An ATO spokesman said the agency was rethinking its approach. "The community has told us they want firmer treatment of tax debtors who do not address their debt," a spokesman said.

"Businesses that ignore their obligations will receive timely, firmer action from the ATO. This will include legal action where there is evidence the business is insolvent."

But Donna Smith, managing director of debt collection agency Reliance Recoveries, said the Tax Office was still too lax when it came to calling in debts from larger small to medium-sized enterprises (SMEs).

She said in one instance, a company was allowed to merge with another business despite owing more than $700,000 in back taxes. This was after being put on nine different payment plans by the ATO and being issued with a legal proceeding that was never followed through.

The company was later discovered to be insolvent but not until after it merged, she said, leading to twenty job losses.