In an interview with INTHEBLACK, Australian Taxation Office (ATO) Commissioner Chris Jordan warns that his staff are getting better at identifying problem tax advisers and taking action.
By David Walker
Tax Commissioner Chris Jordan says the ATO intends to treat tax advisers “harder” where their history shows such treatment is warranted.
Jordan tells INTHEBLACK that the ATO is “getting a lot better at the indicators that show [a particular] case is going to be a problem” and would “deal with them pretty hard”.
“We understand certain advisers and their client base better,” he says. “If you’re a client in a dispute and you have a particular adviser, history shows that this is going to be an aggressive, delaying, difficult case.”
The ATO chief said in late August that the ATO needed to show more empathy for businesses “where something has just gone wrong”.
He made it clear to INTHEBLACK that he was speaking about a small minority of tax advisers, large and small. “Most agents do the right thing,” he adds.
However, he says that while showing appropriate empathy, the ATO also needed to identify tax advisers who consistently use aggressive tactics.
It had found that some ATO auditors were “getting browbeaten and bullied by aggressive advisers and aggressive taxpayers”, and it needed to take action.
“Don’t play with these people”
The ATO chief says the organisation is now “being more purposeful in our actions” with advisers.
“What I’m saying to people is, more empathy on one side, but harder on the other – harder where it’s required. Don’t play with these people.
“We’ve got a dedicated team now to take on the real messy complex cases.
“Some people go to great lengths not to pay tax, some advisers know every opportunity to block, delay and avoid progressing matters.”
Jordan says tougher treatment for tax advisers who use aggressive approaches went along with his stated desire to show more empathy for businesses and advisers trying to do the right thing.
“We have got to be better at distinguishing between recklessness, intended recklessness, intended carelessness, or straight evasion, versus ‘well, what’s the story behind this issue?’”
An example would be a company that had been doing the right thing for years, but where something had now gone wrong. The ATO would ask what had caused the change, he says. “Is it an illness? Is it a divorce? ... Treat those ones with a lot of empathy.”
The ATO was also putting a new focus on how it imposed penalties on first-time offenders, he says.
“If you’ve done nothing wrong in the past, and you acknowledge that something’s gone wrong this time, well, you might not really get a penalty. It’s like a warning: pay the tax, pay the general interest, but no penalty, or very low.”
Jordan’s remarks are not the only indication of a tougher line from the ATO against some tax advisers. The ATO has also published comments by Second Commissioner Jeremy Hirschhorn to Big Four accounting firms warning of the ATO’s concern over advisers “who seem to operate almost on the basis that tax is discretionary, or for people who are not as clever as them or their clients”.
Hirschhorn says the ATO would respond “more forcefully” to “cute” pieces of tax planning devised by partners at Big Four firms, which could be rolled out across the Australian tax base.
Advisers “should be self-aware and consciously choose your ethical framework before you are in an ethical quandary”, Hirschhorn suggests.
Jordan credited Hirschhorn as influencing the ATO’s change of approach since becoming a second commissioner in late 2018, saying he had brought “different thinking”.
Better As Usual: 4 programs rolled out by the ATO
Jordan says that the changes to ATO thinking resulted in a Hirschhorn-led initiative called “Better As Usual”, which began in early 2018. He describes it as “quite a significant piece of work”, which was being progressively rolled out, with some elements already in place.
According to Jordan, it is made up of four programs:
- In what is called a “pipeline review”, the ATO will look at the entire end-to-end set of interactions that the client has had with it as they have moved from one part of the organisation to another.
- The ATO’s feedback loops are being improved, with officers in one area able to make suggestions to those in another area about the handling of the client. Says Jordan: “The objection officer can feed back to the compliance officer: ‘Well, had you done X, Y and Z, we wouldn’t have had this objection’.”
- A dedicated team will now take on what Jordan calls “the really messy, complex cases”. They will be able to give them the necessary time and resources, look at them “more holistically”, and treat them with empathy where appropriate.
- The ATO is also implementing safeguards aimed at eliminating cases where mistakes could seriously impact a taxpayer.