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Commissioner of Taxation Chris Jordan has outlined how the ATO has increased digital capabilities and data, noting that it cannot rely on traditional audits alone.
‘We cannot rely on audits alone’ to maintain tax system integrity
26 November 2021
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8 minute read
Speaking at the 14th International ATAX Conference on Tax Administration on 23 November, Chris Jordan said the ATO is focused on ensuring it has the right processes in place to respond to challenges in a productive manner.
“We cannot rely on audits alone to maintain the integrity of the tax system, so fundamental to all of this is how we use digital capability and data – to build systems that make it easy for taxpayers to get it right (and hard not to), and allow us to better analyse where someone needs a nudge in the right direction, or a firmer hand,” Mr Jordan said.
“...We know the key to an effective tax system is a high level of willing participation and where most taxpayers are honest and try to do the right thing. The majority of Australians do that now; and we must encourage that predominantly compliant attitude to continue by providing the right systems and support.”
Zooming in on large businesses, Mr Jordan said it has become more important than ever for the ATO to work in a “collaborative, open and constructive way”, rather than “auditing after the fact”.
“Under our Justified Trust program, we work one-on-one with the largest economic groups in Australia to assure that they have paid the right amount of tax. We continually monitor the ‘Top 100’ largest public and multinational businesses, and 80 per cent have achieved medium or high assurance,” Mr Jordan outlined.
“The Top 100 is the most intensive of all the programs, and organisations that have achieved this standard can be proud of the achievement. Achieving ‘Justified Trust’ means the ATO can take a less intensive monitoring approach, and it forms a strong foundation for future engagements. This is important at two levels. We assure compliance with those taxpayers who have the largest economic impact, and we provide the community with confidence that large businesses are paying the right amount of tax.”
Mr Jordan said the ATO takes a different approach with other markets.
“Our approach with the other markets is completely different. In markets where we have millions of taxpayers, we don’t have the time or the money to actively engage with each taxpayer. Technology and data do the heavy lifting and they do it better than we ever could before, directing our investment to the right places and having a significant effect on the bottom line,” he explained.
“We know that most people do the right thing – in fact, tax performance in the individuals and small business sectors is strong, with little or no intervention from us. Individuals tax performance is approximately 94 per cent, and small business income tax is around 87 per cent.
“Through our various strategies to address the tax gaps, we have developed a strong understanding of the levers that can improve tax performance. This informs our focus on early intervention and on helping taxpayers and their tax professionals get it right up-front, with the right guidance, systems and support.”
In conclusion, Mr Jordan noted that during tax time 2021, nearly 370,000 taxpayers were prompted to review their work-related expense deductions based on comparisons to individuals with similar jobs and expenditures. These prompts caused taxpayers to make adjustments estimated to have a revenue impact of approximately $37 million, he said.
“This is just the beginning of what data can do to help us manage the individuals and small business markets, and over the next decade we will need to go much further in how we make the most of the data we have available to us,” Mr Jordan said.
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- My gut feeling is that they will utilise eInvoicing at some point as a vehicle to understand what indirect taxes they can expect to flow into their coffers. Already the ATO are enthusiastic subscribers to CbCR so it stands to reason thresholds will reduce, capabilities will increase with the argument of lowering the cost of doing business.0
- We have gotten to a point where taxation is now theft and the ATO are the Government sanctioned mafia. All businesses systems and data will have to be implemented to make the ATO's life easier. Business do not exist to make the ATO's life easier. They exist for profit despite government and the ATO making it dificult. If business succeeds it does so in spite of the ATO and Government.2
- "This is just the beginning of what data can do to help us manage the individuals and small business markets, and over the next decade we will need to go much further in how we make the most of the data we have available to us,” More unpaid work by accountants and more unpaid work by small business to satisfy the ATO's quest for an Orwellian tax system." Leave business alone. Stop doing data comparissions based on your banchmarks (ATO weighted averages) as business are unique and cannot be boxed into your big brother statistical machine.2
- Well we certainly can't rely on the integrity of the Treasury or ATO!2
- The elephant in the room is the complexity of the tax system. It is complexity which is the major cause of noncompliance by small business taxpayers not dishonesty. And this is before you get into the economic waste of thousands upon thousands of people spending millions of hours on convoluted tax law, forms and debating what a particular section means or that what some tax ruling actually implies. As for the big end of town it is that same complexity that allows them to hire an army of tax lawyers to “minimise” tax. On the basis that nothing whatsoever will ever be done to simplify the tax system the ATO's argument is logical but as always is frustratingly tiresome and misguided.2
- "We cannot rely on traditional audits alone..." What hubris? The ATO has NEVERY had to rely on audits at all. The vast majority of voluntary compliance with Australia's tax laws is due to the over-riding integrity of the majority of Australian taxpayers who are still undoubtedly motivated by their own values to do the right thing. Next in line is the unquestionable integrity of the tax professional bodies and the majority of members who further strengthen the self assessment system, and many tax practitioners would no doubt attest to the countless unpaid hours we have all put in over the past 2 years to carry out the decrees of public servants and their Covid measures. I think the very reason that public servants and law makers are so out of touch with mainstream Australia is that they are completely immune to the financial impacts of the decisions that they make. The level of corruption being exposed by ICAC and IBAC, the implications of the close family of former deputy Commissioners in enormous tax fraud, and the fact that public servants have not foregone a single cent of their pay since Covid began all reinforces the perception that taxpayers are merely here to serve and pay our public masters. For all the talk of integrity of the tax system, has Mr Jordan ever once turned his focus onto the efficiency or otherwise of how our collective revenue is actually spent (or wasted)? That Australian taxpayers still have trust in any of our institutions is a miracle of itself.2
- Its amazing how the narrative changes depending on what wheelbarrow they're pushing at the time. Good on us (agents and taxpayers) - pat on the back!1
