Never one to mince his words, Australia’s chief taxman talked candidly with the IPA’s general manager of technical policy, Tony Greco, about the burning issues, the progress he’s made so far and his priorities for the future.
Greco What have been the most important achievements in your tenure as tax commissioner?
Jordan I think the major achievement so far culminated in the recent release of the Reinventing the ATO Blueprint. That will drive everything we do over the next two to three years. It sets out and, importantly, recognises that the culture of the organisation is at the centre. The cultural traits that we need to focus on as an organisation are all around putting ourselves more in the shoes of the client, recognising time has a cost, focusing on service, being future oriented, having a sense of materiality and reasonableness, and treating people fairly and with respect.
We’ve designed a new site called Reinventing the ATO, which is dedicated to all of these issues. It sets out our plans, principles and strategies, and paints a whole series of cameos from different market segments. We’ve really spent the time segmenting our client base: individuals, small businesses, superannuation consultants, BAS agents and the tax profession generally. We now include software developers as a specific segment, because they will play such an important role going forward.
Obviously, change is difficult in an organisation the size that we are, and there are always some people who don’t want to change – they’re very comfortable with what they’re doing. But by and large we have a significant majority committed and wanting to change, so that’s been really pleasing.
Greco What impact will ATO retrenchments have on the service levels expected by stakeholders?
Jordan I don’t think you’ll see any discernible change in the level of service that we provide. We have gone out of our way to make sure we have people at the front line, particularly offering services to advisers and tax practitioners, because they play such an important role. So we have an increased priority in terms of supporting and servicing that segment, because they can make the system work better if we service them properly.
Our target for retrenchments was 3,000, but with the hiring freeze on and some natural attrition, that figure is more around 3,700. Most of the cuts have been in the back office. We are looking at reforming teams and at different ways to work to ensure any gaps are filled.
We’ve spent a lot of time focusing on being more efficient. We’re getting better leverage from technology – frankly, I don’t think we’ve harvested the efficiencies from technology and analytics in the past, and we’re doing that better now.
Greco The ATO has introduced simplified transfer pricing recordkeeping requirements to reduce the compliance burden on small business taxpayers. Is this a trend we can expect more of?
Jordan We’re doing a lot to try to make our correspondence and explanations simpler for businesses – ultimately, that will reduce compliance costs. There’s a lot of talk about SBR [standard business reporting]. It’s a little bit down the track, but once we get people with software that is enabled with standard business reporting we can calculate instalments on actual results.
The other concept is Single Touch Payroll, which makes onboarding employees easier, because the employee effectively does their TFN and their super fund in a standard form and transmits that to the employer. The software accepts that, then every fortnight when [employers] pay their employee, we know, as the ATO, what the salaries are and where the super is going. So, with Single Touch Payroll and with SBR-enabled software, there could well be a transformation in compliance costs.
Greco Some small accounting practitioners have built their business around individual tax returns. What messages would you send to these practitioners?
Jordan There’s no doubt that all our worlds are changing, being driven by technology and advances in software. What does that mean for tax agents? I think the era of high-volume, low-margin simple individual tax returns… you’d have to question that business model going forward.
We had over a million people use MyTax last year and we’re expanding the pool of eligible people to around five million for tax time 2015. Tax agents are going to have to look at how they can move into advising small businesses, how they can look at doing more financial / business advice, how they can advise people on their superannuation. That’s the sort of area that’s not going to go away.
Greco Dispute resolution for larger taxpayers has vastly improved under your tenure. What more can be done for smaller taxpayers, who have limited resources to expedite ATO disputes?
Jordan A great deal of publicity has been on the large market, but we have actually quietly done a lot more in the small business area. We have many in-house facilitators now. We ran an alternative dispute resolution pilot about two years ago, and, quite extraordinarily in my view, one-third of all disputes were solved in the fi rst phone call, because they weren’t actually real disputes. There was just a lot of misunderstanding that needed clarification.
We’re also training a lot of the small business and other compliance offi cers in facilitation of disputes, about how you go about trying to work something out and how it might actually just be a miscalculation or misunderstanding, and all we really need to do is clarify the situation. It might be on our side or it might be on the taxpayer’s side.
We’ve also got to have a greater sense of materiality. You can’t chase every dollar down the burrow; you’ve got to have a return on investment. If someone’s paying a lot of tax and you might have an argument over tiny amounts, you know what, let it go and focus on future compliance. Focus on the big picture, focus on how to do things quickly and don’t argue over the little things.
Greco Most compliant taxpayers are concerned about the level of taxes paid on profi ts generated from business undertaken by multinationals in Australia. What can the ATO do to ensure our good voluntary tax behaviour continues in the future?
Jordan Firstly, we’re not waiting for any new international tax laws to come into place. We’re actually out there challenging a lot of the previous assertions made by some of these companies. I can’t talk about individual cases, but when you draw something up on a whiteboard and it’s contrived, not commercial at all and set to give a result that a lot of your sales are not subject to tax in Australia, I stand back and say: is that really how business is done?
Well, guess what? We’re checking all of this stuff now, and I think you’ll fi nd the tax due diligence 101 is paying off. We’re out there under existing laws looking to see whether there are dependent agents; what is the source of this income in reality? We’re working really closely with the OECD, the G20, the government, to make sure that we have sensible and clear new laws that seek to attribute profit to where it’s earned.
We have a lot of reviews – there are 40 or so audits going on. We’ve already raised $240 million under this one project and we have a target of $1.1 billion by 2017 that I think we’ll easily meet. And it is important, because our mission is to contribute to the economic and social wellbeing of Australians by fostering willing participation in the tax and super systems.
Going hard on these multinationals has a tremendous impact on the confidence and sense of fairness for the whole community. It’s our job to take this on.
