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Tax Office tries to 'crush' whistleblower with $88,000 legal bill

A former tax official who blew the whistle on the ATO's "covert operations" against taxpayers has been left jobless, broke and facing demands for $88,000 in legal fees from the federal government.

Former ATO public servant Ron Shamir wants to continue his legal battle against the Commonwealth, but lawyers are afraid to take the case against a bureaucracy with limitless access to taxpayers' money.

The former tax intelligence analyst has fought a David and Goliath legal struggle with his former public service bosses after he spoke out, alleging millions of dollars in tax returns were being illegally withheld, and was sacked soon after.

But the ATO has won the latest round of the dispute, an unfair dismissal appeal to the full bench of the Fair Work Commission, and the Commonwealth is looking to recover $80,000 in legal fees it was awarded after an earlier Federal Court challenge that Mr Shamir also lost.

Commonwealth departments are supposed to follow "model litigant" guidelines and not use their unlimited access to taxpayer's money to "take advantage of an individual who lacks the resources litigate a legitimate claim."

The ATO said on on Friday that it was not pursuing Mr Shamir for money.

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But the office of the Australian Government Solicitor, which acts for the ATO and is chasing the money, says the model litigant guidelines do not apply in this case and that Mr Shamir should have thought about the potential for costs orders against him before he went to court.

Now, deep in debt, jobless and battling health problems, the former public servant says he is counting the cost of simply doing his job as a public official.

"The ATO is continuing to punish me for speaking out ... I now have to spend every day worrying about the ATO's next reprisal," Mr Shamir said.

"The ATO ignored my disclosures, then terminated me, and now appear determined to crush me completely, perhaps as a warning to others.

"The Australian public should be very concerned about their taxes being spent in this way to silence whistleblowers."

The ATO did not respond before deadline on Friday to a request for comment.

The trouble started after Mr Shamir presented a dossier of evidence last year to the taxation watchdog, the Inspector-General of Taxation, supporting allegations that the ATO broke the law with its "covert operations" against an unknown number of innocent taxpayers.

Much of what is alleged cannot be disclosed by Mr Shamir under the strict secrecy provisions the ATO imposes on its current and former employees and Inspector-General Ali Noroozi says he cannot publicly discuss the case.

But documents, released by the ATO under freedom of information, reveal that Mr Shamir warned his bosses in 2012 they were engaged in an over-zealous response to a court decision that reined in the ATO powers to withhold tax refunds.

Independent Senator Nick Xenophon has taken up Mr Shamir's case, with the senator arguing the former tax official had the best of motives and should be protected from being sacked or further action by the Commonwealth.

But the South Australian Senator has not been able to broker a settlement in the case. 

"I'll be appealing to the Commissioner of Taxation not to pursue this," Senator Xenophon said on Friday.

Mr Shamir says he is now facing bankruptcy.

"The legal bills up to this point have nearly bankrupted me," he said.

"I can never match the ATO's ability to use unlimited public funds to oppose and frustrate any legal action I take.

"I have asked many lawyers for help but they are all frightened by the ATO's deep pockets and ability to easily appeal any decision unfavourable to the ATO. "Conversely, there is no risk to the ATO managers because they are not spending their own money."

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