Whistleblowers are people speaking up when they encounter, in the context of their work, wrongdoing that can harm the public interest, for instance by damaging the environment, public health and consumer safety and public finances. However, potential whistleblowers are often discouraged from reporting their concerns or suspicions for fear of retaliation.
Supporting and protecting these individuals, through effective whistleblowing protection mechanisms, is essential in fostering integrity and accountability, while also deterring and exposing misconduct, fraud, and corruption. The systems which encourage and protect these individuals are vital to the integrity, good governance, and freedom from corruption in Australia's domestic institutions.
As indicated in a recent publication by Griffith University, the importance of effective whistleblowing protection processes are not only being recognised in new laws and rules, but also in stronger organisational systems and programs. This has been informed by a new understanding of the benefits that accompany the raising of wrongdoing concerns.
Notwithstanding this increasing community awareness of the important role whistleblowers play, evidence provided to the Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS) in 2017 indicated that whistleblower protections remain largely theoretical, with little practical effect in either the public or private sectors.
The PJCCFS stated that this was due, in large part, to the near impossibility under current laws of: protecting whistleblowers from reprisals; holding those responsible for reprisals to account; effectively investigating alleged reprisals; and whistleblowers being able to seek redress for reprisals.
The following discussion provides a brief overview of the legislative frameworks currently in place to protect individuals who disclose information to the Inspector‑General of Taxation and the Taxation Ombudsman (the IGTO) as part of a public interest disclosure, a complaint, or when providing the IGTO with information to assist it undertake a systemic review.
Disclosures made under the Public Interest Disclosure Act 2003
In July 2013, the Public Interest Disclosure Scheme (the scheme) was created by the Public Interest Disclosure Act 2013 (the PID Act). The scheme implements the Rudd government's response to the recommendations made by the House of Representatives' Standing Committee on Legal and Constitutional Affairs in their report Whistleblower Protection: a comprehensive Act for the Commonwealth public sector.
The scheme facilitates the disclosure and investigation of wrongdoing in the Commonwealth public sector. The PID Act commenced in January 2014, and was informed by a growing body of research which regards whistleblowing and complaints as an opportunity for organisations to embrace. The scheme covers 178 agencies and, according to the Commonwealth Ombudsman, each year generates hundreds of disclosures.
The PID Act utilises a decentralised approach whereby current and former public officials generally make internal disclosures to their supervisors, managers, or authorised officers in the first instance. This allows the agency the opportunity to investigate the matter and correct any wrong practices in a timely manner.
In certain circumstances, the PID Act also permits individuals who have already made an internal disclosure to make an external disclosure. For example, an external disclosure can be made if an internal investigation was not completed within the required timeframe; or the discloser believes, on reasonable grounds, that the investigation was inadequate or that the agency took inadequate action after the investigation was completed. Importantly, however, for a person to make an external disclosure, it cannot be considered, on balance, contrary to the public interest.
The Commonwealth Ombudsman and the Inspector‑General of Intelligence and Security (IGIS) are tasked with general oversight of the PID Act. In providing evidence to the committee, the Commonwealth Ombudsman, Mr Michael Manthorpe, summed up his role as follows:
We have three primary functions under the scheme: first, we allocate disclosures and investigate complaints about an agency's handling of disclosures; second, we educate agencies and raise awareness of the PID scheme with them; third, we undertake annual reporting on the scheme's operation, which we included in our annual report that was tabled recently in the parliament.
In assessing the overall efficacy of the scheme, the Commonwealth Ombudsman stated at a public hearing on 6 December 2019:
I think the PID scheme is well-intentioned. In principle it should be possible for officials who identify wrongdoing or potential wrongdoing in their workplace to report this and expect that it will be examined appropriately with appropriate follow-up and action where wrongdoing is found, and without risk to the whistleblower. However, it's a complex scheme and it sometimes leaves agencies and whistleblowers alike feeling disappointed.
While it's difficult to quantify, whistleblowers are sometimes subject to reprisal or perceive that they are subject to reprisal.
PID investigations are resource intensive, and there is a limit to the extent to which it can be said that the scheme, in an overall sense, provides assurance about systemic integrity.
Protections afforded under the PID Act
The PID Act provides a number of protections against various liabilities and reprisal action. If a current or former public official makes a qualifying public interest disclosure, they are protected from criminal, civil, and administrative liability. Furthermore, an offence is created for persons who take reprisal action against another person as a result of that person making, or proposing to make, a public interest disclosure.
As stated in the PID Act's revised EM, any public official who has suffered reprisal action for making a public interest disclosure can apply to the Federal Court of Australia or the Federal Circuit Court of Australia for a remedy, such as compensation, an injunction, an apology, or other order which the court deems appropriate given the circumstances.
The PID Act and the IGTO's tax ombudsman function
In 2015, the Inspector‑General of Taxation Act 2003 (the IGT Act) was amended by the Tax and Superannuation Laws Amendment (2014 Measures No. 7) Bill 2014. These amendments transferred the tax investigation and complaint handling functions of the Commonwealth Ombudsman to the IGTO, and merged them with the existing functions of the IGTO to conduct systemic reviews.
Notwithstanding this transfer of functions, the IGTO's submission states that there was only a transfer of partial jurisdiction from the Commonwealth Ombudsman to investigate administrative tax complaints. Specifically, the IGTO stated that the Commonwealth Ombudsman retained the power to investigate taxation complaints made under the PID Act.
Disclosures made under the Inspector-General of Taxation Act 2003
In her opening statement, the Inspector-General, Ms Karen Payne, stated the following in relation to whistleblower protections:
…[I]n the case of whistleblowers, the office of the Inspector-General of Taxation's statutory framework is not designed to allow whistleblowing to our agency. We are only able to offer limited protections. We are not able to offer whistleblower protections, for example, from either professional or personal reprisal. Second, the limited protections we can provide, for example to ATO officers, are only available where the Commissioner of Taxation has first approved the information being made available.
The Inspector-General, reinforced this point in her written submission where she stated that, although the IGTO has powers to investigate taxation complaints referred by the Commonwealth Ombudsman, her office does not have jurisdiction to investigate complaints under the PID Act. This is because, if a complaint is transferred from the Commonwealth Ombudsman to the IGTO, it is taken to be a complaint made under the IGT Act; not a disclosure under the PID Act.
Protections afforded under the IGT Act
The legal protections available under the IGT Act vary and depend on the circumstances in which there is a disclosure of information to the IGTO. These protections mirror the protections under the Ombudsman Act 1976 (Ombudsman Act) for disclosures made to the Ombudsman outside of the PID Act, and are further discussed below.
Importantly, and as stated by the IGTO, the protections afforded under the PID Act are not replicated within the IGT Act.
Disclosure of information voluntarily
Individuals who disclose information voluntarily, such as by lodging a complaint with the IGTO, are protected from civil action only, if the disclosure of information is made in good faith.
Disclosure of information in response to an investigation or review that has been commenced by the IGTO
After the IGTO has publicly announced an investigation or review, additional protections are provided to certain individuals who disclose information, but only where the information has been lawfully obtained.
Importantly, these additional protections are only available to taxation officers when the Commissioner of Taxation (the Tax Commissioner) has authorised the officer to give the information. There is currently no prescribed form for this authorisation, and no direction on whether notification of an authorisation is to be provided internally or externally.
Given this, the IGTO notes that it is not ordinarily notified of the terms of the authorisation, as it is commonly only emailed internally at the commencement of a review or investigation. Furthermore, given the internal nature of such an authorisation, it is unlikely to extend to former taxation officers who disclosure information.
Disclosure of information as part of a preliminary inquiry by the IGTO
Protections are available to taxation officers who disclose information as part of a preliminary inquiry by the IGTO only if they are within a class of officers authorised under specific arrangements with the Tax Commissioner or chair of the Tax Practitioners Board.
Disclosure of information in response to a notice issued by the IGTO requiring compulsory disclosure
The IGTO will issue compulsory notices to disclose or produce only when it can identify the relevant taxation officer, and then only to ensure protections are available to the recipient or to secure timely access to the information.
If the IGTO compels the production of information, additional protections are provided, such as:
any documents provided are inadmissible as evidence;
no liability to statutory penalties;
authorised disclosure under the Privacy Act; and
legal professional privilege is unaffected.
In this instance, taxation officers are protected because they are required to disclose.
Summary of the above discussion
To summarise the above discussion, taxation officers generally receive no personal protection for statutory or criminal penalties without commencement of an investigation, and then only if the Tax Commissioner has authorised the officer to give the information to the IGTO. Please see Figure 4.1, below, for further information.
Figure 4.1: Protections under the IGT Act
Source: Inspector‑General of Taxation, Submission 5, pp. 84–85.
Case study: Protections under the IGT Act when disclosing alleged wrongdoing within the ATO
In evidence submitted to the inquiry, Mr Ron Shamir, a former ATO employee, stated that he made a disclosure to the IGTO in 2014 in relation to suspected misconduct within the ATO.
Mr Shamir stated that the IGTO advised him the disclosure warranted investigation; however, as the IGTO could not provide him any protection from reprisals under its existing legislative framework, which did not contain any ombudsman powers at the time, it would not proceed with an investigation.
Mr Shamir stated that on 4 May 2015, the IGTO contacted him by telephone to inform him that the IGTO now had additional protections, and could progress his matter as a complaint. Mr Shamir stated the IGTO informed him the new protections available to him were contained in section 39 of the IGT Act; however, they would only be enlivened if the IGTO issued him a notice, under section 9 of the Ombudsman Act (a section 9 Notice), compelling him to provide the information listed in the notice.
He also stated that the IGTO advised him that other protections were available under the PID Act, but that it was administered by the Ombudsman, not the IGTO. Mr Shamir stated he rejected the notion of disclosing to one agency while relying on the protections of another and, furthermore, the existing protections available under the PID Act were not the new protections available to the IGTO which prompted it to contact him in early May.
Mr Shamir stated that he informed the IGTO that the offence created by
section 39 would have to be activated before he would proceed further with his matter. Hence, Mr Shamir stated that the IGTO issued him a Section 9 Notice on 18 May 2015 compelling him to provide the information requested in the notice.
Importantly for Mr Shamir, the issuing of this notice created an offence for persons causing, or threatening to cause, detriment to him as he complied with the notice. Mr Shamir stated that the IGTO informed him they would treat the section 9 Notice with 'absolute confidentiality'.
Mr Shamir stated that shortly after he started to collect evidence in accordance with the notice, he was removed from his workplace and his employment with the ATO was terminated. He claims that, even though the IGTO informed him it would keep the section 9 Notice confidential the ATO used information obtained from discussions with the IGTO, without his knowledge, to justify his termination.
He further stated that he subsequently sought assistance from the IGTO in effecting the section 39 offence provisions against the ATO for his termination while complying with a section 9 Notice, but was advised that it was an employment matter and, hence, outside the IGTO's remit.
Mr Shamir summarised his interactions with the IGTO as follows:
In summary, the IGT contacted me in May 2015 to offer whistle-blower protections. However, in June 2015 the IGT advised they did not believe those protections were relevant to me. In my experience as described in this submission, the IGT did not manage my disclosures or use the IGT’s legislative powers in a manner expected from a professional oversight agency that purports to have whistle-blower handling capabilities.
The IGT promised me protection for making a disclosure. No protection was afforded to me as the process unfolded.
…It is confounding that an oversight agency offers an employee protection from reprisals for making a disclosure regarding their employer, but later states it can’t apply those protections to employment related reprisals.
Suggestions to improve the performance of the IGTO's disclosure frameworks
In addition to the evidence gathered during this inquiry, a number of prior inquiries and reviews produced a large body of evidence and associated suggestions and recommendations to improve disclosure frameworks. The below discussion provides an overview of this evidence, as well as key suggestions to improve the performance of these frameworks where they are relevant to the IGTO.
The Parliamentary Joint Committee on Corporations and Financial Services' recommendation to create a whistleblower protection authority
In September 2017, the PJCCFS published its report on whistleblower protections. Amongst other suggestions, it recommended that a single oversight agency entitled the Whistleblower Protection Authority (the Authority), be established. The PJCCFS envisaged such an agency would cover both the public and private sectors.
Specifically, the PJCCFS recommended:
the Authority be established in an appropriate existing body;
the Authority be prescribed as an investigative agency with power to investigate criminal reprisals and make recommendations to the Australian Federal Police or a prosecutorial body and non-criminal reprisals against whistleblowers;
the Authority have power to investigate and oversight any investigation of a non-criminal reprisal undertaken by a regulator or public sector agency;
the Authority be prescribed to take non-criminal matters to the workplace tribunals or courts on behalf of whistleblowers or on the authority's own motion to remedy reprisals or detrimental outcomes in appropriate cases;
any other necessary legislative changes are made to ensure that the Authority is able to investigate non-criminal reprisals, including providing it with appropriate powers to obtain the necessary information;
that the public sector whistleblower protection oversight functions be moved from the Commonwealth Ombudsman to the Authority;
that the Authority, in consultation with relevant law enforcement agencies, approve the payment of a wage replacement commensurate to the whistleblower's current salary to a whistleblower suffering adverse action or reprisals; and
that the Authority have the oversight functions for the private sector excluding the functions relating to the Inspector-General of Intelligence and Security.
These recommendations were supported by a large body of evidence put to the PJCCFS by multiple witnesses during its inquiry.
The Moss Review's recommendation to make the IGTO an investigative agency
Background to the review of the Public Interest Disclosure Act 2013
In January 2016, the government requested Mr Philip Moss AM to review and report (the Moss Review) on the effectiveness and operation of the PID Act. The Moss Review gave effect to section 82A of the PID Act which required a review of its operation be undertaken two years after it commenced. The Moss Review's final report was provided to the Minister Assisting the Prime Minister for the Public Service, Senator the Hon. Michaelia Cash, on 15 July 2016.
Observations of the PID Act made by the Moss Review
The Moss Review made a number of observations regarding the experiences of whistleblowers that had made disclosures under the PID Act since its commencement, as well as the experiences of agencies tasked with receiving and processing them in accordance with the PID Act's provisions.
In relation to whistleblowers, the Moss Review stated:
The experience of whistleblowers under the PID Act is not a happy one. Few individuals who had made PIDs reported that they felt supported. Some felt that their disclosure had not been adequately investigated or that their agency had not adequately addressed the conduct reported. Many disclosers reported experiencing reprisal as a result of bringing forward their concerns.
In relation to the agencies responsible for the day-to-day implementation of the PID Act, the Moss Review stated:
The experience of agencies is that the PID Act has been difficult to apply. Most agencies noted that the bulk of disclosures related to personal employment-related grievances and were better addressed through other processes. Agencies noted also that the PID Act’s procedures and mandatory obligations upon individuals are ill-adapted to addressing such disclosures.
The Moss Review concluded that the PID Act's current provisions impair the effective operation of the PID Act and noted that two principal challenges were that:
the PID Act’s interactions with other procedures for investigating wrongdoing were overly complex; and
the kinds of disclosable conduct were too broad, rather than being targeted at the most serious integrity risks, such as fraud, serious misconduct, and corrupt conduct.
Key recommendations made by the Moss Review
Given the above observations, the Moss Review made a number of key recommendations aimed at improving the function of the PID Act by:
strengthening the Commonwealth public sector’s pro-disclosure culture by encouraging agencies and individuals to see reporting of wrongdoing as an ordinary part of work and an opportunity to enhance integrity arrangements;
increasing the Commonwealth Ombudsman’s and the Inspector-General of Intelligence and Security’s capacity to oversee the PID Act;
appointing existing specialist statutory officeholders who monitor integrity and accountability in the Commonwealth public sector, [such as the IGTO], as additional investigative agencies;
focussing disclosable conduct towards fraud, serious misconduct and corrupt conduct, by excluding disclosures made solely about personal employment-related grievances, except when the character disclosure indicates systemic wrongdoing or reprisal; and
making it easier for potential disclosers, witnesses and those public officials who administer the PID Act to get help and support.
IGTO-specific recommendations made by the Moss Review
A key recommendation made by the Moss Review was to recognise additional investigative agencies under the PID Act. At present, the PID Act recognises only two investigative agencies: the Commonwealth Ombudsman and the IGIS. Specifically, the Moss Review recommended the government:
…create more investigative agencies under the PID Act, including the Australian Public Service Commissioner and the Merit Protection Commissioner (as well as their roles in relation to the parliamentary departments), the Inspector-General of Taxation, and the Integrity Commissioner.
As an investigative agency, the IGTO would be able to receive internal public interest disclosures related to matters it already has the power to investigate, such as tax administration; consent to another agency allocating a disclosure to it for an investigation; and investigate disclosures under their own powers rather than the PID Act.
Importantly, the Moss Review stated that having additional investigative agencies supports the 'no wrong door' approach for disclosers, which is especially important for those individuals who may not have a sophisticated understanding of jurisdictional and legislative issues.
The Moss Review also pointed out that this approach may encourage disclosers who lack confidence in an agency's internal investigative procedures, or who may fear reprisals.
The IGTO's views and suggestions
In her opening statement to the committee at a public hearing held on 18 October 2019, the Inspector-General, Ms Karen Payne, noted that, although other submissions suggested her office should be able to receive public interest disclosures for tax-related matters, the nature of the protections provided would determine who could, would, and should make disclosures to her office. Specifically she stated:
…I would note that the nature of protections that are available to those who complain or disclose to the IGTO will determine who can, who will and who should make disclosure to the IGTO—protection against professional and personal reprisal; reprieve from statutory offences under privacy, confidentiality and secrecy laws; and amnesty from civil, administrative and criminal charges.
In addition to her oral evidence, the Inspector-General also made a comprehensive written submission to the inquiry. In it, she outlined a number of observations on the IGTO's disclosure environment and made a number of recommendations on how it could be improved. These are discussed below.
Legal inconsistencies create ambiguity
Where a taxation officer makes an unauthorised disclosure to the IGTO for the purposes of an investigation being undertaken by the IGTO, the Taxation Administration Act 1953 (TAA 1953) exempts the disclosure from the offence that would otherwise occur.
This contrasts with the requirement of the IGT Act, which requires the Tax Commissioner to authorise the taxation officer, or that the officer be part of a class of officers nominated under an arrangement with the Tax Commissioner, before protections are provided.
Hence, the importation of provisions within the Ombudsman Act create an inconsistency with the IGT Act and, hence, cause ambiguity for tax officials wishing to comply with their statutory obligations regarding secrecy and confidentiality.
Tax Commissioner's authorisation required for disclosure
In its submission, the IGTO recommends the requirement for the Tax Commissioner to authorise disclosures be removed if a review has either commenced or is being contemplated. Upon either of these events occurring, such an approach would provide tax officials with protection automatically from that point in time.
Furthermore, the IGTO notes that the form and timing of the Tax Commissioner's authorisation is not prescribed and believes this may discourage active participation by tax officials.
The IGTO also notes that the authorisation provided by the Tax Commissioner does not appear to contemplate former tax officials and, hence, would likely result in former tax officials not being protected if they disclose information to the IGTO.
The IGTO also recommends that the legislative framework explicitly state that a tax official may choose to provide evidence with or without the presence of another officer or person of their choosing.
No power to investigate complaints, or provide protections, consistent with the PID Act
The Inspector-General, Ms Karen Payne, notes that although, as the Tax Ombudsman, she has powers to investigate tax complaints referred by the Commonwealth Ombudsman, her office has no jurisdiction to investigate complaints made under the PID Act relating to other agencies. Hence, as the IGTO cannot provide protections, it is unable to investigate whistleblower‑style complaints.
Furthermore, complaints transferred from the Commonwealth Ombudsman are taken to be complaints made to the IGTO under the IGT Act and, hence, would only secure the protections available under it.
The blurring of Inspector‑General and Taxation Ombudsman functions
The IGTO states that the need to progress to a public investigation before protections become available to disclosers can create confusion as to the public versus private nature of a matter, and blur the distinction between the functions of the Inspector‑General and the Taxation Ombudsman. The IGTO believes there is scope to clarify this in the legislative framework.
There is ambiguity around the types of disclosures which are encouraged
The IGTO believes there may be some ambiguity around the disclosures which the legislative framework encourages, and suggests that, through the protections provided to disclosers, the legislative framework should clarify which disclosures are encouraged from taxpayers, tax practitioners, tax officials, and tax agents.
Other views and suggestions
Chartered Accountants Australia and New Zealand (CAANZ), in its submission, directed the committee to consider enhancing the IGTO's role in providing assistance to public sector whistleblowers that disclosure tax‑related matters.
To demonstrate the successful implementation of such an arrangement, CAANZ highlighted the oversight model currently utilised in the United States of America where the Treasury Inspector General for Tax Administration (TIGTA) provides both independent oversight of the tax system and a coordination function for whistleblower protections.
This coordination role provides employees of the Internal Revenue Service (IRS), the American equivalent to the ATO, with access to information about whistleblower protections, rights, and remedies. This approach aims to educate IRS employees; ensure TIGTA promptly and thoroughly reviews complaints and provides timely responses to disclosers; and coordinates, where necessary, with other agencies on relevant matters.
A number of submissions remarked on the recently enacted Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019, stating that the protections it introduced need to be extended to whistleblowers that make disclosures to the IGTO. This would require the IGTO to become an 'eligible recipient' under the TAA 1953.
In his 2019 Henry Parkes Oration, Professor A. J. Brown of Griffith University made a number of relevant suggestions which could improve public confidence in the protections provided to individuals making disclosures to the IGTO.
Amongst a number of suggestions in his seven‑point plan, Professor Brown recommended that:
the PID Act be comprehensively overhauled, or replaced, so as to better support a consistent, coherent and workable approach;
the criteria for whistleblowing outside official channels be reformed to ensure such disclosures are protected;
the viability of public servants to use internal and official channels for the disclosure of wrongdoing be safeguarded by amending the PID Act;
whistleblowers be effectively supported in enforcing the protections they are provided under legislation by, for example, creating a whistleblower protection authority; and
a general public interest defence be provided to any person charged with an offence of unauthorised disclosure.
The committee is concerned that the existing public interest disclosure frameworks may be too complex and confusing and, hence, are inadequate for the important role they play in maintaining the integrity and good governance of Australia's domestic institutions.
As stated by the Moss Review, the committee notes that few individuals who make public interest disclosures feel that they are supported, that their disclosures are adequately investigated, and that their agency adequately addresses the conduct reported. Further, the committee notes the evidence it received indicates that disclosers report experiencing reprisals as a result of bringing forward their concerns.
The committee notes Recommendation 12.1 of the PJCCFS 2017 whistleblower protections inquiry which recommended that a Whistleblower Protection Authority be established in an appropriate existing body and be prescribed as an investigative agency. Given the complexity, confusion, and the potentially poor outcomes for individuals who make disclosures, the committee sees merit in having a single, centralised, agency responsible for the oversight of enforcing whistleblower protections. The committee supports the examination of the establishment of such an authority, and suggests that this be considered as part of a review of the PID Act.
As recommended by the Moss Review, the committee believes the IGTO should be recognised as an investigative agency under the PID Act to allow it to receive internal public interest disclosures, related to other agencies, regarding matters it already has the power to investigate.
The committee agrees with the submitters who recommended the protections introduced by the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 be extended to whistleblowers who make disclosures to the IGTO. Hence, the committee recommends the IGTO be made an 'eligible recipient' under the TAA 1953.
The committee notes the IGTO's concerns regarding legal inconsistencies between the IGT Act and the ITAA 1953 regarding disclosures made by taxation officers, and recommends the government make their provisions consistent.
In alignment with the IGTO's recommendation, the committee agrees that the requirement for the Tax Commissioner to authorise disclosures by tax officers severely limits the IGTO's ability to carry out its prescribed functions. As such, the committee believes the authorisation needs to be removed if an IGTO review has either commenced or is being contemplated. The committee agrees that, upon either of these two events occurring, tax officials should be protected automatically from that point forward.
The committee recommends an independent review of the PID Act be undertaken in 2021, which includes consideration of establishing a single whistleblower authority.
The committee recommends the IGTO be made an 'investigative agency' under the PID Act.
The committee recommends the IGTO be made an 'eligible recipient' under the TAA 1953.
The committee recommends the Australian Government resolve the inconsistencies between the TAA 1953 and the IGT Act regarding taxation officers who make unauthorised disclosures to the IGTO.
The committee recommends the Australian Government remove the requirement for the Tax Commissioner to authorise disclosures by tax officers if an IGTO review has either commenced or is being contemplated.
Senator Slade Brockman