ATO defends fraud systems after Cranston scandal

AFR 120403 photo by Louise Kennerley Ali Noroozi inspector-general of taxation speaking at the Atax conference held at the Tattersalls club story by Katie Walsh SMH News story by Rachel Olding. Story: First court appearance for ATO tax fraud people – Michael Cranston, Lauren Cranston and Daniel Hausman, Downing Centre Court, Sydney. Photo shows, Michael Cranston leaves court. Photo by, Peter Rae Tuesday 13 June, 2017

The n Taxation Office’s systems to detect and prevent fraud are working, says Second Commissioner Andrew Mills, but there’s always room for improvement.

The Inspector-General of Taxation Ali Noroozi is conducting a wide-ranging review of the agency following news of former ATO Commissioner Michael Cranston’s alleged abuse of his position.

Mr Cranston was forced to resign amid allegations he accessed restricted information on an ATO audit for his son, Adam Cranston, who was a subject of the tax fraud investigation, named Operation Elbrus. Police do not believe Michael Cranston knew about his son’s alleged fraud syndicate.

Mr Mills said despite the AFP and ATO working closely together on the Operation Elbrus case and evidence that the ATO’s systems worked, it had still hurt the ATO’s reputation.


“I think most organisations have to manage the reputation aspect when this kind of thing happens,” Mr Mills told the Governance, Risk and Compliance Institute national conference in Melbourne on Thursday.

“On the one hand we had an extraordinarily successful joint operation with the AFP and we had extraordinarily successful internal controls that prevented [ATO] officers from accessing information that they weren’t supposed to.

“But from a media point view it was a great story because we had someone in the ATO who was very senior … [and] that called into question our integrity. We take integrity seriously. It’s part of our values.”


He said Mr Noroozi’s review may highlight some areas that need improvement.

“I have no doubt that like with any system there are always tweaks that can be made to improve and to make the system operate even better, but that doesn’t mean that it hasn’t been robust until now,” he said.


Mr Mills also spoke about the ATO’s engagement with big business. He said the relationship with business had dramatically improved in recent years.

“Most of us would agree or at least hope that the adversarial days of ‘us and them’ with the Tax Office are behind us,” he said. “We certainly want to have a cooperative relationship.

“We understand that in the OECD and elsewhere that a good relationship helps foster willing compliance, and wiling compliance is the cheapest form of collecting revenue.”

One of the suggestions after the Canberra tax forum in 2011 was an independent advisory board that would help corporate and the ATO end their adversarial relationship and “speak the same language”.

During the 2011 forum, business leaders including former Pacific Brands chairman, James MacKenzie, spoke of the “rancid” relationship between business and the Tax Office, saying the inability to get clear rulings and “interpretation inconsistencies” were a drag on business and the wider economy.

Now there was good engagement with corporates, but the ATO would still take a tough stance when needed, Mr Mills said.

‘s top 1000 companies “reportable tax positions” were being monitored. False claims or failure to lodge on time and the company could be handed fines of more than $500,000.

Audits were used where needed. And there had been greater tax transparency with almost 120 entities now signed up to the federal government’s voluntary tax code, and two-thirds of them already having produced reports.

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