Whistleblower exposes ATO 'cash grab' targeting small businesses

Updated

The toxic culture inside the Australian Taxation Office and the taxpayers who are fighting back.

Two Australian Taxation Office whistleblowers have told a joint Four Corners and Fairfax investigation about a toxic internal culture where vulnerable small businesses and individuals are deliberately targeted to help meet revenue goals.

They allege unethical tactics are used for revenue raising, at the expense of correct procedure and fairness to taxpayers.

ATO debt collection officer Richard Boyle has told Four Corners that last year some staff were instructed to seize funds from the bank accounts of taxpayers assessed to owe the Tax Office money, regardless of their personal circumstances

Mr Boyle said that on June 8 last year, he and other staff were called into a meeting at the ATO's Adelaide branch.

"People were rushing around, there was a lot of paperwork, I wondered what was going on," he said.

"We were instructed quite clearly and categorically to start issuing standard garnishees on every case," he said.

A garnishee notice is a debt collecting tool that allows the ATO to order a bank to hand over a percentage of money from the taxpayer's account, without consulting the taxpayer.

A standard garnishee notice requires the bank to keep sending money to the Tax Office on an ongoing basis, whenever money is deposited in the account.

This meeting followed an email sent in May to staff towards the end of a shift: "…the last hour of power is upon us... that means you still have time to issue another five garnishees…right?"

Mr Boyle spoke to Four Corners to expose the actions of the ATO.

Last week his home was raided by ATO and Australian Federal Police officers.

Mr Boyle believes the decision in June to ratchet up debt collection activities was motivated by a revenue grab before the end of the financial year.

"The motivation appeared to be that we were just collecting revenue before the end of the financial year and it didn't matter if we hurt members of the community," he said.

In late August everything changed. An email arrived saying Adelaide had been issuing more standard garnishee notices than anywhere else and a "significant" number were inappropriate.

"It seemed to be they were covering themselves and trying to explain away the original decision as a mistake," Mr Boyle said.

The Deputy Commissioner for Small Business, Deborah Jenkins [pictured], did not comment on Mr Boyle's allegations but said the Tax Office only uses garnishee notices as a last resort.

"I don't know the details about who it was sent to or anything like that, but what I do know is we use those powers very sparingly," she said.

"Our powers are used in very, very limited cases and where they absolutely need to be. We've been criticised in a number of reviews for actually not acting soon enough," she said.

Richard Boyle has a history of run-ins with the ATO; he was suspended with pay last September over alleged breaches of the Public Service Code of Conduct.

The ATO tried to settle with him in February, offering him a payout and a statement of service, with no admission of liability. He decided to knock it back to speak to the media.

The Tax Office has since suspended Mr Boyle without pay and notified him that it plans to sack him.

After last week's raid on his Adelaide home, it issued a press release saying an "ongoing investigation" was underway, and that "the Commissioner is committed to doing everything possible to secure taxpayer information, and will pursue cases where taxpayer confidentiality has been compromised".

Ken Phillips [pictured], an advocate for small business who runs Self Employed Australia, believes the ATO targets small business, instead of big business and high wealth individuals with deep pockets to fight.

"They set targets, they chase low-hanging fruit, people who are being honest and upright, and they whack them with a huge bill and then chase them," he said.

The ATO's Deborah Jenkins said she didn't want small businesses to feel like they are an easy target.

"Small businesses are the backbone of the Australian economy. It accounts for the vast majority of the economic activity in Australia, and we're talking around 4 million small businesses," she said.

"I want to be helping small businesses. In fact our mission in small business is to help viable small businesses thrive. We absolutely believe in that."

Former senior ATO insider, Ron Shamir, has told Four Corners and Fairfax his division in the Box Hill branch in Melbourne had revenue targets that had to be met.

He referred to it as "The Plan": an estimate of how much tax revenue the Tax Office will be collecting in the forthcoming financial year.

"It's an estimate given to government, so that it can plan and know how much tax revenue is to be collected," Mr Shamir said.

"It then cascades down to various tax office branches and becomes a target of what they will be collecting in revenue for that financial year."

Mr Shamir says pressure would build and result in shortcuts and staff looking for easy targets.

"You would be looking at taxpayers who are less able to resist the might of the Tax Office. Taxpayers that are more vulnerable, and that often meant individuals and small businesses rather than larger businesses who had less legal resources," he said.

Mr Shamir was sacked in mid-2015 for non-performance. He took his case to the Fair Work Commission, winning initially, but losing on appeal. The ATO offered to settle his case but he refused to agree to any condition preventing him from speaking publicly.

Four Corners and Fairfax spoke to other current and former ATO employees who confirmed what Mr Shamir said.

One senior Tax Office insider, who wished to remain anonymous for fear of retribution, said "The Plan" continues to exist and trickles down to employees in each business line. He said within each business line, key target areas are identified and revenue goals attached.

The ATO's Deborah Jenkins said she couldn't talk about individual staff but denied the ATO was driven by revenue. "We don't have a focus on the revenue collection," she said.

"It's a really important part of what we do, we can't let aside the fact that we are a revenue authority, but for me it's actually really important if we want people to willingly participate in our system… That's why our focus is on education, prevention, and support, and I've got a huge part of my team is actually dedicated to doing that work."

"Somebody eventually has to win against the Tax Office. They can't keep winning just because they have more money, just because they have more power."

Helen Petaia has been fighting the Tax Office since late 2012. She set up a technology company, Safe Family Cards Australia in 2006, to deliver immediate access to critical medical information.

Investors backed the idea and she won contracts with sporting codes including the Queensland Rugby League and AFL Auskick. She was also winning government research and development grants and tax rebates.

But things started to unravel in 2012 when the ATO announced it was auditing her Brisbane-based business.

In late 2013, she was sent two letters that stated that her companies owed hundreds of thousands of dollars to the Tax Office.

"They claimed we had been reckless, that we had made false and misleading statements, and that because of that we had to pay an additional 50 per cent penalties," she said.

The tax bill came as she was in the final stages of raising capital to take the technology to the next stage. Investors pulled out when she told them about the audit, the tax bill and the allegations that she had been dishonest and fraudulent.

"It was overwhelming. I felt very abandoned at the time because the documents seemed to be very strong that we'd done the wrong thing. It was one thing for me to tell people, 'Well, we haven't done it,' but everybody said, 'Well, Helen, you have to prove that'."

She couldn't pay her children's school fees or buy their text books and school uniforms. She started defaulting on bills, the car was repossessed and she was in arrears with the mortgage on the family home.

In November 2014, the ATO called her to admit they'd got it wrong.

Assistant Commissioner Daryl Richardson then rang her personally.

"It was clear to me that there had been a breakdown in the ATO processes. So Helen, again, I apologise firstly for the manner in which it's been conducted and also the impact that it's had on you personally and also on your colleagues," he said.

The ATO initially offered Ms Petaia $20,000 for grave errors and maladministration of her audit.

Helen Petaia decided to fight for better compensation. She requested a copy of everything that had been written about her and her companies.

In February this year — more than five years after the Tax Office first flagged she was being audited — she entered mediation. She said she has not been offered anything close to the millions she has lost.

Ms Petaia now plans on taking the ATO to court.

"I suppose the only way to get fairness is to take it outside the Tax Office and to have people not involved in the Tax Office become judge of my destiny," she said.

Watch 'Mongrel bunch of bastards' on ABCiview.

Credits

Reporting: Adele Ferguson

Design: Alex Palmer

Digital production: Brigid Andersen and Stephen Hutcheon

Photography: Mathew Marsic and Tony Hill

Topics: government-and-politics, tax, business-economics-and-finance, small-business, environmentally-sustainable-business, adelaide-5000, sa, australia, brisbane-4000, qld

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