ATO loses multinational-busting mojo

CONTROVERSIAL reforms to let mining houses and other big corporations audit themselves have been slammed by Australian Tax Office personnel through a survey by the Community and Public Sector Union.
ATO loses multinational-busting mojo ATO loses multinational-busting mojo ATO loses multinational-busting mojo ATO loses multinational-busting mojo ATO loses multinational-busting mojo

 

Blair Price

While a Senate inquiry into tax avoidance and “aggressive minimisation” by multinational companies operating in Australia will reveal findings in June, significant job and resource cuts to the ATO have already weakened its capability.

The CPSU survey, which covered views from 100 senior experienced staff working in compliance, revealed the ATO had lost about 500 auditors with “debilitating” impacts to the organisation’s knowledge bank.

“We are probably at a critical stage in the risk management cycle with international tax avoidance,” one respondent said.

“To succeed we need well-coordinated activity undertaken by knowledgeable staff. The recent voluntary redundancies and loss of experienced staff have put this at risk.”

There were various comments about the remaining experienced personnel being under more pressure or even “fatigued” as a result.

“It’s difficult to comment but generally when you lose experienced staff they are the ones that are able to sort through the web of complex structures that larger entities use to hide transactions and money,” another respondent said in the survey.

Others were less measured when asked about the consequences faced by the loss of veteran staff from compliance teams.

“Maybe this is a strategy of dumbing the ATO down and outsourcing so that the wolf can look after the sheep,” a respondent said.

There were other views that the cutbacks meant the ATO had a less even playing field with the Big Four accounting firms and international clients and that less tax revenue for the government was likely.

“[A] light touch approach only encourages pushing boundaries of tax avoidance,” a compliance worker said.

The cost-cutting External Compliance Assurance Process, a pilot program which will be further evaluated in March, also received considerable criticism.

At this stage ECAP aims to provide public companies with between $100 million and $5 billion of turnover the option use their own registered auditors to audit any ATO-raised “issue of concern to the taxpayer” instead of the ATO pursuing the matter.

While this power is envisioned to be offered only to the companies rated as a “medium risk” it received considerable criticism in the CPSU survey.

“What a joke, we are giving the keys to the vault to the thieves,” was one view.

“A bit like the fox asked to guard the hen house,” another respondent said.

“The big 4 lord it over tax officers and will argue until they get the answer they want by intimidation.”

One respondent made reference to Chris Jordan, the former KPMG partner who is the ATO Commissioner.

“Creates the impression of an impending free-for-all for accounting firms, including the one the commissioner was a director of and which actively promotes the use of off-shore schemes,” the respondent said.

There were other views that the scheme suffered from an inherent conflict of interest and could not be considered an “ethically sound proposition”.

CPSU President Alistair Waters said one in 8 jobs had been cut from the ATO over the past six months and there were more cuts to come.

“While many members are saying we won’t see the full impact until around June next year as it gets busier, already there is real pressure and problems for the Tax Office whether that is following through on leads, assisting businesses trying to do the right thing and investigating tax evasion from the big end of town,” he said.

“Taxpayers need help, businesses still need advice and revenue needs to be collected. None of that changes.

“The government talks about a ‘budget crisis’ and says it wants to fix corporate tax cheats but cuts jobs for the people collecting revenue and making sure the system is fair. It just doesn’t add up.”

The ATO defended the ECAP program last week, telling Fairfax Media it remained "in control of the procedure and outcomes".

“It said all auditors were bound by a professional code of ethics overseen by the Auditing and Assurance Standards Board, which would remove the risk of conflicts of interest,” the newspaper reported.

In July 2014, Fairfax publications issued corrections over their earlier reports which claimed that mining giant Glencore somehow paid zero corporate tax over the past three years.

The anonymous source behind the claims at the time was reportedly “concerned at the rampant levels of tax evasion and tax avoidance by multinationals operating in Australia”

An estimated 25% of the ATO workforce are members of the CPSU.

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