Select Page

Tax commissioner Chris Jordan denies abuse of small business

AUSTRALIAN BUSINESS REVIEW   April 30, 2019   Robert Gottleibsen

Only in Australia could three amazing events be taking place simultaneously.

First, if Australian Small Business and Family Enterprise Ombudsman Kate Carnell is right, the Australian Taxation Office may have misled a parliamentary committee over the extent of its use of garnishee orders when a small business is appealing a case before the Administrative Appeals Tribunal.

But in a dramatic development yesterday, tax commissioner Chris Jordan made a statement that contradicts the ombudsman. I will detail the Carnell-Jordan differences and the implications below.

In the second event, Carnell is also calling for limitations on the exercise of the wide powers of the ATO, while at the same time before the parliament is incredible legislation that actually widens the ATO’s powers.

Third, the proposed ATO power grab would introduce the French system of justice into parts of the Australian court system so that those accused are assumed to be guilty until proven innocent.

Leaving aside the Carnell-Jordan clash, Australia must hope that members of the 46th parliament (after the May 18 election) stop both the power grab and any abuse.

It is significant that Carnell does not recommend reducing the ATO’s powers, but rather calls for instituting proper oversight to prevent them being abused.

In the Carnell-Jordan clash, the politicians will go back to what the ATO told the March 2018 House of Representatives Tax and Revenue Committee. The ATO comforted the committee by telling them that less than 4 per cent of disputes before the AAT were the subject of debt recovery actions including garnishees.

But the Australian Small Business and Family Enterprise Ombudsman report is in complete contrast to those statements to parliament.

Carnell found that “ATO debt recovery action happens in a sizeable number of cases which are before the AAT (at least 12 per cent) and that such action can severely impact a business’s ability to prosecute its case and carry on its business”.

Jordan yesterday fired back: “Of the 108 small business cases finalised in the AAT in 2017-18 there were only 17 cases identified where some type of debt recovery activity occurred.

“We took garnishee action in just four cases, and pursued debt in other ways (for example, a letter or a call) in a further 13 cases.”

I am not in a position to be the umpire, but what’s required is detail of the cases (without identification) that Jordan and Carnell are referring to.

Carnell recommends that small business must be able to seek a stay order of any ATO debt recovery action when a case is before the AAT. But she goes further because the ATO last year issued more than 50,000 garnishee orders destroying thousands of businesses.

The ombudsman recommends that should garnishee action be required, there must be mandated external oversight and approval (such as through the court system) before such an order is made. Jordan does not address garnishees outside the AAT.

It is important that the Carnell-Jordan clash does not overshadow the dangers in the proposed increase in the ATO’s powers.

The legislative measures now before the parliament aim to greatly increase the powers of the ATO under the guise of cracking down on the black or cash economy.

The black economy is a red herring — it’s about making the ATO the most powerful force in the land — perhaps more powerful than parliament and the judicial system.

Some of the recommendations have already passed parliament. For example, reporting payments to contractors — currently required in the construction industry — has been extended to cleaning, transport and IT. The ATO has become a collector of every business-to-business transaction in the community.

Here are some of the ATO power grabs in the legislative pipeline:

  • The “Director Identification Number” proposal. This duplicates ASIC director registrations but will be controlled by the ATO in a similar way it controls ABN (Australian Business Number) registrations. The ATO will be able to cancel director identification numbers at its whim with appeal only to itself.
  • Reversal of the onus of proof for tax criminal offences. The proposals do not specify what tax offences would become criminal. But whatever they are, you are guilty until proven innocent. The Law Council of Australia says: “The principle that the prosecution bears the burden of proof and that guilt must be proved beyond reasonable doubt are essential to the presumption of innocence.”
  • Extension of the jurisdiction of the Federal Circuit Court to criminal matters. Even though the Federal Circuit Court has no criminal law jurisdiction it would essentially hear only tax cases — it would be a criminal court where the implicit presumption is that everyone is guilty.
  • Double jeopardy. The proposed legislation would reverse the statutory protection of double jeopardy. That means that if someone is found not guilty in a criminal matter, the ATO’s administrative penalty still applies. Essentially, taxpayers would need to defend themselves twice.
  • Penalties. The ATO gains power to impose 200 and 300 per cent penalties. Penalties currently top out at 90 per cent. The ATO is also to be able to impose non-financial penalties such as automatic travel bans and revocation of passports.

If any the above powers are needed to tackle crooks — and not just introduced on the back of trumped-up black economy statements — then the ATO can have them, but there must be clear oversight and community protection via the courts or trusted outside bodies.

Pin It on Pinterest

Share This