The new Commissioner has seen both the good and the bad of the ATO and knows what needs fixing.
This article is from the August 2013 issue of INTHEBLACK.
Chris Jordan is a tall man with a grand plan – he’s taking the Australian Taxation Office (ATO) digital.
Amazed that members of the public could not contact the ATO via email, Jordan is introducing sweeping structural and cultural changes to bring the agency in line with how society functions in 2013.
“The Tax Office isn’t broken, but it can be better,” Jordan says.
The average Australian taxpayer can take comfort that Jordan is one of them.
He didn’t grow up in a fancy house or a fancy suburb – “we lived in quite cramped quarters” – he was one of seven children and his first job was as a paper boy.
He was too young for a paper round, so he stood outside a church in suburban Sydney with his newspapers waiting for the congregation to emerge.
He saved his earnings and, with a small donation from his father, bought himself a bike.
In his late teens Jordan joined the police, following in the footsteps of his father, and says that experience – plus playing rugby union – gave him a good perspective on life and taught him about working towards common goals. After a year on the force he decided to put himself through university.
All that experience has culminated in a grassroots understanding of how most Australians live. He and his wife also foster babies in extreme need, one of whom stays with them still, and Jordan gets away from it all by trekking, most recently in the Bolivian forest.
A 20-year veteran of Big Four accounting firm KPMG, Jordan told former CPA Australia chief executive Alex Malley how an opportunity to work for former Australian Prime Minister John Howard 30 years ago opened the door that ultimately led to the commissioner’s desk.
Malley: Chris, you grew up in Sydney and your father and uncles were police officers. I imagine that was a profound culture in the family.
Jordan: Yes, it was. I went to quite a tough school in those days, Maroubra Bay High, and it was often an interesting situation for me to be in, in that my father was a policeman and a lot of the kids and their families did not necessarily always think kindly of the police. Fortunately I was a very large person, so I didn’t get bullied.
Malley: And you were one of seven kids …
Jordan: Yes, there were four girls in a row then three boys. It was a large family, relatively smallish house. I got used to living in quite cramped quarters.
Malley: Culturally, what do you think that gave you as a foundation, moving out into the real world from that family environment?
"The Tax Office has tied itself in a few process knots over the years. There has become a culture of risk aversion." – Chris Jordan
Jordan: Some of my experiences I learned at school. Also, I was a policeman for 12 months and was stationed at Chatswood. I remember vividly going to some domestics and I would walk into these houses and I had never seen anything like this in my life. I thought they were palaces. Being confronted with traffic accidents, with assault situations – I learnt to take a fairly broad view of what’s in front of you: “Is there a way of solving the issue we’ve got here without necessarily trying to push through it all the time?”
It gave me a really good perspective on life and different types of people. I also played a lot of competitive sport – rugby union – so I knew how important it was to be a part of a team, how to have a common goal and as a group work towards that goal. I’m very strongly of the view that no one individual can know everything and the sign of a strong leader is the good people they put around them, rather than thinking they can do it themselves.
Malley: The vast majority of your private sector work was the 20 years or so you spent at KPMG.
Jordan: I headed their National Tax Research Centre, which was involved in doing all the training of staff, writing the publications, doing media liaison and that type of thing. I started there in February 1985, then was asked if I would mind being seconded to John Howard’s staff as a tax adviser.
Malley: Have you reflected on why they asked you?
Jordan: The Tax Summit was in July 1985. I attended as an observer and had written many publications afterwards. I was also doing a lecture circuit around the capital cities of Australia to clients. As I understand it, John Howard, who was leader of the opposition, wanted someone who knew about tax to help them. He saw this as tremendous change: there was capital gains tax, imputation, foreign tax credits, FBT, entertainment allowances and disallowance of entertainment – huge reform. So he wanted someone who could help them understand it and not just take a political point of view all the time.
I grabbed that opportunity and what I say to people now – I’ve gone around and talked to people in the Tax Office – “Never let opportunity pass you by, grab it and work it, [because] I’m standing here now as Commissioner of Tax because I took that opportunity.” Those two things are connected because that decision led to me chairing the New Tax System Advisory Board that was advising the government on the implementation of the GST (goods & services tax), which led to me being a member of the Board of Tax, eventually its chairman, and gave me a very broad view of business and policy.
Then you must try to keep in contact with the people you’ve met. Who did you get on well with? Who did you have a natural connection with? Because being able to keep in contact with people, they grow with you. A lot of the people I was dealing with in my role as chairman of the Sydney office of KPMG for nearly 11 years, they were people I knew at a much earlier stage of my life.
An end to paper wars: Australian Commissioner of Taxation
Chris Jordan. | Photo: Fairfax Syndication
Malley: When you reflect on that turning point, that era, what did you learn about people at that time? The environment you were seconded to was a very different environment to what you knew.
Jordan: One of the big things I did think is that most people are relatively straightforward, no matter what their position is. Sometimes as a younger person you can hold in awe positions or reputations, but when you walk in and sit in the actual [Parliament] House watching Question Time, getting to know the people, you realise they are generally just your average person who happens to be doing a particular role. They are like you, they are like me, they are like anyone else. They have families, they have the same interests, they have the same desires.
I also realised there are a lot of people who are happy to push their own barrow and that there are people who often will ignore both sides of an argument and just push one, but then, that’s the way the system works. That’s what’s expected. So I don’t get annoyed or upset at people who have a single issue and pursue it because that’s often their role, it is all-important to them.
Malley: So you were appointed Commissioner of Taxation to the Commonwealth of Australia. What were your thoughts about what you wanted to achieve in those very early days?
Jordan: I thought there was an opportunity to take an institution that was not a broken organisation, but which I perceived should be better than it was. I had had many dealings with the Tax Office over the years at a policy level and at a client level, so I’d seen the good and the bad. I had enormous respect for the senior people I dealt with on a policy basis through my Board of Tax role.
I was the first person to come from outside the Tax Office to lead it. I did have a lot of policy experience. I did have a lot of interaction with the Tax Office at a senior level and I did have a good feel for what business thought of the Tax Office as well. So to put all those together – to not come in and within the first month want to turn the whole thing upside down – and change it while spending a lot of time asking why, and how, and why is it done that way, has been a very useful exercise.
Malley: Many organisations, be they public or private, can fall into cultural habits, can’t they?
Jordan: That’s absolutely correct, because people grow up with process around them and they think that’s normal. So when someone challenges that, by actually trying to explain it, people halfway through will go “you’re right, it doesn’t make much sense”.
We all know that in an organisation of 24,000, it’s a big ship out in the ocean. Whilst there is a desire for people to change, I fully acknowledge that it won’t change overnight. But it will be my focus over the next three months.
The Tax Office has tied itself in a few process knots over the years. There has become a culture of risk aversion. There has become a culture of having very large meetings with lots of people to try to share accountability, which never really works – things don’t get done. And I could never understand before why it was that decisions were taking so long.
How could any set of facts be so complex that 12 months later, there was no decision? It was not the complexity of the factual scenario; it was the complexity of the processes and the sharing of accountability and trying to eliminate risk at all costs, rather than having a sensible risk-management framework.
We know you can never eliminate all risk, but what you can do is have a fit-for- purpose, appropriate risk management framework.
Malley: You made a comment early in your tenure about needing to improve relations between business and the ATO. What steps have you taken to further enhance these relationships?
Another major change is an independent review function ... we need a process that tries to short circuit the paper wars.– Chris Jordan
Jordan: A major part of my role is to spend a lot of time with stakeholders – and I use the word stakeholders because that’s government, Treasury, business, individuals – it covers that whole spectrum, the consumers of the tax system. I have taken direct action in ensuring the Tax Office has a pivotal role going forward in the whole tax design function. Commencing 1 July there will be an Integrated Tax Design unit formed, headed by Andrew England, who was previously chief tax counsel. It will be the whole area to interact with Treasury, to support them in the development of new policy proposals.
I actually see this as a career development opportunity for good Tax Officers. I want the best and the brightest from around Australia in the Tax Office to put their hands up and say “I want to be part of that unit. I want to spend three, six, 12 months seconded to Treasury”. And when they finish their time in there, I want a lot of thought given to how the Tax Office can best leverage that experience. They might be in charge of writing all the public guidance on the new legislation they’ve just helped develop.
The Tax Office has not been particularly good at coordinating its efforts in terms of requests for changes [from Treasury]. In future, Treasury will know that any request it receives from the Tax Office is important, it’s been clearly thought through, accompanied by suggested solutions to the problem, costings have already been prepared as to savings, it will be a package integrated between problem, magnitude, solution and cost before it actually goes to Treasury.
Malley: In terms of transfer pricing, you’ve said there is significant knowledge out in the market and that there will be times when you will comfortably seek that external advice.
Jordan: We’ve got these taxpayers with multimillions of dollars of tax at stake, the highest qualified, most experienced tax accountants, tax lawyers, tax barristers, all lined up. It is hard for us to keep up with these highly specialised, highly remunerated positions, so therefore my view is that there will be greater times in the future where we will need to engage external experts to help the Tax Office. Business should see this as a good thing, because it means timeframes could potentially be shortened and at least we can narrow the areas of dispute.
I hope the dispute resolution period can be shorter. That’s another major change that will commence from 1 July, an independent review function. And transfer pricing is just one area where you get fundamental disputes – poles apart in the issues here. We need to have a process that tries to short-circuit these ongoing paper wars: I give you a 50-page position paper; you give me a 100-page one refuting that. Six months later I then give you a 200-page one, and so it goes. I call it the paper war.
What I want to do is have a much greater focus in sitting around a table with all the relevant advisers, trying to work through with independent mediators, use dispute resolution much more greatly. Have a truly independent review with the legal people from the Tax Office divorced from the compliance group under a different second commissioner focused on these independent reviews, but with real gateways.
We’re going to have agreements up front that set out mutual obligations and with timeframes. You hear of these things that go on for four, five, six years, which is entirely inappropriate. And the blame is often on both sides. ‑
M: So if there isn’t enough risk in your professional life, you raft in the Bolivian Jungle, you trek in little known territory, what drives you to do those sort of things.
J: It’s just a great way to get away from all of civilisation and also to realise that the simple things in life can be quite good. It’s with a group of friends, we’ve climbed Mount Kilimanjaro, we’ve flown into incredibly remote areas of Alaska and spent seven days walking out to be picked up by another plane, not seeing anyone else in that time. We’ve climbed the highest mountain in the Pyrenees.
I haven’t done all of them, but the most recent one was 12 days trekking and rafting in Bolivia, starting at 5000m. Twelve days in a tent without a shower is about my limit, I’ve decided.
We just wanted to be able to help kids in extreme need, so we took a number of children and now we’re fortunate that one has stayed with us and we have permanent care.
I’ve got to say you don’t see a lot of middle-class foster carers. I think more people could, and should. It’s hard at times with these kids who’ve had a difficult time. They are always incredibly underweight, they are always sick and they never say anything or they never cry because they’ve cried and no one’s ever come, so they’ve given up.
It was always a joy after a few months to see the children put on weight and start to talk. Typically, grandparents will take responsibility for the children, they would come and off the children would go.
A digital tax office
Malley: In terms of the digital age, where do you see the Australian Taxation Office moving?
Jordan: It has a great opportunity for a lot of service improvement by bringing it into the digital age. It’s not taking it into the future, it’s bringing it to the now. I found it quite amazing when I realised there was no email address for the Tax Office. You cannot commence a dialogue right here and now through email with the Tax Office. It’s quite old-fashioned. My goal is to give people the information they need at the point in time they need it, in the manner they would like it.
My vision is, we send you the information by email and let you work out if you want more; you just press that button and if you want to pay [the fee], that’s all you need to know. In terms of EFT for payments, the Department of Human Services stopped doing cheques 10 years ago. We still do something like four million refund cheques a year. It costs something like A$10 a cheque!
Pushing information to you has to be the way of the future. Apps: hundreds and hundreds of thousands of phone calls every tax time asking “Where’s my return? Where’s my refund?”. One of the simple apps is ‘Where’s My Return?’ You can tap it, put your tax file number in and it will tell you where it’s at and how many days it will take to land in your account.
This article is from the August 2013 issue of INTHEBLACK.