Calls For Greater Scrutiny of ATO Collection Practices For Small Business
The ATO is a necessary organisation to maintain revenue for Commonwealth, State and Local Government infrastructure and services. Aussies don’t like paying tax, as with many other countries and cultures. Perhaps it is because there is no direct link between the tax we seem to pay every day and the expenditures governments make with taxpayer dollars.
It is a behemoth that rivals Australia’s largest corporations. As a revenue collector it rivals any similar organisation anywhere in the world. Keeping ahead of tax cheats and tax loopholes ensures the ATO uses the latest technology, resources and systems to gather tax owing.
Its success can be numerically measured in the revenue collected, successful court cases which recover funds that rightfully belong in the public purse, its ability to simplify archaic laws for ordinary citizens and its education program for small business. Operating within a strict legislative framework ensures that the nation’s interest is best served.
The Income Tax Assessment Act 1997 not only provides government revenue. More than 20,000 employees are empowered on behalf of the Taxation Commissioner or the Deputy Commissioner of Taxation to carry out the task of ensuring all Australians, whether they live in the country or abroad, employed, unemployed or self employed in their own businesses, pay the correct taxation.
The ATO is also the only institution in the country where you are guilty until you prove you are innocent. Recent years has seen this become an ever greater part of the ATO’s collection methodology.
Your small business submits monthly BAS returns reporting your GST and PAYE taxation. The ATO automatically matches your data to Industry Benchmarks. Your individual monthly figures are out of line with other, similar businesses and your return is flagged. Should this occur again, it is very likely that an auto-generated letter asking you to pay outstanding tax or explain why you shouldn’t, arrives on your desk.
If you cannot justify why your business numbers don’t align with the suggested ones, you are “Guilty”.
Use of Big Data and The Internet of Things
A casual post about a new car, luxurious holiday or business lunch is tracked via social media, maps or even other government agencies such as the Department of Immigration. Does your trip, car or lunch fit into your normal spending patterns? Has your income or business income grown enough to afford the item’s estimated value? Do your travel deductions qualify as bone-fide, legal tax deductions?
Being guilty and having to prove innocence to avoid penalties is both time consuming and stressful. It is an effective technique for trapping tax cheats, but the rights of the individual often seem to be trampled in the dialoge or media reporting.
Goliath is Looking for a Fight
The size and resources of the ATO make it almost impossible to successfully defend one’s innocence. Few small business owners or individuals have the legal expertise, cash or even the time to spend away from their businesses or jobs to take on Goliath. To protest one’s innocence – a key legal right in our society – may simply be impossible.
The result is often losing a business, savings, assets and health. The stress of simply trying to be ‘innocent’ simply becomes too much for some, who resort to suicide, alcohol or suffer mental health conditions such as depression.
The ATO’s tough treatment of innocent and honest taxpayers, has one saying,
“There isn’t one client who is not under a doctor’s care, Alex* says.
People have suffered massive psychological stress.”
These problems follow the revelation of heavy-handed tactics including the widespread freezing of people’s bank accounts, inadequate compensation and lack of recourse when the tax office makes mistakes. 4-Corners and Fairfax Media say that the ATO has sent threatening letters to small businesses for immediate payment of “overdue” GST when they are not in arrears; and that the ATO has itself asked for patience as it has battled to make payments it owes on workers’ superannuation. *Not his real name to protect his privacy
Although both government and opposition members have indicated they will seek answers or launch an inquiry, underpinning the whole issue is not a revenue one, but a legal, human one. The same government which legislates every facet of our lives on the basis of ‘innocent til proven guilty’ employing state, federal and local police and law enforcement officers to carry out the prosecution of breaches of legislation. The stringent supervision of policing highlight how deeply rooted the legal system is in every day practices and life.
The juxtaposition to greater supervision of the ATO is the pastime of the millionaires, multinational corporations and the directors who lead these organisations: whose occupations and incomes allow them to pursue every possible means of tax avoidance.
The greatest danger to the fabric of our society is the inability to trust. Business owners must be able to trust their accountants, accountants must be able to trust the ATO, business owners must be able to trust governments and the legal system will protect their rights, families, health and businesses.
“By the standards of the rest of the world, we overtrust. So far it has worked very well for us.” Charlie Munger, Berkshire Hathaway