Thursday, April 08, 2010

Tax office: We want a ton of documents now, but we won't read them for six months

The inspector-general of taxation has launched an inquiry into the behaviour of Tax Office auditors targeting high wealth individuals and businesses with turnovers between $100 million and $250 million.

Calling for submissions and promising strict confidentiality Inspector-General Ali Noroozi said he had heard allegations of auditors misusing the process in order to obtain an unfair advantage and demanding unreasonable amounts of information in very tight time frames.

"For example the people say they have been given 14 days or 30 days to respond to a request which has required them to trawl through boxes, they send the information to the Tax Office and don't hear back for six or twelve months," he told the Herald...

The Tax Office received an extra $559 million in recent budgets to beef up its program of high wealth and big business audits and has promised to review the accounts of every business with a turnover of between $100 million and $250 million over the next four years.

Mr Noroozi said there were concerns new auditors were unfamiliar with the on-the-ground workings of businesses and were relying on backup resources that were spread more thinly.

"We have had this raised with us by a range of tax advisors and businesses. I couldn't give you a number, but I have taken it off my reserve list and decided to investigate it because the concern is sufficiently widespread."

Tax Counsel at the Institute of Chartered Accountants Yasser El-Ansary said he had received reports of fishing expeditions that wasted the time of both the auditors and the taxpayers being audited.

"High wealth individuals and small and medium enterprises have accountants on call and given time can deal with the inquiries, but their time is often precious. They need targeted queries, not scattergun questions."

He said part of the problem might be that the Tax Office is unable to hire particularly good auditors.

"Can they pay them enough to entice them out of private sector jobs where they might be be getting paid more? That's a question I hope the inquiry will shed light on. There's very little cross-fertilisation, very little business understanding among compliance officers.

The inspector-general will have the power to examine Tax Office files and interview staff.

He wanted high wealth individuals to feel safe about forward.

"Under my legislation I am required to keep things confidential. Nothing has been leaked from this office in its six year history and there is no reason to think it ever will be. If people mark their submissions confidential I am required by law to keep them that way. Sending me material doesn't even waive legal professional privilege."

Mr El-Ansary said he thought it would "a challenge" to get high wealth individuals to "stick their hands up" and outline their experiences.

"At the Institute of Chartered Accountants we are going to manage this by convening a series of workshops to form the basis of our submission. We are prepared to be a conduit. We can obtain the information on a no-names basis and package it for the inspector general. I understand the concern."

In a further move against tax evasion Assistant Treasurer Nick Sherry yesterday announced a information-sharing treaty with tax authorities in Monaco adding to agreements signed last week with the Bahamas, Cayman Islands, Grenada, St Lucia and Dominica.

Published in today's SMH and Age

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