1.1 The Inspector-General of Taxation (IGT) has conducted this review into the Australian Taxation Office’s (ATO) verification of Goods and Services Tax (GST) refunds in response to stakeholders’ concerns1 which were raised through the complaints handling service and again during consultation on the 2017 work program.
1.2 Terms of reference for the review were announced on 5 April 2017, a copy of which appears in Appendix 1. The report itself is produced pursuant to paragraph 7(1)(f) of the Inspector-General of Taxation Act 2003 (IGT Act 2003).
1.3 The IGT received a range of submissions and also engaged with a number of stakeholders including taxpayers, tax practitioners and their representative bodies as well as senior staff in other government departments to gain a better understanding of the issues and areas requiring improvement. The concerns raised may be broken down into the three broad themes:
- the accuracy of the ATO’s risk assessment tools to detect incorrect or potentially fraudulent GST refunds;
- the adequacy of the ATO’s engagement with taxpayers and their representatives during the GST refund verification process; and
- the adverse impacts that delayed GST refunds may have on taxpayers.
1.4 In addition, the IGT has been approached by a number of businesses operating within the precious metals industry (as well as their representatives) through the complaint handling service. In the main, their concerns relate to the intensity of the ATO’s actions within the industry, the significant delays in issuing refunds and the corresponding financial and personal impacts on affected taxpayers.
1.5 It should be noted at the outset that this report is not intended to be broad examination of the ATO’s administration of the GST, rather, it examines discrete aspects of the GST refund verification process. Other risks within the GST system, such as Input Tax Credit (ITC) inflation and more serious fraud activity may be considered in other IGT reviews, such as the Review into the ATO’s Fraud Control Management (AFCM).2
1.6 The IGT review team has worked progressively with the ATO to distil potential areas for examination and to agree on specific improvements. This work has involved discussions with ATO officers in the Indirect Tax (ITX) business line, being the overall area responsible for GST refunds, as well as ATO senior management. As part of the IGT’s independent assurance process, case records on the ATO’s case management system, Siebel, and performance statistics have been examined and analysed to better understand taxpayer concerns.
1.7 The Commissioner of Taxation (Commissioner) was provided with an opportunity to make submissions on any implied or actual criticisms in this report.3
Structure of the report
1.8 As mentioned earlier, this report examines discrete aspects of the GST refund verification process and is divided into the following chapters:
- Chapter 2 provides a brief history and overview of the GST system with a focus on GST refunds;
- Chapter 3 evaluates the effectiveness of the ATO’s case selection process for retaining refunds for verification purposes;
- Chapter 4 explores the ATO’s processing of cases identified for pre-issue verification and considers how the ATO engages with taxpayers throughout this process;
- Chapter 5 examines the impact that the ATO’s verification activities may have on affected taxpayers and the options available to mitigate these impacts; and
- Chapter 6 considers the specific experience of the precious metals industry, in an administrative context, which has more recently been subjected to GST refund verification.
1 - This review was commenced pursuant to paragraph 7(1)(d) of the Inspector-General of Taxation Act 2003.
3 - In accordance with sub-section 8(5) of the Ombudsman Act 1976 which has effect by virtue of section 15 of the Inspector-General of Taxation Act 2003.