The Inspector-General of Taxation (IGT), Mr Ali Noroozi, today released the report of his review into Debt Collection by the Australian Taxation Office (ATO).

"I am pleased to release my report into the ATO's Debt Collection strategies and activities," Mr Noroozi said. "The review was prompted by concerns with the consistent escalation of tax debt and unfair recovery actions taken by the ATO".

Collectable tax debt has grown over the decade to $20 billion in 2013–14. The ATO has acknowledged that its previous debt collection approach had been 'random and ad hoc' and linear in process. It is developing new processes which aim to use behavioural analysis to determine the 'right action at the right time' based on the circumstances of taxpayers.

"I am pleased that the ATO has acknowledged challenges with its past debt collection strategies and is changing its approach to one based on behavioural analysis — an approach which I have advocated in previous reviews," said Mr Noroozi. "In the meantime, I have also recommended interim measures to improve preventative strategies and minimise the need to take firmer actions later," he said.

Structural changes have also been proposed to the way debt collection is handled within the ATO. Debt officers make debt recovery decisions. However, knowledge of the facts and the law is held by audit and legal officers. Debt officers may take action, such as garnishing accounts, without all of that knowledge while cases are in dispute.

Mr Ali Noroozi said, "I have recommended that the ATO consider merging its debt and audit areas as well as working closer with their legal officers in order to improve coordination and the taxpayer experience."

Whilst the ATO has disagreed with the above recommendations, it will consider the appropriate organisational structure through its reinvention program.

Other areas reviewed included the ATO's decision-making and training framework for debt officers. Junior officers have been authorised to make important decisions, without senior officer approval, such as garnishing taxpayer bank accounts up to $50,000.

"I have recommended a range of improvements to decision-making processes and staff capability, including requiring team leader approvals in more instances, training to increase commercial awareness and better assurance of staff adherence to policies," Mr Ali Noroozi said.

A range of stakeholders expressed strong opposition to the ATO's use of external debt collection agencies to recover tax debts, amongst other concerns.

"I have recommended that the ATO make public its reasons for using external debt collection agencies and transparently share the intended benefits and outcomes to assuage concerns," said Mr Noroozi.

The IGT has been responsible for investigating individual taxpayer complaints from 1 May this year. Whilst this review considered significant debt concerns, individual complaints may surface additional concerns with respect to which the IGT may conduct further targeted reviews.

"Given its importance to the tax system, I will maintain a watching brief over the ATO's new debt management approach particularly through my new role of handling taxpayer complaints," Mr Noroozi said.

14 July 2015
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