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US Congress and Trump agree. Discipline the IRS to prevent taxpayer abuse. Message for Australia

Friday, July 12, 2019

1 July 2019 proved an historic day for US taxpayers when President Trump signed into law the Taxpayers First Act.

The Act is intended to bring discipline to the US tax agency (IRS) after years of strong evidence of both its administrative incompetence and systemic abuse of taxpayers, particularly small business people.

The Bill passed Congress with support from all political parties.

There’s a massive lesson here for Australia. If we’re to be internationally competitive, we must bring justice and the rule of law to the way the Australian Taxation Office administers tax.

In Australia, particularly over the last 18 months, the evidence of ATO abuse of small business people has mounted and is overwhelming. See, particularly, the Four Corners program, ‘Mongrel Bunch of Bastards’.

The US Taxpayers First Act has specific provisions to protect small business owners from IRS seizures of their bank accounts. There is major evidence that the IRS has been wildly abusing its powers to seize bank accounts in cases where there was no evidence of small business taxpayers avoiding tax. The stories here strongly resemble those we see with the ATO garnisheeing bank accounts in Australia. Read the Small Business Ombudsman’s report on the ATO’s garnishee abuse.

Of the twelve-or-so measures in the US Taxpayers First Act, the following six are highly relevant to the sort of things we should be doing in Australia to reform the ATO.
  1. Greater Access to Independent Review: Guarantees taxpayer access to an independent appeal on an audit decision. Before an appeal the IRS must hand over to the taxpayer the taxpayer’s case file.
  2. Limited Seizure of Property: Property seizure limited to illegal cash transactions or concealing criminal activity. Post seizure and hearing requirements to protect taxpayers. (***Highly relevant to the ATO garnishee issue)
  3. Listening to the Taxpayer Advocate. The USA has an independent Taxpayer Advocate (NTA), a bit like the Australian Inspector-General of Taxation (IGT). The US law would grant the NTA significant new powers to give the IRS enforceable directives on taxpayer cases.
  4. Improved customer service: IRS required to adopt best practices of private sector customer-service providers.
  5. Easier Settlement Procedures: No fees by IRS if a settlement deal is done with the taxpayer.
  6. Earlier Notice of third-party questioning: The IRS must notify a taxpayer before it makes enquires of third parties about your tax (for example, a customer).
In 2018 we put together a position and discussion paper for a package of reforms of the ATO. Nothing in our reform package involves reducing the ATO’s powers to collect tax. It’s about ensuring checks and balances and the proper application of the rule of law to the ATO’s powers and behaviour. Since the federal election outcome we have started our advocacy campaign to make progress with ATO reform. We will release more on this over the coming weeks/months.

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