En Passant

This article is an edited and revised version of an earlier article on the appointment of former KPMG partner Chris Jordan to the role of Commissioner of Taxation, musing on whether the new Commissioner would be the fox in charge of the hen house or the poacher turned gamekeeper.

I have submitted this cut down version to some mainstream media outlets for consideration. Nothing back from them, yet.
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Chris Jordan has been appointed Australia’s next Commissioner of Taxation. He takes up his role on 2 January 2013.

Jordan has an impeccable tax and business background. That is the problem.

Jordan is for example Executive Chair of Chase Corporate Advisory and was before that Chair of KPMG New South Wales. He was the Partner in Charge of the New South Wales Tax and Legal Division there. He is also the head of the Board of Taxation.

So what is the problem? In a nutshell, he is too close to business and a former tax adviser to some of them. As a partner in one of the big 3 accountancy firms, his goal was to reduce the tax his clients pay. This is tax planning. But it could easily stray into tax avoidance. One has to ask the question – has newly appointed Commissioner of Taxation Chris Jordan been involved in tax avoidance arrangements for his clients or even himself? Will he, for example, release his tax returns for the last ten years?

This leads to another question – is Jordan’s appointment a case of putting the fox in charge of the hen house or a case of the poacher turned gamekeeper? It is early days but I don’t have any sense from Jordan’s history that there will be a damascene conversion to shepherding the revenue from the foxes of big business.

The art of taxation, so Louis XIV’s Finance Minister once remarked, consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.

There has been a lot of hissing from business. The dilemma is that the Government wants more revenue to help deliver a budget surplus. It also wants a happy big business class.

The current Commissioner, Michael D’Ascenzo, despite his business friendly approach, couldn’t get the mix right. So the Government has not renewed his appointment. I don’t think Jordan will be able to get the mix right either.

Tax law reforms of the sort suggested by the Henry Tax Review could address this contradiction by shifting the burden of tax even more on to workers and less on to capital. The ‘debate’ about increasing the rate of the GST and broadening its base is testimony to that.

Business groups and tax peak bodies that represent the rich and powerful are very pleased with Jordan’s appointment. They are talking about a new era of cooperation and a more business friendly approach from the ATO. That is code for them paying less tax or being under less Tax Office scrutiny. The more scrutiny, the more tax big business pays. The less scrutiny, the less tax they pay.

Tax policy is already moving in the direction of taxing labour more and more and capital less and less. Under Jordan tax administration will follow suit. The focus of the ATO will shift even further away from big business to the little taxpayer, that is to workers and small business.

ATO staff are unhappy, fearing they will become an adjunct for a system designed administratively and legislatively to collect less and less tax from business and more and more from ordinary working people. They will be under attack from Jordan’s worship at the altar of business and his business methods for running the ATO. What next, arms dealers in charge of Defence? Julian Assange running the CIA?

Sidelining D’Ascenzo and appointing Jordan is the Labor Government’s way of responding to business criticism of the already fairly softly softly ATO approach to business. If D’Ascenzo, with his ‘bend over backwards to business’ approach was not re-appointed, then the Government’s message to Jordan is pretty clear. Bend over more.

What better way to gut the Tax Office than for business to have one of their own leading it?

Is there any extra revenue out there? As part of the recent MYEFO announcements the Government gave the ATO an extra $390 million to pursue transfer pricing – where multinationals manipulate pricing to shift profits from Australia to other often low tax jurisdictions – and tax avoidance more generally. This will, the government estimates, raise an extra $2.5 bn.

Why limit the ATO funding increase to $390 million if it is going to bring in six times that amount of revenue, an amount I suspect is an under-estimate?

Governments have deliberately underfunded the ATO. This has undermined the ATO’s capacity to pursue the big end of town fully. There is a gold mine out there. My guess is that under Commissioner Jordan it will remain unmined.

A ‘business friendly’ approach fundamentally misunderstands the role of the State and its revenue collector. The role of the tax office is to collect tax fairly across the board, not favour the rich and powerful.

This ‘ATO as a friend of business’ approach, rather than seeing tax as the price we pay for civilised society, views tax as just another business cost to be cut. That approach could destroy the culture and ethics of the ATO.

With a potential fox in charge of the hen house, revenue from companies could plummet even more and ordinary workers would pay – either through more tax collected from them or savage cuts to government spending and services or both.

Such is Labor’s degeneration they have handed the tax collecting role to a person whose whole working life has been representing the interests of big business in general in policy debates and discussions, advising on ways to reduce tax and defending specific big business when battling the ATO.

This appointment is neoliberal madness from the Gillard Labor Government.

I have a novel suggestion for the ALP. Tax the rich and big business. Give the ATO enough funding for it to do its job properly as the collector of tax rather than the handmaiden of business.

John is a former Assistant Commissioner of Taxation. readers might also like to look at my initial response when D’Ascenzo was axed, before his replacement was known called Tax Commissioner axed.