Neoliberalism and the destruction of the Australian Tax Office
Posted by John, January 20th, 2015 - under Neoliberalism, Tax, Tax avoidance, Tax evasion, Tax Office, Tax policy, Tax reform, Tax the rich.
Tags: ATO, Australian Tax Office, Chris Jordan
I sent this to the Australian Financial Review today (Tuesday) after reading a report in it about a speech Second Commissioner of Taxation Andrew Mills was going to make and indeed did make on Tuesday at the Australasian Tax Teachers Association Conference in Adelaide. I was at his presentation that morning at the Conference. Update on Thursday: Not surprisingly the newspaper of the 1% in Australia hasn’t yet published it.
John
I was at the Australasian Tax Teachers Association Conference at which Second Commissioner of Taxation Andrew Mills spoke and talked about the issues (plus more) that Katie Walsh raised in her report about the ATO conceding separate reviews. (AFR Tuesday 20 January page 1.)
Time ran out before I was able to put my perhaps controversial questions to Second Commissioner Mills. As Ms Walsh reported he referred to the Tax Justice Network/United Voice ‘ Who owns our Commonwealth?’ report as both misleading and in some cases patently wrong. He offered no evidence in his talk for this assertion. In addition the Second Commissioner described the report as undermining confidence in the tax system. Many in the public might see getting rid of 3000 experienced tax officers with another 2000 to go by 2018 as doing that.
I was also going to ask Mr Mills if the statement by ATO Deputy Commissioner Jim Killaly in 2011 that between 2005 and 2008 40% of big business paid no income tax was also misleading or patently wrong and whether it too undermined confidence in the tax system. Does the ATO have the guts to release similar aggregated figures for later years? If not, why not? What are you hiding from the public Second Commissioner Mills and Commissioner Jordan?
Mr Mills also stressed the idea of building trust with taxpayers and I was going to suggest that in relation to big business and the rich this is naive (perhaps deliberately so) and fundamentally misunderstands the role of the state in collecting tax from companies. Businesses view tax as a cost while working class people view it as a contribution to the community. We comply; they don’t. This pandering by the ATO to big business under the guise of building trust and ease of compliance could well lead to less compliance activity on and revenue raised from the rich and powerful.
I was going to make a further point that the slogan cultural change being trumpeted by the ATO leadership represents the final capitulation of that leadership over a number of years to neoliberalism.
The outcome of neoliberal policy since 1983, when Hawke Labor began implementing it and laid out the red carpet for Howard and then Abbott, has been a massive shift in wealth in Australia from labour to capital. The process of neoliberal regulatory capture in tax policy and tax law has now, if Second Commissioner Mills’ speech is any indication, also successfully infected the administration of the ATO.
All the sweet words in the world will not disguise the fact that the fox is now in charge of the revenue hen house.
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Comments
Comment from John Turner
Time January 21, 2015 at 7:40 am
John,
Where do the comments appear?
Comment from John
Time January 21, 2015 at 6:24 pm
Just where you made them. You hit the comments link. That is where they are.
Comment from John
Time January 21, 2015 at 6:51 pm
Ah John, you mean Mills’ comments in the AFR? OK, now I get it. There is a paywall, but here is the online version which has a bit more than in the print edition.
Katie Walsh:
KATIE WALSH
The Australian Taxation Office has agreed that a separate area should be created to handle all appeals by taxpayers, a major concession that seems designed to ward off Treasurer Joe Hockey’s plan to implement a more severe split.
Second commissioner Andrew Mills will reveal the Tax Office’s support for the plan on Tuesday following years of complaints from businesses and advisers citing a lack of independence when complaints are filed and lengthy delays.
“We support the creation of a separate area within the ATO to manage disputes for all taxpayers,” Mr Mills will say. “This would be in line with current practice in leading tax administrations like the US Internal Revenue Service and the Canada Revenue Agency.” Complaints by big business and the very wealthy are already examined by a different part of the Tax Office.
In 2011, one of the ATO’s chief watchdogs, the Inspector General of Taxation Ali Noroozi, called for a separate review function off the back of calls from businesses and advisers. Joe Hockey, the then Opposition Treasurer, adopted the idea for his policy platform.
Tax Commissioner Chris Jordan was a surprise advocate, flagging within months of taking on the top tax job in January 2013 that he would make appeals independent.
Since then, the ATO has separated its review function for big business and high wealth individuals. Some have expressed disappointment that it did not go further.
“An appropriate level of separation, independence and transparency can be achieved by moving all objections from the compliance group to the review and dispute resolution business line,” said Mr Mills.
Some – including The Law Institute of Victoria – want a new agency to undertake reviews to remove any “apparent or actual bias”. Others want a new area within the ATO. The parliamentary inquiry into tax disputes is still accepting submissions and is due to report in March. Mr Mills said the ATO would expand strategies to resolve disputes early to more taxpayers, boost its focus on the taxpayer experience and introduce a dispute resolution charter.
ACKNOWLEDGING PAST MISTAKES
He acknowledged that “there were cases in the past where we certainly could have done things better. I’m pleased to say we are now changing. The ATO’s stance, strategy and capability is now firmly focused on resolving disputes as early as possible, in a way that is efficient, respectful and fair.”
Late last year, the ATO settled a long running dispute with GE Capital over $144 million in tax deductions relating to Wizard Home Loans. Mr Mills called out “conflicting” submissions to the parliamentary committee, which criticised the ATO both for litigating and settling too much.
The ATO is undergoing what it calls a reinvention following feedback that it is out of touch with some members of the public. Key to this is a cultural change to overhaul how it treats and views taxpayers. Mr Mills said that its “new mission” was to foster “willing participation” – giving a lighter touch to the vast majority who do the “right thing” – but denied it was going “soft”.
The cultural change spearheaded by Mr Jordan, the first outsider to the head the Tax Office in its 100-year history, has had its critics, especially from former senior staff who were among 3000 to leave last year under savage cuts.
“Any organisation that is attempting to undertake large-scale reform like we are cannot be successful unless it changes its culture first,” said Mr Mills.
Mr Mills attacked a report on taxes paid by the nation’s top 200 companies, penned by United Voice and released in September, as “misleading” and doing “the tax system no favours whatsoever”.
QUESTIONABLE RESEARCH
“Using questionable research to make misleading (and in some cases just blatantly wrong) claims that some large taxpayers don’t pay any tax or pay very little tax undermines confidence in the system and achieves the exact opposite of what organisations like United Voice claim to be advocating,” he said.
The ATO has started audits on 20 technology or digital-heavy businesses and expected some to land in court later this year.
Speaking at the Australasian Tax Teachers’ Association annual conference, Mr Mills also took aim at the complexity of tax laws and flagged the ATO’s desire for a new discretionary power to deal with problems that arise when the wording of a law leads to a different outcome than the one intended by Parliament.
He said that signs from a pilot program allowing big companies to use their own auditors to make factual findings for the ATO were encouraging.
“Despite misrepresentations by some (I never cease to be amazed by the mischief that some people like to create) it is not handing over ATO auditing functions to the accounting firms,” he said, citing one case where a taxpayer initiated five years of income tax return amendments.
The ATO will decide on the future of the program next month.
Mr Mills spoke of an acute awareness of the need to manage disputes in a “timely manner”, to boost public trust and for the taxpayer’s sake.
“They impact people’s lives and businesses and their effects can be long lasting. When they take too long to resolve and are not managed well, the costs are very high – not only in terms of time, effort and money, but also the stress for everyone involved.”
He listed a litany of changes rolled out in the past two years, including establishing a separate review line within his law division, getting tax officers to “pick up the phone” early on to avoid “protracted paper wars”, increasing dispute resolution staff training and writing a new two page settlement code. The time to issue rulings has dropped from an average of 129 days to 70 days; and early settlements have risen from 52 to 77 per cent.
Mr Mills described his first year as presenting a “steep learning curve” and an “exciting time” of transformation for the nation’s tax collecting body.
——
Mills and other right wing comments should appear on the Conference site in a little while we were told today. I will link to them when that happens.
Comment from John Turner
Time January 21, 2015 at 7:39 am
I suggest you calculate the tax payable at various levels of income when the income is all derived from franked dividends. At $400,000 pa (shares totaling $10-12m) the marginal tax rate on the last $150,000 is just over 23 cents in the dollar.
The tax on company income distributed to resident Australians could be reduced to nil with no loss to residence. Company tax could apply only profit not so distributed.
Such an arrangement would reduce company costs and should reduce prices to consumers.
Shareholders want companies to be treated as separate entities for liability reasons but not in respect to tax.