At least 150 officials from the Australian Taxation Office (ATO) have been implicated in a widespread GST fraud scheme - TikTok GST scandal, resulting in employment terminations and criminal proceedings, according to a new report from Australia's auditor-general.
The ATO confirmed the figure to auditor-general Grant Hehir as part of his investigation into the ATO's management and oversight of fraud control arrangements for GST. The revelations come amidst Operation Protego, a multi-agency response aimed at combating large-scale GST refund fraud that has cost the government at least $2 billion.
Operation Protego, triggered by a surge in suspicious income tax and GST refunds in December 2021, uncovered a sophisticated scam where individuals acquired Australian Business Numbers (ABNs) for sham businesses and submitted false business activity statements through MyGov to receive fraudulent GST refunds.
The fraud, widely known as the "TikTok GST scandal" due to its viral promotion on social media platforms like TikTok and Facebook, prompted the ATO to undertake extensive investigations and enforcement actions.
The ATO's systems to detect GST fraud were found lacking in some areas, with the auditor-general's report stating that the agency lacked a procedure to respond to large-scale fraud events.
Operation Protego was initiated after the ATO determined that the scale of attempted GST fraud exceeded its business-as-usual capacity. The operation, launched in April 2022, involved reallocating approximately 470 staff to combat the fraud.
According to the report, suspects targeted by Operation Protego attempted to fraudulently obtain GST refunds ranging from $38,900 to $2.4 million. Notably, a significant portion of those engaged in the scheme were government welfare recipients.
As of October 2023, criminal investigations resulting from Operation Protego have led to over 100 arrests and 16 convictions. The ATO estimates that more than 57,000 individuals were involved in GST fraud, resulting in a loss of $2 billion to the government.
The ATO responded to the report, stating that it had taken action against the individuals involved, including termination of contracts, administrative actions, and criminal prosecutions. However, it clarified that the majority of those implicated were former contractors or ex-employees, with only a small number found to have committed fraud while working at the ATO.
The agency emphasized its commitment to combatting fraud and corruption, highlighting ongoing investments in enforcement efforts and the Serious Financial Crime Taskforce.
Despite the challenges posed by evolving fraud tactics and digitalization, the ATO assured the public of its dedication to protecting the tax ecosystem from fraudulent activities.
"Overall, the GST system is operating well with the vast majority of GST revenue collected voluntarily. The ATO collected over $81 billion in GST revenue in 2022–23, a 10.5% increase on 2021–22. The GST tax gap in Australia is 3.6% which is lower than many other similar jurisdictions. Additionally, the cost for the ATO to collect GST is 78c per $100," the ATO said in its statement.
In response to the auditor-general's recommendations, the ATO has agreed to implement measures aimed at strengthening fraud control arrangements for GST, including regular risk assessments and a comprehensive response plan for large-scale fraud events.
The revelations underscore the ongoing battle against fraud in Australia's tax system and the importance of robust control mechanisms to safeguard public funds.
