The Phoenix Taskforce – 14 Government Agencies to get confidential Tax information
Slipping through quietly at the end of last year (2014) were some new Tax Regulations that allows for the sharing of tax information amongst the 14 members of The Phoenix Taskforce. Now, I watch this stuff pretty closely and I knew there was a Phoenix Task Force but I certainly didn’t know that there were 14 Government Agencies as members of the club. If you follow this blog, you’d be aware that I have some strong views on Phoenix companies. In brief, I agree with the concept (Phoenix = Bad) but it frustrates me that there is no actual legal definition of a Phoenix company. Yes, that’s right….in no legislation is a Phoenix Company actually defined. It’s in the preamble to a number of new Laws of recent years but not in the actual Laws. And yet, Legislators and Government Agencies talk about it a great deal and regularly seek new funding and new powers to attack the problem. They do so whilst rarely using the existing, strong, legal powers to combat the problem (i.e. ban more directors if they have multiple strikes!!). So here is another rant!
The stated wisdom on Phoenix Companies
Let me recap the figures that I see trotted out regularly by Government Departments, Academics and the media:
- “The total impact of phoenix activity has been estimated to be $1.78-$3.19 billion per annum” – pwc Phoenix Activity Report June 2012.
- The (then) Assistant Treasurer Bill Shorten cited estimates in 2011, “based on ATO expertise, that there are 6,000 phoenix operators in Australia”.
My recap on the actual statistics on Phoenix Companies
To give some perspective, have in your mind that there are about 10,000 liquidations a year, or a little less nowadays. Now consider these statistics:
- Dunn and Bradstreet released a very interesting analysis way back in 2010 that of the 10,200 liquidations for that year, it included Directors who had been directors in 1 or more previous liquidations in 29% of cases – that suggests an upper possible range of 2,900 Phoenix operators (it surely has to be materially less than 2,900 because not all repeat offenders are necessarily Phoenix operators);
- In 2011/12, 1.6% of complaints (194 complaints) to ASIC related to Phoenix activity – indicating a low range of 200 or so;
- In 2009, the ATO investigated 400 suspected cases of Phoenix companies – so that’s in the range;
- In each of the last few years, ASIC has successfully disqualified directors in less than 100 cases – those disqualifications are usually as a result of two-strikes or more as a director of a company that entered liquidation.
So note specifically the yearly number of actual complaints to ASIC (200 ish), the number of Director Disqualifications (under 100) and the number of investigations by the ATO (400 ish). Nowhere near the headline number of 6,000!
A quick and easy first step for Government Agencies
Phoenix activity, by definition, is undertaken by repeat offenders. And yet of the (possibly) thousands of candidates, less than 100 are banned each year. So …. ban more repeat offenders. I deal regularly with the ASIC staff in the Director Banning section and they are without question competent and diligent. We need more of them!!!
So what is the Phoenix Taskforce?
The Phoenix Taskforce is currently comprised of the following agencies:
- Australian Taxation Office (ATO)
- Australian Business Register (ABR)
- Australian Securities and Investments Commission (ASIC)
- Australian Crime Commission (ACC)
- Fair Work Ombudsman
- Australian Federal Police (AFP)
- Australian Competition and Consumer Commission (ACCC)
- Clean Energy Regulator (errrr, why?)
- Department of Employment
- Department of Environment
- Department of Human Services
- Department of Immigration and Border Protection
- Office of the Migration Agents Registration Authority
- The State and Territory Revenue Offices
That’s a big list. And what is it with No.8?
The new Regulations
So what are the new Regulations? Well, the confidentiality provisions of the Tax Act provide that it is an offence if a taxation officer obtains information about a tax payer and discloses that information to another entity. An exception set out in the Tax Act permits disclosure to an officer of a prescribed taskforce if the disclosure is made for, or in connection with, a purpose of a prescribed taskforce. So, the new Regulation prescribes the Phoenix Taskforce in regulation 48 of the TAR 1976, allowing for the disclosure of protected tax information by taxation officers to officers of that taskforce.
Well, OK I guess. But it seems to me that this is the third round of Regulation I have seen in the last few years that beefs up Government Agencies powers to pursue Phoenix operators. But I say again, that’s nice, but I’d suggest the best and most obvious Legislative provision is not being fully used ….. ban directors of Phoenix companies from being directors. ASIC can do that all by itself without having to meet and converse with the Clean Energy Regulator or the Office of Migrations Agents Registration Authority or eleven other Agencies.