The ATO is out of Control
The Australian Taxation Office must be operate under the proper rule of law. It can be done.
If you’ve followed or are aware of my ‘adventures’ over the last thirty years or so in my advocacy for self-employed people, you’ll be aware that the Australian Taxation Office has received a lot of my attention. From about 2007 I started to become heavily involved in assisting people who’d been involved in battles with the ATO. What evolved over a decade or so was the accumulation of a significant number of case studies of individual people being abused by the ATO where they were falsely accused of owing tax.
In 2017 I took a ‘package’ of these cases to contacts in the media. This resulted in the 2018 Four Corners exposure of the ATO bad behaviour in Mongrel Bunch of Bastards. That show and subsequent advocacy work led to some but limited changed behaviour by the ATO. In 2019 I spent time in Washington DC investigating the laws that require the US Internal Revenue Service to behave fairly, reasonably and within the common understanding of the rule of law. I wrote a report that became the basis of an Australian parliamentary inquiry with recommendations for change.
Everything is recorded here on the Self Employed Australia historical website under the section Reforming the ATO.
In this post I’m removing my ‘polite’ gloves. I’m being blunt. It’s time the Australian parliament woke up to the scam being conducted by the ATO against Australians and took action to fix. Here goes!
A really bad tax administrator -ATO
The Australian Taxation Office (ATO) deserves to be condemned. It requires urgent and sweeping reform.
Australians suffer a tax administration process where ATO incompetence, error, false assessment of taxpayer debt and vindictive enforcement of false taxpayer debt is commonplace. Some would say they are ‘systemic’. The ATO covers this up with highly charged and expensive media propaganda that seeks to position it as the defender of tax revenue against tax-cheating Australians. See these recent articles: ATO gets tougher on proposed tax repayment plans to collect billions and Covid hangover: 5097 businesses owe ATO more than $100K.
If the ATO were subject to proper scrutiny and subject to the same rule of law principles as all other Australians, the ATO’s behaviour would surely be found to be scandalous and possibly illegal. Its behaviour is on par with the worst of corporate behaviour.
Yet the ATO can and does behave this way because the Tax Act under which it operates gives the ATO the legal capacity to do so.
For the sake of justice and the rule of law in Australia, the Australian Taxation Office must be subject to similar rules of disclosure, transparency and procedural accountability that apply to the rest of the community. This can be done.
The USA had similar problems with its tax administrator (the Internal Revenue Service or IRS) as we have today. In 1998, the US Congress implemented major legislative reforms. The USA’s tax administration system has for some 25 years been vastly superior to Australia’s. This gives the USA a significant competitive advantage over Australia, not only for business activity but also for individuals.
Americans can have a reasonably high level of faith that they will receive fair and just tax treatment by the US tax administrator (IRS). In Australia, claims to fair tax administration treatment are almost exclusively the product of ATO propaganda rather than reality. ‘Dictatorial oppressor’ is the descriptor which I think most aptly applies to the ATO. I will provide evidence of this that is clearly in the public domain.
But first, think of this. It is quite clear that the second Trump administration is geared to implementing a wide sweeping ‘revolution’ in the USA. That revolution is primarily about how the government and government-funded institutions in the USA function and ‘administer’ the nation. The rest of the world, including Australia, is watching and worried as a Trump USA promises to ramp up the USA’s competitive advantage over the rest of the world. Australia is already behind on many fronts. Australia’s tax administration stands out as woefully bad and well behind the USA’s. We had better catch up quickly.
Evidence: The ATO and Robodebt - The basic facts
The most obvious public evidence of the horror that the ATO can and does inflict on Australians was revealed by the Robodebt scandal. I feel justified in using the word ‘horror’ because when the ATO’s incompetence and misleading income/tax assessments led to unjustified bankruptcies of low-income Australians and even to suicides, then ‘horror’ is an appropriate term to describe it. But more, even when the ATO’s incompetence and complicity in the Robodebt process became obvious, the ATO did nothing to correct its behaviour and, in effect, covered up.
To remind you of Robodebt, it was a scheme invented by the government in the belief that large numbers of welfare recipients were overclaiming welfare entitlements. That is, that huge numbers of welfare recipients were claiming and receiving welfare payments when their incomes were higher than they had declared and were therefore receiving welfare payments to which they were not entitled.
The scheme involved a ‘partnership’ between the ATO and Services Australia, the government body administering welfare payments. The ATO did broad sweeps of income records of Australians on welfare and provided mass downloads of these records to Services Australia. Services Australia then did automated computer matching to allege overpayments. Its computers spat out debt claims and demands for payment against tens of thousands of low-income Australians. The term Robodebt was used because of the automated nature of the debt claims and payment demands.
The fundamental problem with the system was that the income assessments supplied by the ATO were, on a wide scale, misleading. The ATO’s income assessments did not match the truth of actual incomes of vast numbers of low-income Australians. The second problem was that Services Australia applied incorrect interpretation of the ATO data and proceeded with debt allegations and enforcement that was mind-blowingly, bureaucratically arrogant.
It took an eventual media storm to expose the suicides, unjustified bankruptcies and low-income trauma before the horror of the scheme was exposed and stopped.
Following a change of government, a Royal Commission of inquiry was conducted where the entire affair, the abuse and how it happened were documented. The recommendations of the Royal Commission are now in the process of being implemented. My summary and analysis of the Royal Commission’s report is here, including links to the report.
Discussion on ATO culpability
In my view, the ATO got off pretty lightly in the Royal Commission inquiry. In effect, in its evidence to the Royal Commission the ATO weaselled its way into trying to qualify the nature of the data it supplied to Services Australia. It effectively ‘dumped’ responsibility on Services Australia for using the data incorrectly. The Royal Commission report, in my view, ran with this ATO line where Services Australia took ‘the fall’.
But here’s my take. The ATO’s income data were clearly flawed. The data were, on any reasonable assessment, misleading. However, if, as the ATO put it to the Royal Commission and would want the public to believe, the data were not ‘technically incorrect,’ they were clearly sufficiently badly constructed as to enable incorrect interpretation by Services Australia.
Further, the ATO knew what the income data were being used for. Robodebt was a bureaucratic ‘partnership’. The ATO was directly involved.
One would have thought that, at minimum, the ATO had a moral obligation to ensure that Services Australia did not misinterpret the data. One would have thought that the ATO would have had a legal obligation to ensure that the income data were completely accurate and used accurately.
Bad law = Bad ATO
What I think would surprise all Australians to discover is that the ATO has no legal statutory obligation to ensure that its income assessments are accurate and correct.
Here is a staggering truth about the laws that enable the ATO to mislead, make errors, be incompetent and not be held accountable for the harm it does.
At law, when the ATO conducts a tax assessment of someone’s income and hence assesses a tax liability, that assessment is not an allegation of a debt. That would be common sense. No! Instead, that ATO assessment becomes a debt at law due and payable, and which the ATO can enforce. Whether the assessment is correct or false does not matter. Even if an ATO claimed debt is wrong, the debt stands. The taxpayer has to ‘disprove’ the ATO debt assessment and the ATO has no obligation to cooperate with the taxpayer in that respect. For the average person, disproving a (false) debt is a massively costly (and frankly an almost impossible) job.
In the case of Robodebt, the falsely accused welfare recipients, numbering in the tens of thousands, were effectively stranded and powerless.
The fact is that Services Australia was able to ‘legally’ drive the Robodebt scheme (should we call it a scam?) because at first instance the income data provided by the ATO, even though misleading, provided the legal basis upon which Services Australia could issue debt notices to low-income Australians. Lawyers might argue the technical legal correctness of this stance, but from at least a practical perspective it’s accurate.
I think it is a great flaw in the Royal Commission’s report that it did not pick up on this fundamental fact. Arguably the key underpinning of the Robodebt horror was that the ATO’s income data was misleading. But that wrong was enabled and supported by the powers that the ATO has under the Income Tax Act.
Compare this with the USA. It’s a straightforward comparison. When the IRS raises an assessment of a tax debt that assessment is an allegation of a debt. The alleged debt does not become a legally enforceable actual debt until all appeals (internal IRS and through the courts) have been finalised.
If a similar law applied to the ATO, arguably the entire Robodebt scheme and horror would have been considerably more difficult for the bureaucrats to implement.
Public service lies, deceit and fraud – ATO involved
Admittedly even if the ATO’s legal operating framework were as I say it should be (no debt until all appeals finalised) the Robodebt horror is still likely to have occurred. This is because of the dishonesty of the public service. The Royal Commission Report details systemic and deliberate lying, deceit, fraud and cover-up (Page 34) layered over the top of incompetence, bad management, maladministration and ignoring the law (Page 32). And this at the most senior levels of the public service. Remember, the ATO was partnering with Services Australia in the Robodebt scheme. The ATO cannot avoid being implicated in this finding of deceit.
Currently, there is a Bill before the Australian parliament to legislatively force the Australian public service to comply with requests from the Ombudsman for information. Staggeringly, the Royal Commission found that when the Ombudsman investigated Robodebt, public servants withheld information and lied to the Ombudsman. They could do this because there is no legal obligation on the public service to comply with Ombudsman’s requests. That is, as with the worst of corporate behaviour, the public service can (and in the case of Robodebt they did) lie, cheat and engage in fraud. Yet they can get away with this legally. This is the situation with the ATO, not only with Robodebt, but with its ‘normal’ procedures in undertaking tax assessments as well.
The Bill is a public service con
Importantly, the Bill before parliament (the Oversight Legislation Amendment (Robodebt Royal Commission Response and Other Measures) Bill 2024) is supposed to impose a statutory obligation on the public service, including the ATO, to comply with Ombudsman information requests. In the case of the ATO, Australia has a specific tax Ombudsman, the Inspector General of Taxation Ombudsman (IGTO). The Bill specifically includes the IGTO. But here’s another public service scam.
Remember, in Australia such Bills are drafted by the public service. The Bill, as it stands, will thwart the Royal Commission’s intent.
The Bill as drafted uses several ‘weasel’ words/terms that will enable government agencies and departmental staff to frustrate enquiries by the Ombudsman/IGTO. The weasel words/terms are ‘reasonable’ ‘use best endeavours’ and ‘pose an unacceptable risk’.
Below I have included the sections of the Bill with the weasel words highlighted.
By including these words/terms, government agencies and departmental staff can assert that in concealing information or providing misleading information they have the defence of ‘acting reasonably’ or they ‘have used their best endeavours,’ or the Ombudsman’s/IGTO’s request ‘poses an unacceptable risk’.
This puts the Ombudsman/IGTO in the position of having to argue about whether the government agencies’ actions have been ‘reasonable’ or were not ‘using best endeavours’ and so on. This creates a dispute about a dispute, all the while the Ombudsman/IGTO is denied information or has received misleading information.
In drafting the Bill with these weasel words, the Australian Public Service demonstrates and proves (yet again) that when it comes to protecting itself from scrutiny, disclosure and accountability, it cannot be trusted. It is a disgrace. I include the ATO in this.
Here are amendments to the Bill that are necessary if the public service, including the ATO, is fully required at law to comply with information requests from the Ombudsman and the IGTO. That is, such ‘requests’ must have the power of ‘demands’ which the public service/ATO cannot ignore. If they ignore them, they become subject to severe legal sanction.
Amend the Bill – See extracts from the current Bill below.
The following amendments should be amended to make the statutory duties absolute and not qualified.
· 3(c) Delete the word ‘reasonable’ for the clause to read - 5(A)“A person commits an offence if (c) the person does not provide the authorised person with facilities and assistance for the effective exercise of the power.”
· 14A (5) (7) Repeal this entirely. That is, delete “(7) Subsection (5) does not apply if providing the authorised person with reasonable facilities and assistance would pose an unacceptable risk to the security of any of the documents or other records held in electronic form, or otherwise the system where the documents or other records are stored.”
· 32 Delete the terms ‘best endeavours’ so that the clauses read:
“(1) A principal officer of a Department or prescribed authority must ensure the Department or prescribed authority assists the Ombudsman in the performance of the Ombudsman’s functions.
(2) An officer of a Department or prescribed authority must assist the Ombudsman in the performance of the Ombudsman’s functions.”
I am communicating these vital amendments with relevant members of both houses of parliament. Let’s see how we go!
Current Bill
If you’re interested in my other writings you’ll find them under the following groups
Modern Marxism Articles, posts looking at my deep study into the operations of marxists active in the Australian political and social scene.
Aust Work Issues : My study/commentary on the ‘revolutionary new labour laws of 2022-2024. Plus the strange happenings with the radical construction union the CFMEU.
This recent article Woke. Its all Freud’s Fault has attracted quite a bit of interest.
Great work Ken!
Champion, Ken !!