Retooling tax is part of the shift required to foster jobs growth

The tax office needs to be a part of a plan to enable small firms to take up the jobs slack caused by automation.

The new Australian Taxation Office building in Melbourne’s Box Hill.

The Douglass tax case is no ordinary tax case. It is a vital step in the generation of employment opportunities for our children and grandchildren.

And the decision by the Tax Commissioner, Chris Jordan, to roll up his sleeves and personally look at what happened in Douglass enabled him to see for himself the current flaws with the Australian Taxation Office’s procedures and cultures.

And then he stunned the tax community by acting on those flaws and his actions became, potentially, a huge breakthrough for Australia. I set out that dramatic story yesterday (Chris Jordan’s last shot at righting a wayward ATO, November 29). Now I want to explain the wider implications.

Australia, like the rest of the developed world, is going to experience a substantial drop in the amount of labour being employed by its big enterprises, including banks, media companies, accountancy firms, law firms and even the public service.

That fall will be caused by the advent of much greater computing power and artificial intelligence. In many cases, employment in large organisations like banks will be halved over the coming decade.

We need Jordan to understand that the tax office must be part of a national change to enable the growth in smaller enterprises to fill the gaps created by this reduction of employment in larger groups.

As my regular readers will know, I believe that this employment generation will come via the community altering parts of its structure to enable smaller enterprises to prosper. We have actually taken the first of the required steps — the introduction of the Unfair Contracts Legislation which came into operation on November 12 (thank you Malcolm Turnbull and the cross benchers in the 44th Parliament).

The Unfair Contracts Act will see some eight million anti-small business standardised contracts, that are indictments on the management of our large groups, dismantled (Big business needs to get with the contract overhaul program, November 11).

The second fundamental change required is a dramatic revision of the anti-small business culture in parts of the Australian Taxation Office.

Earlier this year I tried to convince Chris Jordan of the need to change the culture which exists deep down in the tax office and he genuinely didn’t believe it was necessary.

Now we have just seen a situation in which his staff and armies of highly paid legal advisers have been talking total gobbledygook about this case for months. It was only when Jordan personally looked at the Douglass mess that he could see what had happened and how it reflected the bad culture within the ATO.

The great problem the commissioner has is that very few people are prepared to come forward to show him what is actually happening in small enterprise taxation.

Accordingly, he must rely on people down the tax office line and the real information doesn’t get to the top — or at least it didn’t until Douglass.

It’s not easy but what I am going to try and do as I bring forward new cases is to attach a solution to each of the problems that arise.

In the case of Douglas it is very easy. Clearly you can’t have the current anti-small business groups deep in the tax office preparing fictitious opinions so that upstanding Australians are falsely accused of evasion and fraud and are threatened with bankruptcy.

No person should be accused of evasion and fraud (which enables the ATO to go back much further than the two years that applied in Douglass) without the case being approved by the Federal Court as was envisaged by the constitution and the 1903 act.

This will mean that tax officials will spend more time looking at suspect returns when they are current. The present situation is that quick action doesn’t matter because they can routinely get an internal ‘fraud evasion’ ruling (in the case of Douglass it was fictitious) and go back ten years.

In order for small enterprises to prosper in Australia this nonsense must stop.

While we must have a tax office that dedicates itself to collecting money — that is its job — it must do so in a way that garners community confidence.

But I must emphasise that there are many parts of the ATO that do just that.

The ATO recently asked me to go to Penrith (near the Blue Mountains) to look at their systems to monitor calls that come into the ATO. It’s world class. I believed I had another situation that revealed the bad culture but in a fair discussion I lost the debate, so I didn’t write anything about it. That’s good news.

The third action I believe we must take to prepare us for this new environment is to substantially reduce the cash economy.

In the current environment, as people are being put out of work or are put on casual labour, more and more are participating in the cash economy.

That is why Morgan Research showed a big rise in incomes in the latest year even though the salaries of non-public servants are not rising (Forecasts point to a Christmas like few others, Nov 22).

The situation is bad now but it is going to get a lot worse.

The tax office is doing its best in this area but it needs extra tools and I hope I can make a contribution by helping them to get the better tools. Like Douglass and the unfair contracts legislation, this is vital for the nation.