IGT will investigate the ‘Four Corners’ allegations that the ATO has abused its garnishee collections powers

On 16 May 2018, the Inspector General of Taxation’s (IGT) announced his investigation into the allegations made during the ABC Four Corners Program (aired on 9 April 2018), regarding the ATO’s use of ‘garnishee notices’. The Program quoted an ATO collections officer and the nub of his allegations was that ATO collections officers, particularly in Adelaide, were directed to issue everyone garnishee orders (suggesting strongly that many would be inappropriate). He produced a copy of a ATO manager’s email, exhorting the collection officers, to issue 10 more garnishee notices, in the remaining hour of work (in other words, inappropriate on steroids).

Garnishee notices can have devastating effects, as they can cut a taxpayer off from its operating revenue, by directing the payer to pay the ATO instead. In many cases, it is the death nell for businesses, and needs to be very carefully administered.

I covered this part part of the Four Corners allegations, in a related TT Article, which we published 2 days after the TV program aired. The slant I took was to investigate whether the proposed ‘Whistleblower’ laws, making their way through Parliament (see TT Article), would have helped this ATO whistleblower, had they already been law. I concluded that they did not (which I think is a major flaw).

This whistleblower’s allegations were begging to be independently investigated, by someone, and the IGT was the obvious person. Now, finally, this is going to happen, but now with the weight of the IGT’s complaints evidence (as Ombudsman – see below).

The IGT’s investigation

In announcing this enquiry, the IGT mentions that he investigated the ATO’s debt collection practices in 2015 and made various recommendations, but despite this, about 20% of the ongoing complaints he receives (as the Tax Ombudsman) relate to the use of ‘garnishee notices’ – suggesting there is something to the allegations made by the ATO whistleblower on the ABC’s program.

The IGT notes the importance of the ATO acting fairly, if it wants to promote voluntary compliance (which it, repeatedly says, it does).

Accordingly, the IGT says that he will investigate allegations that the ATO:

• gave directions to staff to issue standard garnishee notices in every case as a ‘cash grab’ towards the end of the 2016—17 financial year; and
• set targets for staff and assessed their performance based on the level of debt collected.

The review will draw on IGT complaints data, consider the ATO’s implementation of specific recommendations made in his Debt Review and independently assess the relevant ATO systems including interviewing current and former ATO staff in the debt recovery units across multiple locations. It will also seek to understand and assess the nature of any impact upon affected taxpayers particularly small businesses.

The ‘Terms of Reference’

The IGT will investigate allegations that have been made in the Four Corners program regarding the ATO’s use of garnishee notices as well as relevant themes emerging from complaints made to his office.  This review will particularly focus on the ATO’s:

1. strategies to manage tax debts by way of garnishee notices;
2. policies and procedures for issuing garnishee notices, including how the ATO considers circumstances of taxpayers such as vulnerable small businesses and individuals;
3. mechanisms to ensure staff adherence to its garnishee notice policies and procedures;
4. Key Performance Indicators (KPI) with respect to both tax debt collection and staff performance;
5. specific communications to staff regarding the use of garnishee notices and associated KPIs at each location of its debt recovery units; and
6. other relevant concerns or potential improvements identified during the course of the review.

Submissions

The IGT invites interested persons to lodge a submission, to this review, setting out your, or your clients’, experiences with the ATO’s use of garnishee notices, including any impact it has had on you or your client. Your views on any potential improvements are also welcomed. The closing date for submissions is 22 June 2018.

16.5.18

[IGT website: Garnishee Investigation; FJM; Tax Month May 2018]

Study questions (answers available)

1. Is the IGT going to investigate Four Corners allegations of the ATO abusing its ‘garnishee’ powers?
2. Did the IGT investigate the ATO’s collections debt collections practices, and make recommendations, in 2015?
3. Were the 20% of Complaints the IGT received (as Tax Ombudsman) relate to various types of ATO debt collection?
4. Do the ‘Terms of Reference’ that the IGT has set himself, cover all the types of ATO collection action, that he investigated in 2015?
5. Do submissions close on 22 June 2018?