Tax office: crisis of mind and body

Some can make the leadership transition; many cannot and keep repeating the thinking of the past to address present and future challenges. Generals who do that, lose the war. To misquote Oscar Wilde, ''We are all in the gutter; no one in the ATO is looking at the stars.''

A related issue is what I call the detail fetish. Now this is no bad thing in areas administering complex law. But when it pervades an organisation to the exclusion of vision and strategic thinking (as it does in the ATO) then the organisation is in trouble, at least in the long term.

Apart from the Commissioner and a couple of senior leaders, there are few visionaries or strategic thinkers in the ATO. Those who do exist are often ground down by the minutiae, process or detail, or sidelined. Much of the present leadership has thinking more appropriate for the 1980s, the era most of them come out of. They can become obsessed with protecting the revenue and miss the bigger picture of creating a more productive and globally competitive tax system.

For example, some in the ATO see the international tax reforms of the past six years as the devil's spawn and talk about rescuing the system and saving the Government's revenue flows. But as someone who helped develop these reforms and prepare the ATO for their implementation I would merely make the point that the Australian economy is a very different creature now to what it was at the tail end of prime minister Malcolm Fraser's rule and the beginning of the Hawke ascendancy.

Australia is now closely integrated into the world economy. The tax system, especially the international tax system, had to change as a consequence. The ATO and its thinking about international tax is lagging far behind these developments and has to change.

On the theme of international tax, let me raise capability concerns in the ATO. For reasons I don't understand, and at a time of increasing integration of the Australian economy into the world economy, the ATO has halved the number of people in its international area.

If the logic was to transfer much of those functions to the hands-on compliance areas then the results are a failure. The level of international capability in the ATO is abysmal. The rest of the organisation has not risen to the challenge.

The morale in the international area is now very low. They have been forced to concentrate on “risk” assessment which in the ATO is more often gut feel than anything else. Given that few in other areas of the ATO can appropriately recognise complex international issues, the adequacy of the flow of information to enable adequate risk analysis must be in doubt.

Public information about Operation Wickenby for example suggests that it was not the result of clever risk analysis but a lucky accident.

An attempt to develop market specific questionnaires to replace the present pathetic international tax schedule (Schedule 25A) floundered through lack of senior support. An opportunity for better international information and analysis was lost.

How can the ATO seriously proclaim international tax as one of its key areas and then destroy international in the Office? I use international as an example because it is the area I am most familiar with but I believe this is not an isolated example.

Decision making is becoming more and more concentrated in the hands of very senior officers. Decisions that were some years ago made by EL 2s are now made by SES Band 2s. This lack of trust in staff has led to backlogs and delays as senior officers become bogged down with more and more work.

In addition, the decision making process in the ATO is very much top down, with little involvement from the majority of staff in decisions that have an impact on them. As a consequence they feel disempowered and are disillusioned.

Let me make one suggestion to the Commissioner to begin the process of addressing these issues. Trust your staff. Involve them in the decision making process. Democratise the ATO. A flow of ideas from the bottom up has the potential to empower and invigorate staff and produce much better results than the top down approach.

To quote a murdering Stalinist butcher who occasionally got things correct, at least verbally, “Commissioner, let a hundred flowers bloom; let a hundred schools of thought contend.” Do that, and the problems I have identified will become challenges with solutions. Commissioner, you'll be surprised by the creativity of your staff, all your staff. Give them the chance to design a new ATO.