Three decades on and I can see that once again the community is losing faith in its tax system, which will have enormous implications for long-term revenue.
In the 1970s avoiding unfair taxing not only became a national pastime but also was seen as the right thing to do in many sectors of the community.
The much-publicised bottom of the harbour schemes were merely a surface manifestation of the deep community distrust in the tax system and the hundreds of schemes that emerged. The return to the tax avoidance of 1970s has not started but the forerunner, distrust of the tax system, has reached a new peak.
The parliament of Australia has given the taxation department powers that no other peacetime government organisation possesses --- it is not bound by the rule of law. Yet there is no effective appeal process for small businesses and investors. The Australian Taxation Office (ATO) therefore has power uninhibited by the law in the areas, which embrace the majority of the population.
And we now know, without any doubt whatsoever, that the ATO is abusing that power. The abuse is part of the deep cultural problems that are almost always created when you hand a large group of people uninhibited power.
Add to that the scandalous tax avoidance schemes of the international communication and computer giants and its no surprise that ordinary Australians are rapidly losing faith in their tax system.
For two years I have been hammering the fact that given the unfettered powers of the ATO, the lack of an affordable independent appeal body for small business and investors was a national scandal---especially as larger enterprises can afford to appeal to the courts. It is simply wrong and must be fixed.
The ATO made little public comment about my revelations but behind the scenes I was widely and heavily bagged as being badly informed and the only person writing this way.
Normally when a writer for one major media organisation — this time it’s The Australian and its owner News Corp--- takes a strong position rival media organisations either ignore the subject or go the other way.
To their great credit the ABC and Fairfax decided to test my conclusions about the power abuses of the ATO. The ABC’s Four Corners, Melbourne’s The Age and The Sydney Morning Herald found that, if anything, I had understated the ATO power abuses.
The nation should be grateful to these two media organisations and their people, Adele Ferguson, Nassim Khadem and Lesley Robinson, for their revelations.
But the nation should be even more grateful to The Australian’s editor Paul Whittaker and business editor Eric Johnston. I do not know what sort of pressures were put on them but I was totally insulated over two years and none of my words were changed and all were published. My already high pride in this great newspaper was multiplied many times.
My readers will know that my campaign for a fair and independent tax appeal system for small enterprises and investors was part of a four-pronged agenda to adapt the society for a future world that will see more people involved in entrepreneurship.
In my view we needed unfair contracts legislation (that has been achieved); 30-day payment by large enterprises and government bodies (more work needs to be done); a truly independent tax appeal system for small enterprises and investors (that’s now top of the agenda) and a big reduction in the cash economy (electronic payment systems are helping but the heavy lifting can’t be started until there is an effective appeal system in tax).
Back in 2016 when I first started on tax I had a conversation with Taxation Commissioner Chris Jordan in which I undertook to stop writing about the need for an appeal system in general terms but to devote my tax appeal commentaries to specific tax abuse situations. He did not believe I would find any.
Over the last two years I have come up with hideous situation after hideous situation but Four Corners and Fairfax media have found even more. The Inspector-General of Taxation says one in five tax claims are in error. That’s very conservative. The real figure is closer to one in 10. And there is no appeal system that works.
Fairfax and the ABC confirmed my warnings that taking federal government research grants is highly dangerous because the ATO targets these people ruthlessly.
I want to thank Ken Phillips of Self-Employed Australia who provided some of the examples. Others came from readers who contacted me.
It’s important that we do not allow the need for an independent appeal body to be relegated to a “blame game”. We achieved agreement from all political parties in unfair contracts despite opposition from the Business Council and the Franchise Council.
I hope we can do the same in taxation appeals. The seeds for the ATO’s bad culture were planted well before the current government. In theory the countless multi-party parliamentary investigations into tax and parliamentary committee interviews with tax commissioner Chris Jordan provided ATO scrutiny. But in practice the members of parliament were too busy and rarely asked the right questions. On the surface there was scrutiny but in fact there was none.
I am encouraged that the minister directly involved in tax, Kelly O’Dwyer, has withdrawn the draft legislation to give the ATO even more power by allowing them to name to credit agencies people alleged to owe tax. The decision was made after my comments of February and well before the latest round of media revelations.
It’s a good sign that the minister understands what is really happening.
Tomorrow I will look in detail at what needs to be done.
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Australians revolted in the 1970s when the tax system became regarded as unfair.