The ‘dole-bludger’ myth can die now — the real cheats were highly paid public servants
The royal commission made clear what we already knew: the only dangers to the welfare system are public servants and policy makers.
Michel Foucault’s Discipline and Punish, a book drummed into a generation of sociology students, begins with a long description of a public execution in Paris in 1757. Such public celebrations of torture were fading, he thought, replaced by the cold, clipped hand of bureaucracy. Instead of public executions, the 19th century saw governments create prison systems with standardised cells and sentencing guidelines, professionalised prison wardens and schemes to “correct” the incarcerated.
But while we no longer see the condemned broken on wheels in the town square, Foucault warned that a subtler violence remained. State bureaucracies became more powerful. Systems of administrative justice were no less damaging to those in their grasp, even if they no longer left physical marks on felons’ bodies. “As a result,” Foucault wrote, “justice no longer takes public responsibility for the violence that is bound up with its practice.”
I was reminded of Foucault’s warnings about the unaccountable power of government bureaucracies when reading Catherine Holmes’ eloquent final report of the robodebt royal commission. Long but gripping, written in crisp and mordant prose, the report lays out the gory details of one of the worst episodes in the history of Australian public administration.
The Tax Office mistakenly believed there was only one leaker at PwC, not a broader cultural issue - & it pushed back ferociously when TPB investigators asked what PwC told its clients about its tax leak
At every single step the Tax Office has tried to draw the curtain of taxpayer secrecy laws over the PwC tax leaks scandal. When the Tax Practitioners Board obtained legal advice contradicting this the ATO response was spectacular
How two regulators went to war over the PwC scandal Neil Chenoweth Neil Chenoweth
Tax Commissioner Chris Jordan accused the Tax Practitioners Board of “serious overreach” and pressured the agency to stop investigating 26 tech companies as part of its probe of the PwC tax leaks.
Mr Jordan called the actions of the board, which regulates the country’s 65,000 tax agents, “extraordinary”, “highly inappropriate”, evidence of “active deception” and “deliberate disregard” for the Tax Office’s position, and a “matter of utmost seriousness and concern”.
Chris Jordan (left) and Jeremy Hirschhorn at the Senate estimates hearing. Alex Ellinghausen
One of Mr Jordan’s key complaints was that the board obtained its own legal advice, which contradicted the Tax Office’s claim that secrecy rules prevented it from providing information to its investigators.
The Tax Office first became aware of the leaks in late 2017, when it obtained copies of internal PwC emails that showed partners used confidential information obtained from Treasury by international tax chief Peter Collins from 2013 to 2017 to help clients sidestep new anti-avoidance laws.
Mr Jordan and his second commissioner Jeremy Hirschhorn told senators at a committee hearing that the Tax Office shared some PwC emails with the federal police in March 2018, but that secrecy laws made it illegal to share detailed information with the police or with Treasury.
In June 2020, the Tax Office referred Mr Collins to the Tax Practitioners Board. From the start, the ATO’s position was that the leaks involved one person, Mr Collins. Several other partners who had used the information had since left PwC.
“It was quite a specific referral in relation to breaches of confidentiality agreements that were signed between him and Treasury,” the board’s chairman Peter de Cure told the Senate inquiry last month.
The Collins investigation widens
The board opened a formal investigation into Mr Collins in January 2021, then in March 2021 it opened a second investigation into PwC itself. The Tax Office did not oppose this, but it continued to regard this as a matter focused on Mr Collins.
However, emails that the board provided to the Senate on May 2 indicate at least two other partners shared confidential information – though it’s not clear if the Tax Office saw those emails.
“The emails we have are not the same – there’s some overlap in the emails that have been provided under the question on notice by the TPB,” Mr Hirschhorn told the inquiry.
But as the Tax Practitioner’s Board investigation expanded, in June 2021 the Tax Office stopped providing assistance.
“From June you were on your own basically, the ATO stepped away from the investigation,” Labor senator Deborah O’Neill suggested at the inquiry.
“The ATO just said to us that they didn’t have any information that they could give to us because it would identify taxpayers, and it was protected, and they said it was not relevant to the TPB’s investigation,” board secretary Michael O’Neill replied.
What happened next is described in the letter Mr Jordan wrote to Mr Klug, the then board chairman on September 21, 2021.
Mr Jordan writes that in June the Tax Office had expressed concerns about “unnecessary overreach” by the board, and “explicitly declined to provide specific taxpayer-related information to the TPB, citing concerns about taxpayer confidentiality and the lack of connection with the matters referred to the TPB”.
The documents that the board sought included settlement agreements that the Tax Office had made with tech companies targeted by PwC, over their attempts to sidestep the 2016 Multinational Anti Avoidance Law, on which Mr Collins had advised Treasury.
In the face of the ATO’s refusal, the board used its own powers, under Section 66-100 of the Tax Agent Services Act, to issue notices to 26 foreign multinationals, requesting information including details of restructures prompted by the new tax laws, diverted profits tax and the hybrid mismatch rules, negotiations with the Tax Office and details of settlement negotiations with the Tax Office.
What particularly incensed Mr Jordan was that TPB officers sought their own legal advice, which contradicted the Tax Office’s claim that it was legally prevented from disclosing taxpayer information.
In his letter, Mr Jordan claimed TPB investigators showed a “deliberate disregard” for the Tax Office’s concerns and that “it is apparent that your staff have also been accessing ATO systems for the same taxpayer information, including audit files and settlement deeds”.
The 150 staff of the TPB are all tax officers on secondment, and as such they are entitled to access Tax Office files, which they do routinely.
It is inexplicable that your staff would be reviewing our settlement deeds and making unilateral judgments about our confidentiality obligations to justify that access,” Mr Jordan wrote.
“Not only is it highly inappropriate for your staff to be reviewing these settlement deeds, but it is extraordinary that they did this without notice or consultation (in fact after us stating our position that these documents were not relevant and should not be accessed) and drew conclusions about our legal obligations.”
The fiery 2021 board meeting
The letter was sent after a fiery meeting of the board on September 1 which Mr Jordan and Mr Hirschhorn attended.
In June, Mr Hirschhorn dismissed a report by The Australian Financial Review that the September 2021 meeting was triggered by complaints by two US tech companies that wished to curtail the PwC leaks investigation.
“There were no two companies and there was no shouting,” Mr Hirschhorn told the Senate inquiry on May 6. “There was a forthright meeting. I would say this article is, frankly, misleading.”
Mr Jordan’s letter says the ATO was “approached by concerned advisers” to multinational companies which had received notices from the board to produce documents, triggering the ATO’s concerns about the PwC investigation.
Mr Hirschhorn told the senators that he and Mr Jordan had not tried to influence the direction of the board’s investigation and that the ATO’s concerns related to how it was conducting its investigation.
“We did not tell them to back off,” Mr Hirschhorn said. “We wanted them to do this review. We were talking about the how ... They already had the information. They had obtained it under their own powers.”
At the time of the meeting, however, while the TPB had issued notices to produce documents to 26 tech companies, it had not received responses.
In the September 21 letter, Mr Jordan urged the board to review its “entire conduct of this investigation as a matter of priority” and said he “would strongly suggest withdrawing the notices while that review is conducted”.
Mr Hirschhorn also denied that he and Mr Jordan had accused TPB investigators of acting illegally.
“I was at that meeting,” Mr Hirschhorn told the Senate inquiry. “That is not consistent with my recollection of the meeting.”
New TPB chairman Peter de Cure, who was also at the meeting, later confirmed that it was a forthright discussion about the legality of the TPB’s investigation: “The ATO representatives definitely expressed in clear and unmistakable terms their views in relation to how we were investigating the matter. We listened ... it was very direct,” he told the Senate inquiry.
“The ATO had a view as to how we were conducting our investigations. They expressed that view and they subsequently agreed with us, based on their own internal legal advice, that the way our investigations were being conducted were in accordance with the law and in accordance with our powers to investigate.
“As the [Financial Review] article indicated, the ATO had a different view at the time, but they subsequently agreed that we acted lawfully.”