senator Rex Patrick makes comments.
(duration time) 01:46:20 — Finishes.

Note the restrained but shocked reaction of the Senators.

There has been massive media coverage. Including The Australian (‘Tax Commissioner Chris Jordan flays media over ‘whistleblower’ coverage’), The Age/SMH (‘Tax Commissioner attacks ‘out of control’ press over whistleblower reporting’), The Mandarin (‘ATO responds to press freedom campaign’),  the ABC (‘Tax boss Chris Jordan hits back at ATO whistleblowers and media reporting’), the AFR (‘ATO boss Chris Jordan attacks whistleblowers’), the SMH/Age (‘”Absolute devastation”: The whistleblower who will “never work again” after helping tax watchdog’), the SMH (‘ATO appalling in its treatment of public servant, says Fair Work Australia’)  and the SMH/Age (‘ATO’s Chris Jordan seeks to shoot the messenger’).

Following the Senate hearing, Greens Senator Whish-Wilson has asked for the Tax Commissioner’s statements to be ‘expunged’ from the official Hansard. The media report states that “Senator Whish-Wilson requested this happen given information provided by Mr Jordan ‘went beyond what was public knowledge’, was subject to pending court proceedings, and the individuals named had no immediate right of reply”. But can what has been said so publicly be ‘undone’? Justice is at stake!

It would be for a court to decide, but has the Tax Commissioner just made a fair trial for Richard Boyle now impossible? Has the course of justice been perverted under parliamentary privilege?

The behaviour of the ATO reminds us repeatedly of the banks denying financial misbehavior, the churches denying sexual abuse by clergy, large firms denying underpayment of workers and more. In those instances the large organizations’ behaviour seems to fit a set pattern which involves:

  • Denying the evidence of their bad behavior.
  • Attacking the people who expose the bad behavior.
  • Claiming the organization is nonetheless good.

Every time the pressure builds until there is an explosion. When that happens:

  • The truth overwhelms the denials by the large organization.
  • All hell breaks loose.
  • The top people in the organization are forced to resign or are sacked.
  • The task of cleaning up the organization begins.
Because the ATO is an arm of government, ‘all hell breaking loose’ will not happen until the government considers that the ATO is doing damage to it politically. Events are inevitably heading in that direction. The question is: How long will it take for the Morrison government to reach that conclusion?

We need your help to defend democracy from an aggressive ATO bureaucracy—Richard Boyle GoFundMe

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This is a very special appeal for your help to defend against the ATO small business bully.

We’re asking you to contribute to the legal defence fund for Richard Boyle, the ATO whistleblower. We consider Richard a hero for democracy. He exposed the truth about ATO abuse at great personal risk to himself and his family. We must support Richard.

Richard is facing a staggering 161 years in jail under ATO prosecution. Mass murderers don’t face this. It demonstrates the vindictiveness of the ATO.

Richard provided key evidence in the Four Corners exposé ‘Mongrel Bunch of Bastards’, which aired last year. The program triggered a tsunami of media, parliamentary and official reports that continued throughout 2018 and into this year—all confirming the ATO’s bullying behaviour.

The facts of Richard’s situation are as follows:

  • He worked for the ATO for some 13 years specialising in the debt-collection area. That’s the area where the ATO can take money from your bank account without your permission or knowledge. The ATO can do this if they think you owe money. No proof needed!
  • Richard witnessed the ATO undertaking aggressive and dubious processes to grab money.
  • He lodged an official, internal ATO report on this. He was told to shut up and ignore the ATO’s bad behaviour.
  • Richard then lodged an official report to the ATO investigator, the Inspector-General of Taxation and told his story on Four Corners.
  • The ATO raided his house and sacked him.
  • Now the ATO is prosecuting Richard.
  • The official Inspector-General’s Report confirmed Richard’s allegations of ATO misbehaviour as did several other official reports.

The ATO has a river of money to fund its prosecution of Richard. Richard is unemployed.

There are times when we must stand together. Otherwise democracy and the rule of law mean nothing. Richard is a hero. We need to stand with heroes. Richard deserves to have the funds to conduct a proper legal defence. That’s the least that we can do. Please give.

It doesn’t matter how small your contribution. But please give what you can afford.

You can donate to the GoFundMe campaign here.

Regulation-lovers with a ‘solution’ desperately seeking a problem—Gig it!!!

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Monday, August 05, 2019

Since the Global Financial Crisis, unemployment has dropped to low levels in most of the developed world at least. That’s fantastic. It needs to continue.

One of the important factors in this positive trend seems to be the evolution of work arrangements that enable quick responses to fast-moving markets and consumers. Flexible work creates work! But this gets regulation-lovers worried. They reckon that if work isn’t controlled through government regulation, there’s got to be something wrong. Currently their focus is on the so-called ‘gig’ economy. Apparently, it’s a big ‘problem’ that needs a solution.

We’re intensely interested in the ‘gig’ issue because ultimately the regulation-lovers’ push is about squashing the right of people to be self-employed. And that’s a right that we love!

There are heaps of inquiries and reports. As examples, there are questions over Uber (ride sharing), Facebook, AirBNB and so on generating big media coverage. But here’s a core question. Just how many people are earning their income through ‘gig’ engagement’? How big is the issue?

We’ve pulled together data from reliable sources covering the United States, the United Kingdom and Australia. Here are the summary tables.

Get this. For all the big noise about the ‘gig’ economy the number of people using ‘gig’ engagement as their income source is tiny. The stats show that:

  • Only 1 to 1.8 per cent of workforces are involved in ‘gig’ work but, of those,
  • 0.63 per cent to 0.88 per cent are in fact ‘regulated’ employees.

And significantly

  • For 56 per cent, gig work is less than 15 per cent of their income. (UK)
  • 69 per cent earn less than £1,000 a year from gig work. (UK)

The results are similar in the USA and Australia.

That is, for the bulk of people using gig engagement, it’s pocket money or top-up ‘nice-to-have’ income, but not core income.

But it’s important also to distinguish between ‘gig’ and other self-employed work. The Centre for Research on Self-Employment (CRSE) in London has produced a great research report on this. The report looks at the freelancer side of self-employment and finds that:

  • 85 per cent of freelancers undertake project-based and ‘portfolio’ work.
  • Only 15 per cent are gig workers.

This is consistent with our summary table.

What’s more, CRSE identifies that the freelance sector generates some £140-145 billion of economic output for the UK economy. It’s major stuff. Here are some key extracts from the CRSE report.

An important finding by CRSE identifies skills as the key issue relating to income levels, not the nature of the contract:

…high skilled gig work generates higher quarterly income than equivalent employee work. It seems that skill rather than the nature of the employment contract is the most important determinant of a worker’s income…

Why are we concerned? Too often we’ve seen attempts by worker regulation-lovers to use ‘invented’ problems to try and kill off self-employment. It’s a campaign that’s been ongoing since around the 1990s. Its current rebirth is ‘gig’ focused.

Regulations are needed for real problems. But let’s not invent problems. We want a fact-based debate. Self-employment in its many forms—freelancing, gig, traditional shop-keeping, trades and so on—all make an important mix for job creation, economic activity and personal income creation. Let’s not kill off the good stuff!

We ask MPs: ‘Stop this ATO bully boy tax Bill’

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We rushed into action late Saturday night when we discovered that a really scary tax Bill was listed for a vote in Parliament this week.

The new law is supposed to stop illegal phoenixing. (That’s when someone sends their business bankrupt then ‘rebirths’ it under another name. They leave victims with huge debts.) But this new law would instead empower the ATO to:

  • Do a forward estimate on how much a business owed in GST.
  • Demand payment whether the ATO’s estimate was correct or not.
  • Deny someone a tax refund (say on overpaid income tax).
  • Make company directors personally liable for the estimated GST.

This has nothing to do with stopping phoenixing. It is instead a further cunning power grab by the ATO. This would give the ATO new powers to ramp up its small business bullying campaign.

On Sunday we wrote to the government and all MPs and Senators asking them to stop this bad law. Robert Gottliebsen wrote in The Australian condemning the law. We spent Monday and Tuesday in Parliament talking with MPs and Senators asking for the law to be pulled. We’ll let you know what happens.

But, while this was occurring, the ATO created news coverage by saying that it is introducing new ‘procedural safeguards’ to prevent ATO bullying of small business people. The article stated that the ATO is to “…overhaul its internal culture to avoid a repeat of the embarrassing ‘garnishee’ scandal that damaged its reputation among small-business taxpayers.”

Give us a break!!! The ATO puts out PR spin saying that it is going to stop its bullying culture and behaviour. Yet at the same time it is seeking to sneak through Parliament new laws that will increase its bullying powers. The ATO is engaging in an outrageous community, media and parliamentary con. It’s got to stop.

Quite recently we praised the ATO for a new, independent appeals process. We’ll continue to praise when we see good things from the ATO. But we’re not going to fall for the ATO’s two-faced con.

If the ATO is serious about addressing its bullying—particularly over garnishee issues—then prove it! It should drop its persecution and prosecution of ATO whistleblower Richard Boyle. He exposed the ATO’s garnishee bullying behaviour, the very behaviour the ATO says it now wants to stop. For exposing this the ATO is now trying to send Richard to jail for 161 years. The ATO’s credibility is in tatters. Its behaviour is like that of the worst bank behaviour.

US Congress and Trump agree. Discipline the IRS to prevent taxpayer abuse. Message for Australia

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1 July 2019 proved an historic day for US taxpayers when President Trump signed into law the Taxpayers First Act.

The Act is intended to bring discipline to the US tax agency (IRS) after years of strong evidence of both its administrative incompetence and systemic abuse of taxpayers, particularly small business people.

The Bill passed Congress with support from all political parties.

There’s a massive lesson here for Australia. If we’re to be internationally competitive, we must bring justice and the rule of law to the way the Australian Taxation Office administers tax.

In Australia, particularly over the last 18 months, the evidence of ATO abuse of small business people has mounted and is overwhelming. See, particularly, the Four Corners program, ‘Mongrel Bunch of Bastards’.

The US Taxpayers First Act has specific provisions to protect small business owners from IRS seizures of their bank accounts. There is major evidence that the IRS has been wildly abusing its powers to seize bank accounts in cases where there was no evidence of small business taxpayers avoiding tax. The stories here strongly resemble those we see with the ATO garnisheeing bank accounts in Australia. Read the Small Business Ombudsman’s report on the ATO’s garnishee abuse.

Of the twelve-or-so measures in the US Taxpayers First Act, the following six are highly relevant to the sort of things we should be doing in Australia to reform the ATO.

  1. Greater Access to Independent Review: Guarantees taxpayer access to an independent appeal on an audit decision. Before an appeal the IRS must hand over to the taxpayer the taxpayer’s case file.
  2. Limited Seizure of Property: Property seizure limited to illegal cash transactions or concealing criminal activity. Post seizure and hearing requirements to protect taxpayers. (***Highly relevant to the ATO garnishee issue)
  3. Listening to the Taxpayer Advocate. The USA has an independent Taxpayer Advocate (NTA), a bit like the Australian Inspector-General of Taxation (IGT). The US law would grant the NTA significant new powers to give the IRS enforceable directives on taxpayer cases.
  4. Improved customer service: IRS required to adopt best practices of private sector customer-service providers.
  5. Easier Settlement Procedures: No fees by IRS if a settlement deal is done with the taxpayer.
  6. Earlier Notice of third-party questioning: The IRS must notify a taxpayer before it makes enquires of third parties about your tax (for example, a customer).
In 2018 we put together a position and discussion paper for a package of reforms of the ATO. Nothing in our reform package involves reducing the ATO’s powers to collect tax. It’s about ensuring checks and balances and the proper application of the rule of law to the ATO’s powers and behaviour. Since the federal election outcome we have started our advocacy campaign to make progress with ATO reform. We will release more on this over the coming weeks/months.

Reflections on an incompetent ATO—ABNs & Gig stuff

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Friday, June 28, 2019

Earlier this week we discussed the history of Uber in its global legal battles to have its drivers accepted as independent contractors. The Uber battle is at the forefront of the gig ‘question’.

Today we focus on the Australian Taxation Office and its incompetence (from our experience) in assessing employee vs independent contractor status. The ATO should learn from a significant Uber legal decision in Australia. It probably won’t though

The issue is important because the ATO has the unrestrained power to destroy the business of self-employed individuals simply by denying individuals their Australian Business Number. It can do this by declaring an independent contractor to be an employee.

This is because under the ABN legislation a person is entitled to an ABN if they are ‘carrying on an enterprise,’ a business being a ‘Profession, trade, employment, vocation or calling.’ But a business does not include an occupation as an ‘employee’.

Under this definition, self-employed people should easily qualify for an ABN because the definitions are so broad, intentionally so we believe. However, the ATO can legitimately deny a person an ABN if the person is an employee at common law.

We have sighted ATO assessments of ‘employment’ when the ATO has denied or withdrawn people’s ABNs. The ATO did this to some 17 individuals in late 2017. The story of the case is here. The ATO was eventually pressured into returning the ABNs to these people.

We have sighted the ‘employment’ assessment done by the ATO in this case. On our assessment the ATO’s process was amateurish and incompetent at best and at worst was manipulated by the ATO to achieve its predetermined view that the independent contractors were/are employees. By these actions the ATO strips itself of its legitimacy.

One of the ATO’s current obsessions is the gig economy and an apparent determination to deny that gig platforms legitimately use self-employed independent contractors. If the ATO is to have legitimacy in this area, it must demonstrate that it follows proper common law processes in undertaking its assessments.

Fortunately, there are some authoritative recent Australian examples that the ATO should replicate if it is to have legitimacy in this area. We present and analyse the major Uber case here.

Will the ATO fix its incompetency? On past experience, probably not.

Hysterical reaction to Uber (gig) drivers not being employees. ATO wake-up call

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Tuesday, June 25, 2019

Earlier this month the Fair Work Ombudsman released a statement that, after a two-year investigation, it has concluded that drivers working through Uber are not employees.

The Transport Workers Union described the decision as ‘…devastating for workers in the gig economy’. One academic said the decision was ‘very disappointing’.

We disagree. The Fair Work Ombudsman’s decision is consistent with a highly detailed investigation and legal ruling on Uber drivers by the Fair Work Commission in December 2017.

We have a message for the labour movement and its apologists: Wake up! The world has changed. By their actions people demonstrate that they want to be independent and control their own working lives. The worker vs bosses war is irrelevant to most people. Read the tea leaves from the recent federal election. You’re flogging a horse that will kick you! Our message is equally directed to the Australian Taxation Office: We reckon that you’re breaching the law!

So, after getting our ‘rant in reply’ out of our system, let’s look at the facts.

There’s a big push from the Victorian Labor government, the unions, some academics and many in the federal bureaucracy (particularly the ATO) to clamp down on or stop the gig economy. They have similar motivations in our view. They don’t like, understand or accept that independent work can actually exist. They are obsessed with controlling all work.

But independent work is a legal, economic and behavioural fact discovered and found in clear, established processes of investigation. There is no mystery or confusion about this. Unless it’s confusion created by those who want to stop it. (Oooops. I think we are still ranting!!!)

The Uber decision matches those facts. Proper investigative process was followed by the Fair Work Commission and, it would appear, the Fair Work Ombudsman. On the basis of the facts, Uber (gig) drivers are engaged in independent work.

It’s important to base analysis on facts. We’ve put together an analysis of the facts and issues relating to the Uber/gig economy issue. It covers:

And we have a message for the ATO. In our experience the ATO demonstrates gross incompetence in its investigations and analysis of who is an ‘enterprise’ for the purposes of ABN allocation. The ATO needs to learn from the Fair Work Commission and the Fair Work Ombudsman and become competent in this area.

Goodness. Shock! We’re praising the ATO. That’s not like us!!!

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It probably had to happen at some stage! For all the criticism we direct at the ATO (all warranted) there had to come a time when we could direct some praise!

You’ll be aware of our intense campaigning against the ATO for bad treatment of small business people. We’ve now had a very good experience, however.

ATO Independent Review

Last year, in partial response to the media coverage of bad ATO behaviour, particularly the Four Corners program ‘Mongrel Bunch of Bastards’ the ATO started a trial ‘Independent Review’ process for small business disputes.

We have just finished supporting and assisting a small business person through this process. We can’t mention the case or specific details but this person accepted that he owed the ATO money. The dispute was over how much was owed. The ATO was claiming about three times the amount we assessed he owed. There wasn’t any tax avoidance or attempt to avoid, rather a series of situations that led to a debt.

We have been involved with many ATO internal ‘alternative dispute resolution’ processes over several years. Frankly, until now, we’ve found these processes to be ‘con-like’ where the ATO used the processes to press their massive superior power and to ‘cook small business people slowly’.

This Independent Review process has been totally different. We found the process genuinely independent and focused on the facts of the case. That’s all we’re asking. The ATO officers did not play any power games or spin, mislead or seek to lie to us and the person we were supporting. The ATO officers were firm, diligent and, yes, nit-picky in seeking factual evidence. And that’s what we’d expect and ask from the ATO officers in doing a professional job.

The outcome is that the small business person won some points but lost others. That’s not unreasonable. Some of the issues in dispute were quite involved. What we were impressed with was that the review was a genuine review. We praise the ATO officers who conducted the review and the senior officers who are directing the process. This is a very big step in the right direction. We hope this continues and moves forward.

But one good experience does not dampen our campaign for major ATO reform to be implemented through legislation. We’ll explain this in future news alerts.

ATO aggression against whistleblowers

One of the ATO’s behaviours that must change is its abuse of whistleblowers. The Age/SMH have a major feature today on Richard Boyle who faces 161 years in jail for telling the truth about the ATO’s abuse of small business people. Richard’s story is covered on the ABC’s 7.30 Report. It’s worth watching.

ATO exposed again! Systemic mistreatment of small business people

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It doesn’t seem to stop. The ATO continues to deny that it does anything wrong, but official reviews and reports keep slamming the ATO. We listed in early April this year the string of parliamentary and other reports calling for urgent reform of the ATO.

This time it’s the Small Business Ombudsman reporting on the ATO’s enforcing debt even while the debt is being challenged in the Administrative Appeals Tribunal. The report finds that the ATO does this on 12 per cent of occasions. This destroys the small business and their ability to challenge the alleged debt. The Ombudsman severely criticizes the ATO and calls for legislative reform.

Here are the Ombudsman’s:

The report refers to

  • “…an inconsistent and undisciplined approach to debt collection by the ATO.”

And quotes an anonymous submission from a current ATO employee saying

  • “The imbalance of power and unconscionable conduct of the ATO leads most to relent as they don’t have the resources to continue.”

The Ombudsman calls for legislative reform to require “mandatory external oversight”. We totally endorse the Ombudsman’s call.

A year ago we released one of our reports on the ATO calling for reform—The Power to Audit is the Power to Destroy. We called for:

  • The ATO to be divided into two 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 to be established.
  • Transparency to 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.
  • Strengthening of the Administrative Appeals Tribunal.
We’re delighted that the Morrison government has implemented the Small Business Tax Tribunal and that Labor has endorsed this. But we need this locked into legislation. This new Small Business Ombudsman report strengthens the need for legislative action.
After this election, whoever governs, legislative reform of the ATO must be an item high on the agenda. The integrity of the tax system relies on tax collection being fair and being seen to be fair.