As they recover from the impact of COVID-19, a new wave of fear is sweeping many of Australia’s 500 largest private companies.
The Australian Taxation Office has initiated an unprecedented inquisition campaign.
Without warning or any pre-negotiation, the ATO has fired around 100 questions at the top private companies demanding information that goes to the heart of how their companies are managed.
While some questions are reasonable, the “laundry list” of queries seeks detailed management information that appears to have little relevance to the business of collecting tax.
Although they might have large turnovers, most of the private companies don’t have the extensive accounting and information systems that exist in big public companies. Most will need the help of outside accounting firms to undertake the massive task which they are required to complete next month.
The costs will be at least $150,000 and may go much higher.
This new “tax” comes in the wake of the pandemic.
Below I set out some of the questions private companies are asking but are too afraid to say publicly. They turned to me in desperation.
The Australian Taxation Office is one of the most feared and ruthless in the world when it comes to dealing with private companies. The ATO has many good people (as we saw in JobKeeper) who treat private companies fairly but there are large ATO fiefdoms that take advantage of their incredible powers.
ATO officials can make assessments using their own rules with little regard to the laws of the land; the ATO has an internal appeal system that is broken because too often it is influenced by the people who make the assessment (sometimes those involved in assessment sit on the appeal panel); higher up the appeal chain, while there are some areas where appeals will be treated fairly, the next major appeal area, the Administrative Appeals Tribunal, has adopted practices that have been slammed by the full Federal Court.
It’s only when you get to the full Federal Court and the High Court that there is an appeal system that works.
For private companies, even large ones, this is an expensive process which few can afford.
They are therefore at the mercy of the ATO and interest and penalties start from the day of the assessment, not when the when the appeal process is completed.
The ATO has smashed industries like gold refining, big elements of Australian research and even tiny businesses like transcription services. They ruthlessly garnishee private company bank accounts as a matter of routine.
While the government is looking at the situation our elected representatives appear scared and bamboozled when ATO officials go before parliamentary inquiries.
The laundry list questionnaire takes this feared body close to the role of managing private companies, but uses sugar-coated words that claim that the ATO wants the information to “help” firms. Because of past ATO actions here is no trust between the ATO and private companies and offers of “help” are regarded with scorn.
Here are some of the questions that private company chief executives want to ask the ATO:
* Was Treasurer Josh Frydenberg, tax minister Michael Sukkar or even the Prime Minister consulted before the unprecedented inquisition was launched?
* Why didn’t you talk to me first before machinegunning me with 100 odd questions that look like they are the same for all others? We could have discussed what you really needed to know about my company.
* If we refuse to answer your “laundry list” of questions will we be put on the “punishment” list and taxed out of existence?
* Why does the tax collector need to know the names of my company’s executives plus my executive structure and organisation?
* Will the ATO need to be informed when my executive structure changes, when executives are moved to different positions or leave the company? What on earth does that have to do with tax revenue raising?
* Why does the tax office need to know the different ways my company manages it operations, including different strategies in the various states?
* Why does the tax office need to know my company’s acquisitions and acquisition policy.
* Is the tax office aware that Australia has just been through a pandemic and that many of us have been saved by JobKeeper and/or are still dealing with customers and suppliers that have been badly bruised?
* Was the inquisition timed to coincide when we were weakened as a result of the pandemic?
* Will the ATO support an appeal to the Federal Court to rule on whether the detailed management information you require is necessary for the business of collecting tax?
* Is this simply the first of the inquisitions and will they be an annual affair, thereby becoming a fixed tax on private companies?
* And to the politicians who allow the ATO to run uncontrolled without any working appeals system - will you do your job and give us fair taxpayers rights and an independent, fast and low-cost appeal process? For that we would gladly embrace the US system. Almost all of us want to honour our legal tax obligations but the process must be fair and workable. .
We do not want to have the ATO as a quasi board member.
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