Will We Have a Report Like This for the HI Service in A Few Years’ Time?

The following reports appeared yesterday.

Ombudsman slams ATO over tax file errors

By Ry Crozier on Sep 21, 2010 2:21 PM

Flawed data matching put Australians at risk of identity theft.

The Australian Taxation Office was criticised by the Commonwealth Ombudsman for its handling of cases where a person's tax identity was compromised by data matching or administrative errors.

The Ombudsman said today that actions taken by the ATO in eight cases involving tax file number compromise were "unreasonable" with cases lasting months to years.

"Our investigations suggest a systemic failure by the ATO to properly recognise and respond to the issues faced by taxpayers who, through no fault of their own, have their [tax file numbers] compromised or incorrectly linked - by the ATO - to another person's," the Ombudsman said in a new report [pdf].

"[Tax file number] integrity and ATO data and systems quality are areas of high importance to the tax system."

The ATO conceded that the experiences of "some taxpayers [had] been less than satisfactory" but said the eight cases outlined by the Ombudsman were isolated and not typical of taxpayer experiences.

The tax agency agreed to the five recommendations made by the report and cited last year's establishment of the Client Identity Support Centre as a step to create a "single capability for the management and resolution of identity crime" and tax file number compromises.

Some of the cases involved identity fraud, where a person's tax number was compromised by an unknown third party that used it to lodge tax returns.

Others were caused by data-matching errors where the ATO incorrectly "culled" a person's tax file number in the mistaken belief they were issued two.

But the numbers were for different people with the same name and, in one case, also with the same date of birth.

It took seven months to resolve the latter case, in part because the ATO sent an "objection" letter from the taxpayer whose number was canned to a "decommissioned email address", causing a four-month delay.

More here:

http://www.itnews.com.au/News/232827,ombudsman-slams-ato-over-tax-file-errors.aspx

The issue is also covered here:

Ombudsman slams 'systematic failure' of tax office

September 21, 2010 - 4:56PM

The Commonwealth Ombudsman has slammed the taxation office for failing to properly handle complaints about misused tax file numbers.

A report released on Tuesday detailed eight cases where the numbers were compromised or linked to the wrong person.

In one case, a welfare recipient was hit with a $7000 Centrelink bill and a $2250 tax penalty after another taxpayer made an error with an online tax return.

The Commonwealth Ombudsman has slammed the taxation office for failing to properly handle complaints about misused tax file numbers.

A report released on Tuesday detailed eight cases where the numbers were compromised or linked to the wrong person.

In one case, a welfare recipient was hit with a $7000 Centrelink bill and a $2250 tax penalty after another taxpayer made an error with an online tax return.

In another case, the Australian Taxation Office (ATO) wrongly assumed a pensioner from a non-English speaking background had two tax file numbers, which meant income was incorrectly attributed to her.

Both cases took two years to resolve.

More here:

http://www.smh.com.au/national/ombudsman-slams-systematic-failure-of--tax-office-20100921-15l2g.html

and the ABC also has a take:

Tax file number problems far from resolved

Posted Tue Sep 21, 2010 5:10pm AEST

The Commonwealth Ombudsman has criticised the Australian Tax Office for not responding adequately to complaints about compromised tax file numbers.

The Ombudsman, Allan Asher, says that when individual tax file numbers are compromised it can lead to delayed tax refunds and payments and debts being incorrectly attributed.

He says the Tax Office's actions to date do not fully address his concerns.

"The Tax Office themselves make it absolutely clear that the sanctity of tax file numbers is so important and it's the unique identifier for taxpayers and where they themselves don't get on to these problems quickly and resolve them, it can cause devastation to individuals," he said.

More here:

http://www.abc.net.au/news/stories/2010/09/21/3018072.htm

The Executive Summary is pretty damming:

Executive Summary.

Complaints investigated by the Ombudsman identified concerns with the Australian Taxation Office’s (ATO) response when Tax File Numbers (TFNs) are compromised or TFN records are incorrectly linked. Three key areas of concern are the ATO’s:

· failure to respond appropriately to problems arising from compromised TFNs

· inadequate policy oversight and recognition of the systemic issues demonstrated by these complaints

· inadequate communication with taxpayers.

TFN integrity and ATO data and systems quality are areas of high importance to the tax system. Australian National Audit Office (ANAO) reviews and a Parliamentary inquiry into ATO management of TFNs in the past decade highlighted the need to improve the integrity of the TFN system,1 and resulted in significant government funding being given to the ATO to achieve this.2

We consider that action taken by the ATO in eight cases involving TFN compromise was unreasonable. Our investigations suggest a systemic failure by the ATO to properly recognise and respond to the issues faced by taxpayers who, through no fault of their own, have their TFNs compromised or are incorrectly linked, by the ATO, to another person’s TFN.

In the cases we investigated, the taxpayers with compromised TFNs had not been able to resolve their problems with the ATO, despite having made a number of attempts to do so. Responses to these investigations suggest that there is a need for the ATO to improve its systems and processes for resolving more complex TFN compromise cases.

----- End Extract

What can happen when issues arise are pretty clear: (Page 4)

1.12 Complainants experienced a range of consequences including:

· ATO delays in processing their tax returns or bonus payments

· having debts wrongly attributed to them

· problems with other agencies, such as Centrelink, that exchange information linked through TFNs with the ATO

· loss of faith in the integrity of the tax system and security of TFNs

· lack of resolution with scope for problem to recur or cause delays and difficulties for future lodgement

· loss of tax revenue (but in small amounts so that ATO investigation resources are not used to investigate or to recover funds)

· difficulty and delay in being provided with an accurate account record

· possible breach of privacy and confidentiality by the ATO

· the need to go through objections and complaints.

----- End Extract.

That the ATO agreed to all the recommendations for improvement says they recognised the problem.

Given the role of the Tax File Number in record linkage and identity theft the parallels with the Health Identifier Service are pretty stark. There is a clear warning here for Medicare Australia to make sure its procedures are really up to scratch or you can be sure the Ombudsman will be on their case a few years out!

David.