ATO warns businesses big and small to fess up on tax problems

While the Australian Taxation Office has this morning warned big businesses to approach the agency before private tax problems spin out of control, experts say the commissioner is speaking squarely to small and medium-sized enterprises as well.

The comments come as the ATO continues to crack down on SMEs after a few years of leniency during the global financial crisis. Wind-up orders are on the rise and businesses are reporting the ATO is setting stricter deadlines.

“The commissioner is giving the exact same message, the only difference is the sums of money involved,” Institute of Chartered Accountants tax counsel Yasser El-Ansary told SmartCompany this morning.

Commissioner Michael D’Ascenzo told the Australian Financial Review this morning the ATO is keen to be approached by large businesses about outstanding tax problems.

“I think it’s increasingly the case that boards and CEOs ask themselves ‘is it better for me to lock in the certainty I want in relation to my tax, super, excise, GST, or is it worth the reputational risks, the revenue risk, the litigation costs and also the opportunity costs of having a fight over things after the event?’,” D’Ascenzo said.

He also criticised the lack of information given by in-house tax advisors to chief executives in large companies. But El-Ansary, who previously served as an in-house advisor, rebutted this.

“I think companies maintain a close eye on their tax obligations, and I think the ATO perhaps has seen examples where that may not be the case and that has influenced their view.”

El-Ansary says small businesses should pay attention to these comments, as they are squarely directed at SMEs as well.

“This is exactly the same message. You’re always better off working proactively rather than just sitting on your hands and hoping the ATO won’t notice.”

“The ATO always wants to develop these relationships, and wants groups to deal directly with the ATO at all times.”

However, it’s easier said than done. The ATO is continually cracking down on SMEs after a few years of leniency and even El-Ansary says this is still the case.

“This is consistent with what I hear from small businesses, and I think you will find the ATO’s approach has involved being aggressive and assertive, moving away from that more lenient approach, and that applies across both SMEs and larger businesses.”

“If you were to talk to large businesses, they would have seen a change as well. It all applies to all sizes of business.”

D’Ascenzo also said this morning anti-tax avoidance laws must be strengthened in order to obtain more lost funds.

“We’re still looking for a bit more guidance on that from the courts before we make a conclusion one way or the other, whether or not it has a flaw or whether it’s still possible to be operated sensibly,” he said, referring to possible changes to anti-avoidance provisions.

The problem is that the ATO is losing more court cases, and as a result, is losing more money. With a strained budget, the Government is keen to find all the money it can.

D’Ascenzo said yesterday the ATO had signed a new agreement with OECD countries that will allow it to more easily track offshore debtors by asking allied countries to find tax avoiders.