ATO 'out' $39.3bn in refunds

THE Australian Taxation Office made a $39.3 billion error in estimating company tax refunds in 2002, prompting cries of double standards from taxpayer groups and the federal Opposition.

The mistake was one of a string of errors made by public service departments in accounting for their use of government funds, which the Australian National Audit Office said exposed "significant shortcomings" in the Government's system of financial management.

The auditors found the tax office had estimated it would make refunds of $11.2 billion when the actual amount was $50.6 billion.

The problem resulted from it mistakenly subtracting company tax refunds from company tax revenue and reporting a net amount.

The law requires all tax refunds, which are drawn from consolidated revenue, to be reported separately. Tax refunds to individuals were reported correctly.

The auditors said the estimates of tax refunds provided by the tax office at budget time were regularly between 20 and 350 per cent out.

"It is just not good enough. We have to demand more of our regulatory authorities who have the powers to impose very draconian penalties on taxpayers who don't do it right," said the national director of the Australian Taxpayers Association, Peter McDonald.

The tax office systems often fell short of requirements, while they did not allow individuals the same leniency, Mr McDonald said.

"As the agency responsible for ensuring companies' and individuals' taxes are in order, it is hard to escape the double standard of the tax office's shortcomings identified by the auditor," Labor Treasury spokesman Wayne Swan said.

A spokeswoman for the ATO denied that the difference between the estimated and the actual refunds amounted to a mistake, and said the tax office had lacked the ability to accurately estimate company tax refunds.

She said the tax office had now agreed present estimates as required by the auditors.

Tax Commissioner Michael Carmody denied that the ATO imposed draconian penalties on people who did not get their returns right.

"People who make a genuine attempt to meet their obligations can expect fair treatment from the tax office," he said.

In a litany of reporting errors across the Government, the auditors found examples of money being spent when legislation approving it had not been passed by parliament, and two examples where unauthorised spending breached the Constitution.

ATSIC was found to have miscalculated an indexation formula, with the result that $18.7 million more than was authorised went into its Land Fund. Of this, $6.8 million went to the Indigenous Land Corporation.

The Department of Veterans Affairs committed a similar breach diverting to administrative costs $1.5 million of funds intended for former prisoners of war in Japan.

Between 2001 and 2003, the Department of Finance claimed that a total of $7.2billion paid to the commonwealth superannuation scheme was authorised under legislation that, in fact, was blocked in the Senate. Fortunately, there was other legislation supporting the payments.

Taxing times at the ATO...