Tax authorities were warned two years ago that ATO managers were routinely breaching policies and bypassing internal controls and their "sacred cow" status protected them from detection.
The Tax Office is in crisis after a deputy commissioner from one of its vital compliance unit was charged with accessing privileged information on behalf of his son, the alleged ringleader of a giant tax fraud.
More BusinessDay Videos
- Video duration
- 00:23
ATO boss charged over tax fraud
ATO boss charged over tax fraud
Australian Taxation Office Deputy Commissioner Michael Cranston will be charged in connection with an alleged $165 million tax fraud syndicate.
Up Next
ASX winners and losers - a snapshot
- Video duration
- 00:43
- Video duration
- 00:43
ASX winners and losers - a snapshot
ASX winners and losers - a snapshot
The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.
Up Next
No chance wages will suddenly pick up
- Video duration
- 02:17
- Video duration
- 02:17
No chance wages will suddenly pick up
No chance wages will suddenly pick up
The economics text book on wages is wrong; there are a number of reasons why wages growth will remain subdued. Michael Pascoe comments.
Up Next
Passport control system failure causes chaos
- Video duration
- 00:52
- Video duration
- 00:52
Passport control system failure causes ...
Passport control system failure causes chaos
A glitch with the Advanced Passenger Processing system causes mayhem and delays at Sydney and Melbourne airports on Monday morning.
Up Next
Online harassment on the rise
- Video duration
- 03:50
- Video duration
- 03:50
Online harassment on the rise
Online harassment on the rise
In August 2016, Twitter co-founder Evan Williams spoke about his growing concerns surrounding online trolling.
Up Next
Ken Rosewell faces insolvent trading claim
- Video duration
- 00:35
- Video duration
- 00:35
Ken Rosewell faces insolvent trading claim
Ken Rosewell faces insolvent trading claim
KPMG pursue claim against tennis great Ken Rosewall, his son Glenn and another director following the demise of their company BBY in 2015.
Up Next
Want to save thousands on your tax bill?
- Video duration
- 00:11
- Video duration
- 00:11
Want to save thousands on your tax bill?
Want to save thousands on your tax bill?
Ken and Martha are using a family trust to knock thousands and thousands of dollars off their tax bill. This is how do they do it.
Up Next
Financial markets remain beholden to political risk
- Video duration
- 03:21
- Video duration
- 03:21
Financial markets remain beholden to ...
Financial markets remain beholden to political risk
In the absence of any tier-one economic data, it really will be sentiment towards US politics that dominates investors' mindsets, although the OPEC meeting is also a consideration. (This video was produced in commercial partnership between Fairfax Media and IG Markets).
ATO boss charged over tax fraud
Australian Taxation Office Deputy Commissioner Michael Cranston will be charged in connection with an alleged $165 million tax fraud syndicate.
But the ATO was told through official channels in 2015, that such behaviour was commonplace among senior managers at the agency.
Rank-and-file public servants at the Tax Office believe their workplace's internal culture might have allowed a successful cover-up of the allegations of $165 million tax fraud.
Whistleblower Ron Shamir says frontline staff at the agency believe that only the involvement of an external law-enforcement agency, the Australian Federal Police, ensured the allegations were properly investigated.
The former mid-ranking tax official turned whistleblower warned in an official disclosure in early 2015 that a culture of fear stopped rank-and-file public servants from reporting misconduct by their senior managers.
Mr Shamir, who lost his job at the ATO after making detailed reports alleging wrongdoing at the agency, says greater external oversight is the only way to ensure the integrity of the revenue collection agency.
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.
The Tax office denies the accusations.
But in his complaint to the Inspector General of Taxation in July 2015, he also sounded a warning about the culture at the top of the Tax Office.
"Bypassing controls is systemic...and many frontline staff are aware of the practice but feel powerless to change the culture of the ATO and fearful of reprisals from the ATO if they report breaches by senior management," Mr Shamir wrote in his official notification in 2015.
"One colleague reflected the view of many staff when he said he advised me that 'if you make a complaint, you can lose your job'."
Until Wednesday, Mr Cranston headed-up the ATO's "Private Groups and High Wealth Individuals" unit, the outfit that investigates tax fraud among Australia's super rich.
In 2008, he was in charge of the ATO's 'Serious Non-Compliance' team, when it was investigated by corruption-busting QC Tony Fitzgerald over the treatment of members accused of misconduct, including consorting with criminals.
Mr Fitzgerald found the team's leadership acted appropriately in the matter.
Now Mr Cranston is facing criminal charges linked to the new allegations of massive fraud, and is among four ATO officials to be suspended without pay over the scandal
The other three public servants are being investigated for potential breaches of the Australian Public Service code of conduct.
The ATO would not answer questions on Friday about Mr Shamir's warnings.
But the whistleblower, who was sacked after making his disclosures, said it was vital that senior tax officials be stopped from investigating each other when serious accusations were made.
"Under this sort of regime, there is no chance that serious ATO misconduct by senior officials will be detected, unless the AFP happens to be running an active investigation into an [alleged] $165 million fraud, which inadvertently happens to implicate four senior officials including a deputy commissioner," Mr Shamir.
"What else is going on in the ATO that the public are not aware of, because of the culture that affords senior officials sacred cow status?"