ATO Attacks Freedom Of Information Act

by Mary Swire, Tax-news.com, Hong Kong

12 June 2001

There was outrage in Australia last week when it was revealed that the Australian Taxation Office (ATO) is trying to persuade investors in mass marketed 'tax effective' schemes to forfeit their rights under the Freedom of Information Act in return for the settlement of long running tax disputes.

The schemes typically involve 'round robin' financing arrangements, whereby the funds do not flow through to the actual project, thus inflating the investor's tax deduction. However, the Australian tax commissioner has branded the schemes tax avoidance vehicles, and the government is strenuously pursuing the billions of dollars that it claims is lost in tax refunds each year, leaving many investors with an elevated tax bill, instead of the promised tax benefits. As part of the clampdown on such schemes, the ATO has promised reduced penalties for those investors who agree a settlement with the ATO (although the tax bill would still be payable with interest), but it has come to light that as a precondition for settlement, tax officers have been asking investors to surrender their rights to see ATO documents dealing with their involvement in the scheme.

Investor representitives and freedom of information experts are highly suspicious of the ATO's motives, and believe that the provision would be unlikely to stand up in court if put to the test. As Peter Bayne, an associate law professor at the Australian National University, and a leading authority on freedom of information puts it: 'FoI confers rights on members of the Australian public, and for a government agency to say you should give up those rights strikes me as contrary to public policy (the public interest as perceived by the courts). This also raises questions as to what the ATO is worried about.'

However, the ATO insists that there is nothing sinister going on, and that it simply wants to bring a speedy end to tax disputes. The solicitor for the Taxation Office, Iain Anderson, says that the Freedom of Information clause in the settlement offer should be taken in context: 'It is not in the community interest to allow people to continue to agitate issues in a dispute after the parties have actually agreed to settle.' However, many feel that there would be no further agitation if an amicable settlement had been reached, and that the ATO is just using this as an excuse to push them into unsatisfactory settlements.

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