The Robert Gerard tax saga has raised questions about the
administration of the Tax Office. Taxpayers lodge their tax returns in the
knowledge that they will be treated fairly by the ATO.
But is the tax playing field an even one?

The Public Accounts Committee inquiry,
set to take place in the new year, is not only an opportunity to
examine the details of the Gerard case, it’s a chance to put the
fairness, equity and transparency of our tax system under the
microscope.

The Fin Review reports this morning that the investigation will
look into whether the ATO is “correctly applying its policies on
prosecuting
individuals and businesses, and the tactics it uses when deciding to
settle major disputes ATO settlements.”

One person
who’s in a unique position to assist the public and Parliament’s understanding
of the issues is Peter Haggstrom, who served as the Howard government appointed
taxation ombudsman from 1995-1998.

“The big problem with giving a balanced view of tax
administration to the parliament and the public is the secrecy provisions of
the tax act,” says Haggstrom.

“One area I particularly wanted to look at closely was settlements and we
got a complaint that actually demonstrated the flaws of the system. To say that
the ATO was unenthusiastic about having its
settlement processes picked over is an understatement. It had external Senior
Counsel riding ‘shotgun’ on the investigation,” says Haggstrom.

Haggstrom tried to make the settlement process more accountable but
it fell on deaf ears. “My suggestion that videotaping of
settlements be mandatory (at least for amounts over a certain level) was not
greeted warmly by the ATO or the tax
industry. “

And in a swipe at the Howard government he declares: “Fundamentally I don’t
think our politicians really want to know what goes on – it is a bit like not
wanting to know what the chef did to the liver in the kitchen before it was
served up to you.”

It is, of course, impossible for the ATO to
check everyone’s return to see whether they have been honest. The ATO
Corporate Plan relies on what they call voluntary compliance with the tax laws
where they hope the vast majority of taxpayers, big and small, will be honest
and file correct tax returns.

Voluntary compliance is one of the pillars that
support our tax system. It has the potential to fall down like a pack of cards
if one or more segments of the market believe another is being treated
differently or favourably.

Anyone who had anything to do with the Gerard case inside the
ATO will have a very nervous Christmas as they know they’ll have to
face the full brunt of Federal Parliament’s Public Accounts Committee
in the new year. They’ll have to explain to Australian taxpayers at the
Committee’s inquest how they “settled” a serious case of tax evasion
without penalties or prosecution.

I’ve been in contact with
Joel Fitzgibbon, the Labour member for Hunter, who’s enthusiastic for me to be involved further with the Public Accounts
committee (PAC) investigations into the ATO.
I’ll be presenting a submission on behalf of Australian taxpayers
asking them to include a number of things in their terms of reference. I’m happy to take input from Crikey
readers. They can email me at
[email protected]

Read more about the ATO’s settlement process on the website.