A damning review of the tax office by one of its directors has caused angst and discomfort among senior management, with some preferring it never be made public.

Key points: The author of a yet-to-be published review warns "the average tax evader may be financially better off even after they're caught and penalised"

The author of a yet-to-be published review warns "the average tax evader may be financially better off even after they're caught and penalised" Chris Leech, a director within the ATO, says the paper does not reflect the opinion of the ATO

Chris Leech, a director within the ATO, says the paper does not reflect the opinion of the ATO FOI documents reveal pushback from the ATO was to blame for the paper's publication delay

The yet-to-be published review warns financial penalties for tax evaders are so low that some people could be better off taking the risk of being caught.

But the ATO has dismissed the findings of the report, which was written by its own director of reform within the tax evasion and crime division.

Chris Leech wrote the paper while on secondment with the Australian National University's Tax and Transfer Policy Institute and insists it does not reflect the ATO's official opinion.

When showed a draft, senior tax office executives were so worried they considered asking Financial Services Minister Kelly O'Dwyer to dodge questions if she was ever asked about it.

"The average tax evader may be financially better off even after they're caught and penalised," Mr Leech wrote in a presentation summarising his report.

"If you just look at it from a purely rational economic view … it may suggest to some people that you are still better off taking the risk and running the gauntlet of being penalised."

A slide from Chris Leech's presentation summarises his findings on the issue of tax evasion. ( Supplied )

Mr Leech's paper was scheduled for publication late last year, but freedom of information documents reveal pushback from the ATO was partly to blame for its delayed release.

The report calls for tax evaders to be publicly named and shamed and for financial penalties to be increased.

"A very worrying statistic is that just over three quarters of those companies that receive these penalties made zero payment," Mr Leech's presentation said.

"Obviously, penalising a company and collecting a penalty is very difficult because it is so difficult for the controllers to wind up the company, and they would have already stripped the assets for it.

"But my worry here is that the ATO may be hesitating to devote many resources to auditing these companies."

In his pitch to senior executives, Mr Leech said publishing his report would expose some weaknesses in the tax penalty regime but also gave them a chance to be open with the public.

"The ATO would be 'on the front foot' and acknowledging the tax penalty isn't working as intended for the very small group of taxpayers who intentionally disregard the system," he said.

Internal emails show angst about critical report

Because the report was written while Mr Leech was on secondment, the ATO insists it does not reflect Government policy or discussions within the office.

"They should not be interpreted as representing any administrative or policy considerations in this area," an ATO spokesman said.

Emails seen by the ABC show how senior ATO figures planned mitigation strategies for the report's release, including what to do if it was even presented to Ms O'Dwyer.

"Maybe she could just say something like, 'The paper raises issues which are also being considered by the taskforce', which is slightly dodging the question, but in the ballpark," ATO assistant commissioner Julia Neville said in an email.

Ms O'Dwyer's office told the ABC the minister was never given the draft paper.

Ms O'Dwyer's office said the Financial Services Minister was never given the draft paper. ( ABC News )

Other senior executives, including Deputy Commissioner Robert Ravanello said Mr Leech's conclusions were based on incorrect data.

"Certainly helps provide further justification as to why publication should not be supported," one senior staffer said in reply.

Deputy Commissioner Will Day noted the concern among management and said: "We are happy with the thinking at the moment not to publish."

"This is not the work of the ATO and as a general rule, without properly considering the data used and the conclusions made, I am not comfortable endorsing or approving this as such," chief service delivery officer Melinda Stewart said.

Author stands by his report

Mr Leech did admit there were some weaknesses in his report but has strongly defended his final conclusions.

"My and others' frontline case experience was that penalty payments were very low by this group of taxpayers — deliberate tax evaders," he said.

"I don't know any other tax officer who works on serious tax evasion cases that believes otherwise."

Mr Leech was supervised by ANU Professor Miranda Stewart, who approved his paper for publication in late January but recommended he remove some "emotive elements".

"She's mainly tempered some of my colourful and emotive language, which I totally understand and am comfortable with," Mr Leech said in an email to ATO management. "I get a tad passionate when I see tax evaders getting away with their misdeeds :) (sic). "I understand these changes may be somewhat redundant if the paper is not able to be published on the ANU website, but it's still useful to have a final version of the unpublished paper."

A spokesman for ANU said the paper has been "subject to revisions" and will be published as part of its Working Paper series soon.