At least 150 Australian Taxation Office (ATO) officials have been investigated as part of a GST fraud crackdown, 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 in his report into the ATO’s management and oversight of fraud control arrangements for GST.
It singled out Operation Protego — the widely reported multi-agency response to the large-scale escalation of GST refund fraud that resulted in the payment of at least $2 billion in bogus refunds.
The scam first came to the ATO’s attention in December 2021, when the agency began receiving an increasing number of referrals about suspicious income tax and GST refunds.
It involved people acquiring an Australian Business Number (ABN) for a sham business and using MyGov to submit false business activity statements to receive GST refunds.
The scam has been widely reported as the “TikTok GST scandal” because the social media platform, as well as others such as Facebook, allowed it to go viral due to a high number of users promoting it there.
The auditor-general’s report noted that the tax office’s systems to catch GST fraud were in some areas lacking and “not fit for purpose”.
The ATO, it said, had “largely effective” strategies to detect and deal with GST fraud but “does not have a procedure to respond to a large-scale fraud event”.
ATO ran Operation Protego to stop GST fraud, but former officials were involved in scam
The report found Operation Protego itself was launched only after the ATO determined the scale of attempted GST fraud “exceeded the ATO’s business-as-usual capacity to treat”.
In April 2022 the ATO reallocated about 470 staff in GST-related roles to work on Operation Protego and on May 6 2022 issued a public warning to people not to engage in this GST fraud.
“Operation Protego targets are suspected of fraudulently obtaining GST refunds amounts between approximately $38,900 and $2.4 million and attempting to fraudulently claim GST refunds between approximately $8,100 and $32.3 million,” the auditor-general’s report noted.
The ATO established two senior executive-level committees in May 2022 to look at the issue and found that many of those engaged in the scheme (57 per cent) were government welfare recipients.
About 30 per cent tried to obtain a fraudulent refund a second time and 10 per cent attempted a third time, the report noted.
The ATO also identified “individuals who have had their identity stolen and used to lodge fictitious BAS or have been coerced into participating or providing credentials to third parties”.
But the ATO advised the auditor-general in October last year that “it cannot identify the number of Operation Protego participants who were subject to identity crime and third-party fraud”.
The ATO only confirmed that “as of October 2023, 150 ATO officials suspected of Operation Protego behaviours have been investigated using the ATO’s standard internal fraud procedures”.
“A range of treatment strategies have been applied by the ATO, including termination of employment and criminal investigations,” the report said.
The ATO told ABC News in a statement: “The majority of these were former contractors or ex-employees and were not working with the ATO at the time they are suspected of committing Operation Protego fraud.
“In line with the broader fraud population, some of the ATO officials were victims of identity theft and were not perpetrators.
“We have taken action against the small number  of those who were substantiated as having committed the fraud while working at the ATO. This includes termination of contract, administrative action, and criminal prosecutions.
“As a result of our actions, we are not aware of anyone currently working at the ATO who is suspected of committing the fraud.”
It said the ATO “has always treated fraud and corruption seriously and has zero tolerance for such behaviour”.
“We expect all ATO staff and contractors to act with the highest levels of integrity, and we will take all reasonable measures to prevent, detect and deal with fraud and corruption risk to the ATO,” the agency said.
More than 57,000 ‘perpetrators’ of GST fraud costing at least $2 billion
The auditor-general’s report noted that as of August 31 2023, criminal investigations resulted in more than 100 arrests and 16 convictions.
The report said the ATO estimates there have been more than 57,000 perpetrators of GST fraud, costing at least $2 billion.
“The total primary liabilities raised since the commencement of Operation Protego in mid-April 2022 to 30 June 2023 is $2 billion, with $2.7 billion in suspect GST refunds stopped prior to payment,” the report said.
The ATO had, as of August 31, recovered $123 million (including $67.6 million recovered via bank garnishees).
And penalties of more than $120 million have been issued to June 30 2023, with statutory interest about $220 million, and that “will continue to accrue on amounts not repaid”.
The ATO has not quantified the administration cost of Operation Protego “due to the significant manual estimation and apportionment of costs required”.
The report also noted that ATO’s chief internal auditor’s report of their review of Operation Protego on April 29 2023, states that the ATO’s analysis and assessment of its GST fraud risks is “not holistic or based on robust evidence”.
But since June last year the ATO has been “working towards clarifying the roles and responsibilities for assessing and managing GST fraud risks,” the report said.
In its response to the auditor-general’s report, the ATO said: “Fraudsters’ tactics continuously develop, and the environment is rapidly evolving.
“The ATO, like other tax administrations and organisations around the world, continues to face increasing fraud attacks, often seeking to subvert the improved client experiences offered through digitalisation,” it noted.
“Protecting the ATO’s systems and the broader tax ecosystem from fraud is a constant fight, and one that the ATO takes extremely seriously.
“We will continue to implement and build on the recommendations identified by the ANAO [Australian National Audit Office], which we consider will support the already improved management and assurance of fraud control arrangements for the GST.”
The ATO told ABC News that continued investments in the Serious Financial Crime Taskforce, the ATO, and its partner agencies, will enable them to “take strong action against individuals suspected of being involved in tax fraud”.
“Overall, the GST system is operating well with the vast majority of GST revenue collected voluntarily,” it said in a media statement.
“The ATO collected over $81 billion in GST revenue in 2022-23, a 10.5 per cent increase on 2021-22.”
The auditor-general’s report includes five recommendations aimed at strengthening assurance and improving responses to fraud events.
The ATO has agreed to these five recommendations in full.