ATO's Change Agenda a 'black hole'

The Australian Taxation's Change Program (which is best suited perhaps for simple formulaic tax collections, not complex audit, analysis and interpretation work) may collapse under its own dead weight.

commentary The crisis in the Australian Tax Office continues. The ATO has a budget deficit of around $140 million. How can an organisation that can't manage its own affairs run revenue collection for the nation?

The other cost is the white elephant called the Change Program — an outdated recording and analysis system that many staff hate and believe is unworkable.

There are two main causes. The Labor Government's so-called efficiency dividend of 3.25 per cent has cut funding to the ATO by at least $45 million. As Commissioner D'Ascenzo explained to Senate Estimates in 2007, that would result in a loss of revenue in the order of $450 million (he put it in more nuanced terms but that is what he meant). Now that is efficiency! Save $45 million and lose $450 million.

In May 2008 after the Federal Budget, the ATO said that it would allow natural attrition to reduce staff by 1,137 to meet Labor's inefficiency dividend. It also said there would be no sackings. This was before the overspend became evident and the global economic crisis hit. The attrition rate has slowed markedly since then, so that the 1,137 target cannot be met. Sacking staff becomes the option. So far it is 133 non-ongoing contractors. The 133 will just be the start.

Of course, the functions that these thousand or more disappearing staff (sackings plus attrition) perform won't themselves disappear. So remaining staff will be expected to work harder and harder.

The other cost is the white elephant called the Change Program — an outdated recording and analysis system that many staff hate and believe is unworkable. Instead of delivering so-called efficiency gains, it is actually less efficient than the previous systems in some respects. Certainly that is what some some staff have said.

Contrary to the express statements of acting Prime Minister Julia Gillard to bosses around Australia to keep staff on, the ATO rushed to the gate of unemployment for 133 contract staff.

This will save at most $10 million over the next six months. This means that there will be more sackings to help make up the $140 million overspend.

The ATO has stopped all international travel. The saving will be in the order of a couple of million.

Many staff think the system is a crock.

So it appears that instead of participating in OECD forums, travelling to meet and discuss matters with other tax agencies, training less developed countries, and possibly helping negotiate treaties overseas and tax information exchange agreements with tax havens, the ATO has put expediency before value and continued and intensified its attack on all things international.

Domestic travel has been severely curtailed. Yet there were not enough ATO video-conference centres to meet the demand before the travel cutbacks, let alone after them. Such video-conferences are a poor substitute for face-to-face contact with other people, such as tax payers and staff.

The ATO has cancelled all acting work arrangements. Staff on higher duties are now returning to their less well-paid substantive jobs. They are less than impressed. Morale is heading to the bottom of the harbour.

Staff may be the ATO's greatest asset, (a tired old mantra that hides the truth), but like the stockmarket, their value seems to have plummeted recently, at least in the eyes of the managers of the ATO.

Recruitment will be under threat, especially of graduates. Maybe the ATO has learnt from the last time it froze graduate recruitment. They are still feeling the consequences of not having brought in for a few years bright young staff with new ideas and energy.

The Sunday Canberra Times has since reported that the ATO's graduate intake this year will be 10 per cent lower than last year.

What is now happening is that those areas of the ATO that have kept within budget (or are below budget) are subsidising black hole areas like the Change Program. That program is running 12 months behind schedule with cost blow-outs compared to initial estimates that appear staggering — from $450 million to $750 million.

In "Capgemini up for review at tax office", Mahesh Sharma in The Australian of 27 January 2009 suggests the cost has blown out from $350 million to $725 million. JP]

Many staff think the system is a crock.

The ATO knows the cost of everything but the value of nothing.

The Change Program (which is best suited perhaps for simple formulaic tax collections, not complex audit, analysis and interpretation work) may collapse under its own dead weight.

Certainly the blow out in completion times — from 2007 to 2010 (itself a date one should not rely on) — and the inability of the Program to deal adequately with interpretative work (like public and private rulings and advice to Treasury on proposed new laws) casts great doubt on the efficacy of the original planning around the whole system, if not the system itself.

Those areas of the ATO that have kept within budget (or are below budget) are subsidising black hole areas like the Change Program.

And then there is the ATO Senior Executive Service (the bosses). There has been an explosion of SES in the ATO (as someone who was promoted into the SES in 2002, I was a beneficiary of this explosion). According to the commissioner's Annual Report as at 30 June, the ATO had 279 SES employees. The all-up cost per SES is in the order of $300,000 per annum when you take into account salary, superannuation, free parking, travel, accommodation and so forth.

Cut that SES figure in half, including some of those at the highest echelons. Why, for example, does the ATO need a commissioner and three second commissioners? Who for example is going to fall on their sword for the budget overspend? Bring the ATO's SES numbers into line with other more rational agencies.

This ATO SES cut would save around $50 million per year, with no negative impact on overall ATO productivity. The real work is done by the workers in the ATO, not the managers. The main role of managers in the SES is to police the ATO workforce to work harder and harder. An alternative strategy of trusting staff and letting them organise their work responses has a greater chance of success than the iron rod of numbers.

The ATO needs more staff at the grunt levels, not less. Otherwise standards of service will collapse (as they are now beginning to do). If you must sack people, Commissioner, sack some bosses, not workers. And rein in your Change Program.

Just as importantly, commissioner, lead the fight against the stupidity of Labor's "efficiency" dividends.

John Passant is a former ATO assistant commissioner. This commentary, which represents his own view on the ATO, was first published on his blog, En Passant, and is replicated here with his permission.

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