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Review into the ATO’s fraud control management – IGT report publicly released

The Inspector-General of Taxation (IGT), Mr Ali Noroozi, welcomes the public release of his report into the Australian Taxation Office’s (ATO) Fraud Control Management.

“The Parliament’s Senate Economics References Committee requested that I examine the ATO’s management of fraud risks,” said Mr Noroozi.

The Committee’s request arose due to concerns surrounding Operation Elbrus, including allegations of tax fraud that may be linked to abuse of position by a public official. The review examined the ATO’s management of fraud risks for detecting and addressing fraud and corruption.

Mr Noroozi said, “Generally, the ATO has sound systems for managing risks of internal fraud, however the review uncovered a number of areas requiring improvement.”

In the wake of Operation Elbrus, the ATO had conducted its own review and made significant improvements to some of its risk controls. This IGT review has sought to augment and complement those improvements. One of the key areas identified by the IGT was the appropriate management of conflicts of interest to minimise risks of corruption.

“One of my recommendations is aimed at the systematic capture of conflicts, including those that are not declared, appropriate action being taken in respect of identified conflicts and ensuring that former colleagues of current ATO officers do not obtain information or exert influence by reason of their previous association,” said Mr Noroozi.

Some of the other improvements sought by the IGT are transparent reporting of interventions by senior officers in particular cases, bolstering the independence of the ATO’s Audit and Risk Committee as well as a number of recommendations relating to medium to high risk roles.

“There should be periodic rotation of officers in senior management or higher risk roles and the induction of external senior recruits should be bolstered to focus on ethical standards and highest level of integrity that an organisation such as the ATO should exemplify,” he said.

Aspects of the ATO’s management of external fraud risks were also considered, complementing other initiatives aimed at addressing tax and financial crime. Certain case studies examined the ATO’s response to alleged fraud such as those in the precious metals industry where $2.5 billion of GST revenue was estimated to have been at risk. A recommendation was made in another recently released IGT review, GST Refunds, to allow effective investigation of fraud risks in appropriate cases whilst ensuring that bona fide GST refunds are issued promptly.

“In this review, I have made recommendations to facilitate earlier risk identification and real time action on perpetrators of fraud,” said Mr Noroozi.

The review has also considered ATO’s collaboration with other agencies to combat serious tax crime.

“I have recommended that the Government review current interagency collaboration including optimising models for sharing specialist capabilities and information as well as the management, structure and funding of interagency taskforces,” he said.

In terms of international collaboration, in recent years, there have been significant positive developments to combat cross-border tax avoidance and fraud. In particular, the extent of information and intelligence sharing amongst revenue agencies has been encouraging following the revelations contained in the Panama Papers and Paradise Papers.

“The next stage in the development of international collaboration should be for tax avoidance and fraud to be increasingly uncovered by revenue agencies rather than relying on whistleblowers and the media,” said Mr Noroozi.

In total, 13 recommendations were made to the ATO and one to Government. The ATO has agreed in full or in part to all 13 recommendations and has advised that some have already been implemented. The Government has agreed in principle with the recommendation made to it.

“I offer my thanks to all who have contributed to the review including taxpayers, tax practitioners, industry associations and professional bodies, academics as well as Government agencies and my staff. The review has ensured that the specific matters relating to Operation Elbrus, which are currently before the courts, are not prejudiced in any way,” said Mr Noroozi.

SYDNEY
22 October 2018
Media contact: (02) 8239 2111