Since its formation in 2013, the House of Representatives Standing Committee on Tax and Revenue has reviewed the Australian Taxation Office’s performance as recorded in its annual report. The Committee’s review of the Commissioner of Taxation Annual Report 2016–17 continues in the tradition of past assessments, which since 2015 have monitored the progress of the ATO’s ‘reinvention’ of its services model in support of voluntary compliance.
According to the ATO, the Reinvention Program has delivered against this goal over 2016–17. In his opening statement to the annual report, Tax Commissioner Mr Chris Jordan highlighted the year’s key results. Lodgements were again up in 2017 over 2016, a top lodgement year, with complaints down by 26 per cent. The ATO’s early engagement focus was also a success—appeals were down by 61 per cent, with timely alternative dispute resolution measures reducing ‘time, money and angst’ for taxpayers, as well as the need for litigation.
Despite these and many other points of progress, the 2016–17 reporting period was nevertheless a challenging one for the ATO. Late in 2016 and in early 2017 there were the major systems failures at the ATO’s Sydney Storage Area Network (SAN) and then, in May 2017, the revelations of Operation Elbrus raised questions about the ATO’s internal integrity management.
While the ATO’s annual report glanced over these problems, and the Commissioner reported them as resolved or in resolution, stakeholders in the Committee’s review had a different view about the impact of the service outages in particular.
At hearings in May 2018, tax professional organisations said the ATO’s digital reinvention was the linking factor in all their concerns. Citing ongoing poor functionality, unfixed implementation timeframes and low accountability, they called on the Committee to extend the period of its scrutiny beyond the annual review period and bring the ATO to account.
Later in August, the Australian National Audit Office and the retiring Inspector-General of Taxation Mr Ali Noroozi also wanted the ATO to be more accountable about Reinvention goals and outcomes. The IGT referred to the risks of ‘Reinvention fatigue’ under sequential digital rollouts and reforms, and the ANAO found no clear connection between the goal of ‘willing participation’ and the ATO’s cultural reinvention, with programs implemented in support of this ‘not bounded’ and hence not measurable.
These comments bookended an inquiry that began with controversy. At the Committee’s first hearing for this review, public allegations of the ATO’s procedural unfairness to small business elicited a firm rejection from Commissioner Jordan. Soon after, in April 2018, an ABC/Fairfax investigative report on the same topic had the same response from the Commissioner at Senate Budget Estimates in May. This strengthened the Committee’s resolve to test the ATO’s reportage on its Reinvention against the measure of the taxpayer’s experience.
The scope of this review was wide, and accordingly the Committee has made extensive and detailed recommendations, 37 in all. A primary concern was that the ATO, while meeting the letter of the law, may be failing to communicate the spirit which it says guides its Reinvention. This is the value code which underpins commitments articulated in its core vision documents—the Reinvention Program Blueprint, the new 2024 Corporate Plan, and the revised Taxpayers’ Charter.
In the Committee’s view, the Tax Commissioner should strike a note for fairness and respect between the ATO, tax agents, and taxpayers in all his public statements, and this guarantee should be consistently extolled and consolidated in all ATO vision documents. The ATO, and the Treasury, should also consider a structural review of the ATO’s governance models for appeals and its dispute resolution processes, as long recommended by the IGT.
Measurable benchmarking, clear and public contracting arrangements and comprehensive performance reportage on fairness and digital functionality are vital supports to taxpayer confidence in the ATO and the tax system. This is more fundamentally important as the digitisation of tax services shifts the onus of proof and the compliance burden back onto taxpayers.
The recommendations made in this report intend to adjust the imbalance of power perceived by taxpayers in their engagement with the ATO, and to ensure that, under the ATO’s Reinvention, willing engagement will be the test for fair treatment.
Mr Jason Falinski MP
Chair
21 February 2019