TAX NEWS - June 2010

Australia Tax: Email sparks fears about tax inquiry

The independent senator Nick Xenophon says that Tax Office staff could be intimidated into withholding information about a bungled $800 million computer upgrade blamed for delays and errors with tax returns.

With the Australian Taxation Office insisting its system is in order heading into tax time, Senator Xenophon told the Senate that a message to staff from the Tax Commissioner, Michael D'Ascenzo, could stop them providing details to an independent inquiry into the upgrade.

"As a tax officer you should be aware that privacy and secrecy laws still apply to any submissions you may choose to make," Mr D'Ascenzo's email said.

"Given this, I would like to remind you to be careful in providing confidential information and that the law does not allow you to disclose identifiable taxpayer information unless directly requested to do so by the inspector-general's office."

Senator Xenophon, who told the Herald he had been contacted by concerned ATO staff, said he was worried the letter did "not give the full story". "There is a concern that tax officers may be fettered by the commissioner's email to his employees."

The inquiry by the inspector-general of taxation was initiated by the Assistant Treasurer, Nick Sherry, after a series of delays and errors in tax return payments and lodgements.

The problems with the system were blamed on a computer upgrade that began in 2004. Its cost was estimated at $445 million but it has since climbed to more than $800 million.

Senator Xenophon said he was concerned about the emphasis of the letter, which did not make clear that tax officers could provide any information they wanted to the inquiry, because it would be treated confidentially by the inspector-general.

The inspector-general, Ali Noroozi, said Mr D'Ascenzo's email was technically correct.

"To the extent that tax officers are still concerned, if I actually request information from tax officers under my legislation they are fully protected.

"Any tax officer who comes to us off their own bat, we can guarantee confidentiality. And where we request information from tax officers, they are fully protected."

The ATO says that its computer programs should not cause undue delays when taxpayers start filing returns in the new financial year.

"We're in a very sound position," the assistant deputy commissioner Megan Yong said.

"We've implemented our new processing system and since April 1 we've been able to process all newly lodged tax returns in the new system in accordance with all our service standards. "We've already processed 3.5 million returns through our new system."

Senator Sherry said he had spoken to Mr D'Ascenzo, who had assured him there would be no prejudice against officials that spoke to the inquiry.