Watchdog's secret report lashes ATO for weakening trust

The Australian Taxation Office's tactic of diminishing legitimate complaints from taxpayers and its attempts to discredit the people raising concerns, could undermine public confidence in the entire tax system, a confidential watchdog's report has warned.

The report from the Inspector General of Taxation takes aim at the ATO over its handling of a joint Fairfax Media and ABC Four Corners investigation into the tax office.

The report, obtained under Freedom of Information, says the ATO’s media strategy, as exposed in its response to the investigation, fell short of public expectations and could cause wider problems.


“Serious concerns were expressed by small business owners and former ATO officers … Many have commented that the ATO’s initial responses were to, first, pre-emptively publicly negate the existence of a problem and discredit the people raising the concerns, and then later, refine its message to acknowledge a problem, but diminish it.”

IGT submitted its report to Treasury in response to a request from the Minister for Revenue and Financial Services Kelly O’Dwyer to investigate serious allegations raised in the media investigation. Allegations included that the ATO unfairly targets small business, sometimes misuses its powers, lacks oversight and its compensation scheme is opaque and falls short of repairing the damage to people's lives.

The IGT suggests the ATO “rethink” its media strategy and address issues that have been raised without resorting to diminishing them or singling out specific groups or organisations for rebuke.

“The ATO must show its care and compassion for the public that it serves both in words and in actions if it is to maintain the confidence of taxpayers, which itself is the lynchpin for Australia’s self-assessment tax system,” the report says.

It said, notwithstanding recent events, the ATO had generally done a good job of maintaining public trust in administering the tax system.

“In some cases it may make mistakes or errors. That is not to say that the mistakes, of themselves, erode taxpayers’ trust. However, how the ATO responds to disaffected people can have a large impact on the general confidence of the system," it says.

The report specifically raises concerns about the ATO’s handling of comments to the media investigation by the Inspector General of Taxation Ali Noroozi that the tax office makes mistakes in “probably” 5 per cent of cases.

The ATO’s response quoted a series of statistics including that it has almost 150 million interactions and transactions with taxpayers each year with less than 0.1 per cent result in a complaint or an objection.

This response, at best, is unhelpful to those impacted and, at worst, misleading without considerable explanation.

“This response, at best, is unhelpful to those impacted and, at worst, misleading without considerable explanation,” the IGT report says.

It notes that at the same time the ATO was disputing the number of mistakes its makes, it was dealing with errors regarding its Small Business Superannuation Clearing House system which affected a substantial numbers of transactions.

An ATO spokesperson in a statement acknowledged the IGT had expressed opinions on its media approach, “noting that the ATO’s media approach is not in scope for the IGT, nor for the Treasury review”.

The spokesperson said the ATO cares about each individual taxpayer’s experience and “there is no evidence to support accusations that there are systemic issues in the way we treat any taxpayer group.”

Ms O’Dwyer said in a statement she was “deeply concerned” about allegations raised in the Fairfax and Four Corners reports.

“I requested a thorough investigation of all allegations raised and the Government will be responding once it has had an opportunity to consider that in detail.”

Ms O’Dwyer called for the investigation on August 10, a day after the media reports. Submissions were confidential and had to be completed within 10 days. Treasury was requested to turn the report around within a few weeks to hand to the Government for consideration. It has not yet been released.

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