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Australian Tax Office compliance ability gutted, say departing insiders

The ATO's cultural shift away from being 'revenue focused' to a 'light touch' approach to tax enforcement posed a grave danger to federal government revenue streams.

The ATO's cultural shift away from being 'revenue focused' to a 'light touch' approach to tax enforcement posed a grave danger to federal government revenue streams. Photo: Louie Douvis

The Tax Office's ability to catch or deter corporate tax cheats is being "gutted" by downsizing of its workforce, according to departing insiders.

The ATO's cultural shift away from being "revenue focused" to a "light touch" approach to tax enforcement posed a grave danger to federal government revenue streams, the upper middle managers have warned.

In exit interviews with Fairfax media, two compliance managers who are among the thousands of taxation bureaucrats leaving the office this year, have revealed how the ATO's ability to do its job is being hollowed out by the downsizing process.

The revelations come as the federal government and opposition traded barbs over the Tax Office, with the Abbott government denying reports on Tuesday that ATO cuts might cost $1 billion in tax revenue.

According to the federal budget papers, the ATO's staff numbers will drop from 21,390 to 19,068 in the next 12 months and the agency lost 900 staff last year as it bears the brunt of budget cuts.

The two managers, who spoke on condition of anonymity, told of falling audit rates, a loss of industry-specific expertise and junior tax public servants being "outgunned" by highly paid private sector accountants.

The ATO did not respond to questions before deadline on Tuesday.

One of the resigning bureaucrats said that corporate tax cheats were more likely than ever before to avoid an audit, with ATO compliance teams “lucky” to generate two or three audits for every 20 risk reviews of corporate tax returns.

“Toward the end, a lot of our risk reviews weren’t converting to an audit process, we were getting a really bad conversion rate,” the manager said.

“It’s an exception more than the rule that you’ll get an audit up.

“The cases we were selecting weren’t the optimum cases where you’d be able to find issues that you could then convert into an audit.

“But as you lose the expertise, how are you going to pick the right cases?”

One of the managers said there was a widespread belief that the downsizing process was focused on effecting cultural change by ridding the Tax Office of many of its veterans and specialists.

“Some very senior capable people are going out the door and there are some others who were pushed to the side because they were too 'revenue focused', which means it was felt they didn’t understand the commerciality of a transaction,” he said.

“In Box Hill, about 10 EL2s (executive level two) from one area have gone out the door, and that area has been gutted.

“What’s left has not necessarily been the best.”

One of the managers warned that the ATO’s tax compliance capability was the major deterrent to tax avoidance and evasion and warned of anarchy if it was eroded.

“The Commissioner [of Taxation] says that 95 per cent of the revenue comes walking through the door, but it comes through the door because the compliance ability is there, the stick is in the cupboard,” he said.

“But if the stick is not in the cupboard, if people know there’s no cops on the beat, then it's going to lead to anarchy down the track then someone is going to realise that they’re going to have to go out and recruit these people again.”

53 comments

  • So who decided who was leaving or was there a general "please put your hand up" - if areas/people were specifically identified then presumably the Band 1 & 2s will be responsible for achieving the outcomes. If the latter, then no one can blame long term APS 6-EL2 taking voluntary retirement.
    ATO also knew that 85-90% of revenue flowed in (almost in defiance of ATO systems) but hopefully the much vaunted Change Program (and very expensive at the time) has delivered what was promised ten years ago in efficiencies in processing and better compliance processes. Sadly I suspect that it probably didn't. Good luck to the people who remain (which is still 19000 cops)

    Commenter
    Been there
    Date and time
    July 16, 2014, 7:07AM
    • The ATO has been prime example of the crippling effects of the Peter principle for at least the last 15 years. Those who are capable start, get shouted down via petty politics and incompetent thinking and eventually leave for greener pastures.

      Those that are incompetent become highly specialized in writing responses to selection criteria whilst rising up the ranks. They get into new roles, they shuffle the deck chairs, remake all the obvious decisions / mistakes of their predecessor and then move on again.

      Around 2000, it was a great place to work. Now, its a culture is slowly killing it and delivering poor service to the Australian community.

      Commenter
      Dave
      Date and time
      July 16, 2014, 10:01AM
  • Unfortunately many of the cuts seem to be focused on simply saving money than a real understanding of what is needed in the public service. By all means we can't be in deficit for ever but you just have to be so careful not to throw the baby out with the bath water.

    What is also forgotten here is the long term effects. How many young talented people are currently coming into the public service? Even if you could get a position , is it still an attractive career path?

    There is always a lot if talk about public servants being promoted above their capability, or positions being classified than they should be. These cuts will not help this situation in the long term. It will only make things worse because governments will need more people to achieve their aims and we will have lost a generation.

    Sadly both sides of politics only want to look at the cost of public servants, not look at how they want the service to operate.

    Commenter
    Public Servant
    Date and time
    July 16, 2014, 7:25AM
    • Quod erat demonstrandum ! If Abbott has delivered a class warfare budget, wouldn't you expect him to cut of the tax office at the knees ? He is only being consistent.

      Commenter
      adam
      Location
      yarrawonga
      Date and time
      July 16, 2014, 7:40AM
      • Well done Abbott ... who needs to catch those large corporate tax frauds anyway.
        I feel happy that my tax dollars are going towards the elites. Just remove the price signal about pollution & ETS.... & then allow banks to rip off customers ... & then just tell corporates all over the world that we are not going to try & catch you for tax evasion.
        Do we have an honour system .... please put your hand up if you are a tax dodger & manipulate our tax system for your own gain. Yeeee haaaa .. the coal cowboys are in charge (no disrespect to cowboys meant).

        Commenter
        Yuppy
        Location
        Yuppy Ville
        Date and time
        July 16, 2014, 9:34AM
    • The circle comes around again. We bleed every FY when the big compaies don't want to pay tax by using loop holes in the legislation. They pay their tax where ever it is the cheapest. Thats no Australia.

      Commenter
      Wayne
      Location
      Brisbane
      Date and time
      July 16, 2014, 7:50AM
      • All this press and tall cocky syndrome from the Government, telling the world it should cut out tax evasion, to stop companies offshoring accounts, and yet the agency in charge if seeking out tax fraud in Australia is being dumbed down, hobbled by not enough staff and experienced staff, to seek theses companies and individuals out, this a Government who tells other countries what they should do, then do the complete opposite, the hypocrisy is astounding.

        Commenter
        Lost2
        Date and time
        July 16, 2014, 8:05AM
        • If an international corporation transfers debt to Australia to get a deduction, isn't that tax evasion - a crime?

          Commenter
          adam
          Location
          yarrawonga
          Date and time
          July 16, 2014, 9:49AM
      • Every morning there is some new article bashing the ATO. We can't win - either we are big fat cats doing no work or we are cutting and slashing veterans and specialists. The cuts are necessary and the process is voluntary. No one is being forced out the door. That's why it's called VOLUNTARY redundancy.

        Commenter
        padfoot
        Date and time
        July 16, 2014, 8:08AM
        • You are ALL fat cats in the public service and the public service needs to be de-centralised out of Canberra.

          Cake days, dress up days, jeans Friday, half days Fridays, let's have a sports day with the embassy, let's travel around the world on tax payers' money, "I wanna go on another trip to America". "why don't I get to go to America or Europe", "he gets all the trips", ooh let's go on another trip, travel travel travel travel and nothing to show for it!

          It's about time you public servants worked like the rest of the population.

          Commenter
          Sharron
          Location
          Canberra
          Date and time
          July 16, 2014, 9:27AM

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