The " Tax Agent " Industry !

Perhaps the Royal Commission uncovering the outright fraud endemic in the banking industry should widen its scope to the people who give financial advice on tax matters to the business community. They are termed " tax agents " and their job is preparing the complicated tax returns of small and medium sized businesses to legally obtain whatever benefits are available to lower the tax bill.

One such agent in Melbourne is accused of stealing $1.3 million from fifteen of his clients and another $2.8 million that is the property of the Australian Tax office.   This tale of woe has left many of his clients locked in a bitter legal battle with the ATO.

This 56 year old tax agent constructed what he called " an efficient tax planning arrangement " in which he required an up front payment from his clients to deliver a lower tax bill.  He simply pocketed that money and constructed a network of false tax claims to artificially lower his clients tax obligations to the tax office.   In due course, this instigated a raid on his home and office by a combination of the ATO and the Federal police.  The tax agent has indicated that he will plead guilty to all the charges.

Perhaps those clients should have been warned by their tax agents lifestyle.  He drove a Maserati and regularly took expensive overseas holidays, and was well known for his gambling habits, and his forays into the property market were legendary.  But then such excesses are often the legitimate rewards of a successful business man. It is those property acquisitions that are now souring relations between those left owing a tax bill and the ATO.

The ATO is aggressively pursuing the tax bills their tax agent left them owing and is applying fines and penalties for late payment.   At the same time it is proceeding through the courts to gain access to those properties the agent bought with stolen money and intends to reclaim them to recoup the loss it has suffered at his hand.

The aggrieved clients see it differently.  These properties were obtained with money stolen from them and they have the expectation that they should share in funds recovered, but in the pecking order of debt recovery, the ATO takes precedence.   At best they are receiving vague promises that the ATO may take a benevolent view on those fines and penalties for late payment.

Many of these clients are small " Mum and Pop " suburban businesses which now face ruin.  They can not afford to get into a legal duel with the tax office because that would be a very unequal contest.  The ATO is backed by unlimited public money and in comparison they are paupers - and all the legal powers are in the hands of the ATO.

Perhaps now would be a good time to force tax agents to contribute to a fidelity fund such as applies to the legal profession.   Should a barrister or a solicitor commit a crime that involves a clients funds those losses are reimbursed.  Membership of the fund is conditional on gaining accreditation to practice law.   It seems long overdue to extend such an arrangement to the professions that offer services in the tax industry.