Last week the Inspector-General of Taxation, David Vos, announced a major investigation into how the Australian Taxation Office conducts its GST audits

His investigation was launched after many disgruntled taxpayers and taxpayer groups complained to him that during GST audits tax officers are pursuing trivial claims, are levying penalties and interest in an inappropriate manner, do not understand the industry they are auditing or the GST rules applicable to that industry, are employing unfair tactics during audits (such as the withholding of the full amount of a GST refund where only part of the relevant amount is the subject of investigation by the Tax Office) and are taking too long to complete GST audits.

However the problems can be traced back much earlier when Michael Carmody was in charge of the factory and was under the pump from John Howard and Peter Costello to deliver on GST implementation. He ordered a streamlined selection process to ensure enough troops hit the ground running when GST commenced in 2000 by outsourcing the recruitment of staff to a major employment agency rather than using the normal public service protocol. “The order came from the top they wanted foot soldiers not independent thinkers or technical people”, said one former ATO audit manager who did not want to be named.

Much talent was jettisoned in the name of expediency, which has only just come back to haunt Michael D’Ascenzo.

I have said in previous commentary here that many of the auditors assigned to conduct GST audits are from the disbanded and discredited Special Audit group which was featured by Chris Masters in a Four Corners program in 2003.

The same boofheads are now causing the problems in GST, getting taxpayers offside by issuing incorrect assessments and later withdrawing them and using bullying tactics.

One tax office insider said to me, “GST Audit is a dumping ground for the mediocre mice of the audit group.” The leap from the educational phase of the GST implementation to enforcement is proving too much for the technical well of the ATO. But it was all their own making!