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Bailing out the Tax Office

Once again government has rescued the Australian Tax Office.

This financial year the ATO’s deficit was running at a projected $140 million.

Cutbacks totalling $60 million are to be paid for partly by staff losses, partly by low wage increases and partly by forcing middle managers to work longer hours.

Couple that with tied grants from Rudd Labor in the May Budget worth $80 million and the two have wiped out D’Ascenzo’s debt, at least in the short term.

Estimates are that over 300 tax jobs will go. This means those who remain will be forced to work harder and harder.

Certainly that is the case for middle managers whose access to accrued flextime is effectively set to go if the Commissioner gets his way.

Work/life balance in the ATO seems to mean more unpaid work, less life.

The wage increase the ATO has offered to its staff is below that offered to other agencies in recent times. In other words the ATO’s aim over time appears to be to move from the top end of the salary scale for public servants to the bottom end.

D’Ascenzo’s deficit came about because of the black hole called the change program and the Rudd Labor Government’s ‘efficiency’ dividend of 3.25 percent last year on top of twenty years of 1 percent or so cuts.

This 3.25 percent cut has, on top of all the other efficiency dividend cuts, severely shaken the ATO’s compliance and risk assessment ability.

But the ATO has convinced the Government to give it extra money for the change program and Project Wickenby (plus some other identified programs.) This is the ATO’s henny penny strategy.

Every year the ATO runs to government to tell them the sky is falling in and every year the government provides funds to save them.

As I have pointed out elsewhere on this site, more money for the Change program will just feed the beast. It should have been killed off years ago.

It has for example no relevance for the law areas of the ATO and various panicked ‘build arounds’ of a system essentially designed for the Washington DC revenue service and bought cheap off the shelf are only going to see more money go down the drain.

Wickenby after five years and hundreds of millions of dollars has so far only produced one major successful prosecution. Now the amount going to this second black hole is going to increase by almost fifty percent.

What conditions did Rudd Labor impose on the ATO? No doubt Treasurer Swann will claim that there  are strict conditions and they are stringent and transparent, but the Sir Humphries in the ATO have him completely under control.

So Treasurer, tell us what the ATO promised it would deliver in cold hard cash, improved ‘efficiency’ and Wickenby prosecutions.

Once we know what the leadership of the ATO promised we can debate whether it is fools’ gold.

There is another imperative for Government here. Treasury estimates that revenue collections over the next four years will fall by $210 bn, or somewhere over 3 per cent a year. 

That seems to indicate economic activity falling each year by the same amount over that time.

It is also interesting that to disguise the impact of the 3.25 percent ‘efficiency’ dividend the Government has given the ATO extra money. The extra amount just happens to be about 3.25 percent of ATO outlays.

Clearly the Government, through extra ATO funding, recognises that the ‘efficiency’ dividend is a failure. It just can’t say so.

It should fund the ATO properly and across the board, without strings attached as to what it should be spent on. But to do so would inspire other agencies to ask for exactly the same funding model.

Hence the Government’s sleight of hand – the efficiency dividend applies, but we will give you some disguised make up money to address specific issues.

The problem is not just ATO inadequacies in prioritising. It is the Rudd Government’s massive underfunding of the public service and social services.

Having more well trained ATO compliance staff is a necessity.

But no one in the ATO planned for the Great Recession -despite John’s Krondatiev waves discussion in early 2008 – and indeed they have been running down their compliance staff over a number of years. (It has ups and downs but the main trend is down.)

You can’t turn a recent graduate into an experienced auditor overnight, especially when many of their prospective mentors have left or are leaving in disgust at the lack of support they receive from senior management.

This is clear from International.

Other countries are increasing their expenditure on international officers. The ATO has destroyed its international section – cut by almost 50 percent in staff over the last few years – and it now parades the area around under the pathetic rubric of international risk assessment.

Make no mistake – there is little international risk assessment that is other than guesswork or the tried and true (and politically popular but perhaps essentially futile) tax haven work or the easy money in the transfer pricing program.

Of course the big four accountancy firms love transfer pricing work because it produces huge fees. And the ATO despite this area being a cash cow, has gone slow on it in recent years.

There is an environment of myopic monoculturism in the ATO when it comes to international matters.

The piece de resistance is the international schedule – schedule 25A. This schedule, aimed at eliciting international information from taxpayers, belongs in the dark ages.

Yet attempts to modernise it, attempts supported by a broad cross section of tax office areas with international dealings, fell into the abyss that passes for compliance leadership in the ATO.

But maybe that leadership is finally learning that a new international schedule might be a good idea. Years too late, but that’s what vision and far sightedness are about.

It’s a pity the Government doesn’t more closely scrutinise the leadership of the ATO and demand real results instead of cheering from the sidelines as its leaderships attacks its staff.

There is some hope. The union, the CPSU, looks like it is stirring against the current ATO position on an new agency agreement.

Objectively the workers in the ATO could effectively destroy Government revenue raising.

Subjectively 26 years of union class collaboration and quietude have destroyed any concept of industrial action as a weapon in the struggle for better wages and conditions.

Stopping revenue collection is a powerful tool that could win thousands more tax staff and large real wage increases.

Already the CPSU stirrings have had some success. The ATO’s stalking horse for staff attacks – the Operations restructuring – appears dead. 

Instead of the massive shift to part time and outsourced work that the plan proposed, the ATO will adopt a softly softly approach to restructuring, and now proclaims that its Operations attacks were never ATO policy.

In other words they flew the kite and the reaction forced them to back down.

Imagine what a real industrial campaign could win for staff from  ATO management and the Government.

It’s time for the Tax Office union members to stop the flow of money to the Government to win more staff and more pay and improve tax administration in Australia.

Next year will be too late.  The 2010 Budget (probably after a late 2009 election) will be a shocker, attempting to address estimated unemployment of 1 million and debt of hundreds of billions through savage attacks on social services and the public service. 

Strike now.



Comment from Mike
Time May 31, 2009 at 6:19 pm


Most of the $60m savings have been achieved by staff not travelling interstate or overseas – an unsustainable strategy in the mid to long term.

As usual, the middle order have to pay for poor management decisions.

Perhaps we could borrow Alan Joyce from QANTAS for six months to ‘cut’ the fat out of the SES and the mediocity our of the EL2s.

We all know the where the real power lies – the worker bees at the bottom who do all the real work.

Comment from Leonie
Time May 31, 2009 at 10:33 pm

Thanks Mike. Good point. But there is only so much you can save from not flying anywhere, as you say. That has to be only a temporary solution. the proposed agency agreement is a way of cementing cost saving into the future at the expense of the worker bees. I see the ASU (the tax office section) has agreed to the main agency agreement being put to a vote. This part of the ASU is an offshoot of the Federated Clerks Union (Tax Office Branch) and came into the Commonwealth jurisdiction when income tax became a Commonwealth preserve during the second world war. They were a grouper union and are now a bosses union, more so than even the CPSU. In a split in the 80s most joined the CPSU (or its predecessor) but a small conservative rump remained in the FCU.

Pingback from En Passant » 9,000 Tax Office jobs to go?
Time June 13, 2009 at 9:07 pm

[…] As John has pointed out to me, the logic of this article remains correct, but the Government in its May Budget has rescued the ATO with even more money to pour into its black hole Change Program and the Wickenby fiasco. For more detail see my article on this site called Bailing out the ATO. […]

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