Big bad brother

Thirty years ago, when I managed the local credit union I received regular requests ( if memory serves it was called a S263 query) from the Australian Taxation Office to search through financial records in an attempt to find those taxpayers who had not declared significant interest income.

Through the use of what’s called ‘data matching’ the ATO can now analyse the data sent to it after interest payments have been credited to your account and determine if you have received income not declared on your income tax return.

In pre-GST days the small businessman was not subjected to the same scrutiny as his salary-earning cousins. He could, without fear of retribution from the tax collectors, not bank some of the cash he collected. And, so long as he paid cash for his supplies, nobody was the wiser. Then GST was introduced. It would broaden the tax base we were told. The states would get the revenue; the rate couldn’t be easily altered, all in all, a good thing for the country. A new method was developed for the collection of data to calculate how much GST to pay; it was called the Business Activity Statement.

Remember 4000 new officers being employed to help small business complete their BAS ? Those ATO officers are now called ‘compliance’ officers and are subtly investigating whether or not Sams Sandwhich Shop is declaring all the income received.

Now an ATO officer will turn up unannounced and quiz Sam about how much bread he bought. “I notice you claimed $5,000 GST you spent on buying bread from Darwin Bakery” the official says to Sam. “That’s right” say Sam ‘we bought $50,000 worth of bread”. “Then how do you explain your income tax return reports you sold only $40,000 worth of sandwiches” the officer enquires.

Not satified with developing a template for every small business in Australia the ATO has now turned it’s attention to creating an individual profile of every taxpayer.

The Australian Taxation Office is spending $4.7 million to upgrade its database and give tax collectors new tools to analyze taxpayers. The aim is to create an individual profile of each taxpayer, showing demographic information as well as his/her tax compliance history.

Information gathered will include taxpayer salaries, amounts owing to the ATO, tax payment history and tax returns. Personal details like age, gender and marital status may also be included.

The ATO said when contacting individuals for payment in future, it would base its approach on compliance behaviour and demographic attributes gathered from the database.

All the more reason to have nothing to do with the GST/Tax system I say. From now on I think I’ll gradually become a sixty year old drop out, with no assets, no income and no respect for the ATO.

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attila
2022 years ago

Sorry, but I can’t really agree with this post, and fail to see why the Bunyip has linked to it.

“In pre-GST days the small businessman was not subjected to the same scrutiny as his salary-earning cousins. He could, without fear of retribution from the tax collectors, not bank some of the cash he collected. And, so long as he paid cash for his supplies, nobody was the wiser.”

Forgive me if i have misunderstood, but the tone of your post seems to think this was a good thing. Why should small businesspeople have this ability over their salary-earning cousins? It was various tax lurks like this that have led to a crushing tax burden being placed on the middle income PAYG tax payer, as they were the easiest to chase.

I hope the Sam shopkeepers of the world are kept on the straight and narrow by the ATO. I hope they investigate any family trust arrangements he has set up to funnel income through his three kids as well….

Toryhere
Toryhere
2022 years ago

Speaking as a top tax lawyer, I would say that you only need to send Sam to me, I would ensure that he pays no more than the propoer amount of tax.

GST is a brilliant tax. It is simple, it is hard to avoid and it has fewer loop holes than its predecessor, sales tax, which was nightmare of complexity. Sales Tax was only paid by manufacturers and wholesalers, so a lot of people didn’t realise what an administrative burden it was. At least with GST the administrative burden is shared acroos the whole business community. Now, if we could only get rid of incme tax and stamp duty….

Razor
Razor
2022 years ago

As Financial Advisor and RWDB I fully agree with Toryhere. Can’t see what the problem is. GST and the BAS system has spread the tax base and allowed significant reductions in income tax. What we need now is to extend the GST to all goods and services, with further reductions in tax rates and increases in the thresholds.

While it pains me to see the cash leaving my account on a quarterly basis, I take heart in the fact that it costs $500 – $1,000 per round for a tank shell and an F-18 costs more than $15,000 per air hour. Money well spent.

Shaun Bourke
Shaun Bourke
2022 years ago

The Government Standard Thieft was orignally bally-hooed as a means to reduce, then remove, income tax. Although it has significantly increased the monies collected by the Commonwealth its unforeseen consequence has been to rapidly increase the underground economy.

At the end of the day the socalled costs and burdens on business mean little as ultimatly these are as usual paid for by the consumer of the products and services sold by a business making the GST nothing more and nothing less than a Commonwealth sales tax just like the VAT in Britian. Sadly most of these monies end up feeding the leeches feeding from the government trough.

goetz von berlichingen
goetz von berlichingen
2022 years ago

From now on I think I’ll gradually become a sixty year old drop out, with no assets, no income and no respect for the ATO.

And at 65 you’ll apply for the Age Pension, Pensioner Concession Card and so on.
All paid for by taxes funnelled through the ATO.

Ken Parish
Ken Parish
2022 years ago

Wayne’s closing words have distracted attention from a point that I think is an important one. The emergence of a practice where the ATO builds profiles of all individual taxpayers is a truly frightening one. It really IS Big Brother made manifest. The GST data has facilitated it, but isn’t the cause per se. I agree with commenters who argue that the GST as a tax is reasonable, and a signifcant improvement on sales tax and the previous tax regime in general. But it doesn’t oblige the Tax Office to invade our privacy and build individual profiles of every one of us. That’s a choice made by Carmody and Costello that must be challenged by anyone who values freedom. Collection of detailed information will always be a temptation to those who would abuse power, but abuse isn’t inevitable. We can and should object to the erosion of liberty.

It doesn’t mean we condone people who divest assets and claim the old age pension when they shouldn’t, nor that small businesspeople should have an inalienable liberty to defraud the taxman at the expense of the rest of us. But these abuses can be kept within tolerable limits without building individual profiles on every Australian. Pointing to one while shrugging one’s shoulders about the other is missing the point and throwing the baby out with the bathwater. Probably the day is already here when governments could maintain complete surveillance, 1984 style, on every citizen if so minded. But that doesn’t mean it’s a good idea, or that we should let them do so while we can still object. Being a “Tory” surely doesn’t mean being a dickhead with no regard for individual liberty. Now that’s ad hominem. And he deserves it.

TrueRWDB
TrueRWDB
2022 years ago

“We can and should object to the erosion of liberty.”

The only liberty being eroded here is the liberty to cheat the system.

“Information gathered will include taxpayer salaries, amounts owing to the ATO, tax payment history and tax returns. Personal details like age, gender and marital status may also be included.”

The ATO has long held all this information internally in various forms. Most of it is available in our tax returns, tax assessments and other correspondence with the ATO. All that’s being proposed it seems is the more efficient organisation of it in a database. I’m astonished the ATO has admitted it hasn’t had all this information in a well-organised data-base for the last two decades. If that’s where they’re at only now then no wonder tax evasion is rife.

I’m surprised at your attitude, Ken. Have you never filled out your own tax return? They reveal more about each one of us than Catholics tell the priest in the confessional.

woodsy
woodsy
2022 years ago

Thank you Ken, I’m sure I couldn’t have said it better myself. I really don’t care whether people think that I’m trying to defend the tax cheats, they miss the point. As one who has benefited massively from the medicare system I make sure that my wife and I pay our fair share when I do our income tax, and, no, neither of us will collect the age pension because we don’t like the idea of being beholden to some faceless bureaucrat for our income. Further, I can’t understand the obsession with collecting an age pension. Don’t those who moan about ‘getting something back from all the tax they paid’ realise that all their taxes were spent during their working lives, maintaining the armed forces, building roads and educating their children. Indeed, I would suggest that they didn’t pay enough tax to support deteriorating infrastructure and degrading environment.

The point is that the ATO, and perhaps their political masters should be using different methods of convincing taxpayers to pay the correct amount of tax. Imagine the effort and intellect applied to, at best minimising tax and at worst, performing the financial tricks promulgated by the ‘top tax lawyers’ to actively avoid paying tax. I think the general opinion expressed of late is that most people (there will always be the few who bludge, using taxpayer funded services without contributing their fair share) are happy to pay a reasonable amount of tax IF (and it’s a bloody big IF) they can see they’re getting value for the money extracted from their pockets.

IMO we’re not getting good value for our taxes. When the present Government got in it reduced the public service by about 120,000 but by now it’s spending a billion dollars a year more than when it was elected. On what ? They’ve outsourced most of Centrelink’s function. The military has a huge unknown unfunded leave (and probably superannuation) liability; their excuse is they’re too busy fighting wars, and that’s without the billions the government hands out to it’s business mates, dairy farmers and sugar millionaires. I’m sure that even the RWDB commenters could see that our taxes are not being spent efficiently.

Why do nurses constantly fight over getting fair pay? What’s happened to the teaching profession – I suspect pay and conditions along with respect in the community have meant it’s a second class job (I hesitate to use the word profession). Many of these problems could be fixed if our politicians focussed on funding the important things, health, education, the environment to the detriment of pork barrelling.

It isn’t just that “Information gathered will include taxpayer salaries, amounts owing to the ATO, tax payment history and tax returns. Personal details like age, gender and marital status may also be included.” The original article in the AFR went on to say “Based on the attributes from their…behavior…, and also the demographics, you should be able to predict which kind of approach to them would be the best reponse..”; this goes a little beyond just collecting data. Databases like the one contemplated in this article form the foundation for analytical models used to predict everything from consumer behaviour to voting intentions. No one can convince me that the ATO should be constructing mind-fucking systems like that!

TrueRWDB
TrueRWDB
2022 years ago

Oh, come on Wayne – the proposed database is nothing more than doing more efficiently what the ATO has, and is supposed to have, done with the very limited data we have provided on our tax returns for almost ever.

I agree with you about the misuse of tax money. If you think Latham and Co will do a better job, then vote for him like the rest of the inhabitants of fairyland will do in November. They will be at best just as bad, more likely worse, just on different things. The plea that it’s OK to evade tax because of misguided government spending is just anarchy. The key to straightening out governments in this regard is political action, not self-interested rationales like you propose.

Adam
Adam
2022 years ago

So you don’t like paying taxes?

Get over it.

And you can cut out your mock outrage in pretending to care about civil liberties, it’s not fooling anyone.