Tax Office staff caught up in $2 billion TikTok GST scam
The fog over where responsibility starts at the Tax Office. The Protego/TikTok fraud cost $2bn & 150 ATO ex or current personnel were investigated but hey, it was nobody’s fault
No one is responsible for $2b GST debacle
Two years of committee meetings, $2 billion lost and still the ATO doesn’t know who should have picked up the fraud.
Neil ChenowethSenior writerDespite all the resources the Tax Office has thrown into pursuing the 57,000 fraudsters behind the $2 billion Protego GST loss, the investigators have never worked out just whose fault this disaster movie was.
The auditor-general’s report delicately refers to “a lack of clarity” about who is accountable for GST fraud control and notes that “after two years of committee discussions this issue remains unresolved”. Others might call it a fog.
ATO deputy commissioner Will Day.
The warning signs were there. From August 2021, the number of tip-offs about GST refund fraud had rocketed. By November that year, the number of Australian Business Numbers being issued was exploding. In January 2022, risk models were finding the rise of GST refunds was “high risk” and “clearly apparent”.
Banks such as Westpac had been warning of suspicious GST payments for months. And it wasn’t until the banks shared their concerns with the Reserve Bank in February 2022, and the RBA warned Treasury, that the Tax Office launched Operation Protego to fix the mess, led by deputy commissioner Will Day.
The GST system was wide open to anyone with a MyGov account to secure an ABN, register for GST then claim a refund. Tens of thousands claimed without documentation that they had just spent $500,000 or so setting up a new business, so could they have $50,000 in GST payments back immediately, please.
And that’s just part of the Tax Office’s GST problem. From 2018 to 2023, the ATO’s uncollected debt jumped $26.4 billion to reach $50.2billion. Commissioner Chris Jordan has attributed much of this to the $16.9 billion rise in small business debt.
In fact, $17.6 billion of the rise has come from unpaid GST debt owed by small businesses. To be clear, while this includes some Protego numbers, most of this total is not fraud.
‘A position title that does not exist’
With GST overseen by the ATO’s small business line, the business registry and compliance, who should have been picking up this problem?
The ATO’s approach to external and internal fraud is organised around two Chief Executive Instructions (CEI). But the auditor-general’s report says these CEIs put the responsibility for handling fraud on “a position title that does not exist within the ATO” and does not say who is responsible for reviewing internal fraud.
In 2018, the ATO assessed the risk of external fraud as severe. Two years later, the Tax Office reduced this risk to low, and one of the mysteries in the auditor-general’s report is that no one could say why the risk assessment was changed. Indeed, “the ATO has been unable to locate any detailed written explanation for the change in risk level”.
Coincidentally, the Tax Office was dropping the estimated tax gap for GST from 8.8 per cent in 2016 to 5.9 per cent in 2021. The tax gap is an estimate of how much tax escaped the ATO’s net, and the ATO was saying that figure had dropped by $1.25 billion.
Hurrahs all round. Except that fraud was about to explode, and uncollected GST debt would jump by $17.6 billion.
And the ATO still hasn’t worked out who’s to blame.
Blame? The ATO put its hand out for an award. It was a finalist in the Institute of Public Administration Australia’s Spirit of Service awards last year for the success of Operation Protego.
They came close, but they didn’t win the gong.
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Neil Chenoweth is an investigative reporter for The Australian Financial Review. He is based in Sydney and has won multiple Walkley Awards. Connect with Neil on Twitter.Email Neil at nchenoweth@afr.com.au