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ATO Executive ‘Not Guilty’– Credible evidence that ATO audits are ‘wrong’

Tuesday, February 19, 2019

Last week top ex-ATO official Michael Cranston was found not guilty of misusing his position to benefit his son who is on separate charges of alleged tax fraud.

In his defence Mr Cranston said that the actions he took in relation to his son were no more than what he had done for other taxpayers on hundreds of occasions. That is, that tax audits were often so bad that he had to intervene to stop injustice against taxpayers.

Mr Cranston’s evidence confirms what we have been saying for years—namely, that the ATO audit process, outcomes and appeals are systemically bad and flawed. Mr Cranston had to fix bad audits for high-wealth individuals. But our experience and other evidence (see Four Corners) strongly suggest that wrong audits are imposed on small business people and that the ATO has no internal ‘white knight’ to fix bad audits suffered by small business people.

In his evidence Mr Cranston stated that tax audits frequently treated taxpayers badly and that there was a cultural problem inside the ATO. Media quotes are as follows
  • “I was always looking out when my auditors went a bit too far which happened often.” (The Australian, 5 Feb 2019)
  • Mr Cranston said he was concerned about the correct application of tax law, and was “always looking out” for examples of when tax office employees were “too aggressive.” (SMH, 4 Feb 2019)
  • Cranston said he was concerned about “the culture (ATO) side of it” and wanted to know what area was treating taxpayers “like this.” (Goulburn Post, 4 Feb 2019)
  • Mr Cranston had referred to him “hundreds of times” where he feared the tax office had been too aggressive… (AFR, 8 Feb 2019)
  • Bruce Collins, who ran the ATO’s Technical and Case Leadership team handling complex tax matters until he retired in April 2017 told the court: “Michael’s job was to make sure that the wheels didn’t come off and embarrass the tax office” (The Australian, 18 Feb 2019)
Mr Cranston's evidence is effectively that of a highly credible quasi-whistleblower who operated at the very top levels of the ATO and knew the truth about the bad audits inside the ATO.

This exposes as misleading the denials by the ATO of the existence of a problem—even denials under Senate questioning. Evidence from Mr Cranston’s trial is that the ATO’s concern is to avoid adverse publicity for the ATO. Where, we ask, is the ATO’s concern for truth and the correct application of tax law and treatment of ordinary taxpayers?

The government is moving to implement quickly a fix for the ATO’s mistreatment of small business. But this week we note that the draft design of the Small Business Tax Tribunal put forward by the Canberra bureaucracy will neuter its effectiveness and enable the ATO to continue its bad ways. (The Australian, 18 Feb 2019.) We will say more on this shortly.



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