Tax Commissioner Michael D'Ascenzo has warned the staff of the Australian Taxation Office through an email that providing details to an independent inquiry is also considered a breach of law.

“As a tax officer you should be aware that privacy and secrecy laws still apply to any submissions you may choose to make,” Mr D'Ascenzo's email said.

“Given this, I would like to remind you to be careful in providing confidential information and that the law does not allow you to disclose identifiable taxpayer information unless directly requested to do so by the inspector-general's office.''

The e-mail follows after the Senate Treasury requested for a tax inquiry due to a series of delays and errors in tax return payments and lodgements. The inquiry was requested by the inspector-general and initiated by Assistant Treasurer, Nick Sherry.

The system was purely blamed on a computer upgrade that started in 2004. The cost for an upgrade reached $445 million but has increased to more than $800 million.

Independent Senator Nick Xenophon told a local paper that the e-mail sent by the Commission is an intimidation to the staff.

''There is a concern that tax officers may be fettered by the commissioner's email to his employees,” he said.

Senator Xenophon said he was concerned about the letter, which did not state clearly that tax officers could provide any information regarding the inquiry since it would be be considered as “confidential” by the inspector-general.

Ali Noroozi, the inspector-general, commented that Mr. D'Ascenzo's e-mail was technically correct.

''To the extent that tax officers are still concerned, if I actually request information from tax officers under my legislation they are fully protected.

''Any tax officer who comes to us off their own bat, we can guarantee confidentiality. And where we request information from tax officers, they are fully protected.''

Senator Sherry has assured the Tax Commissioner that there will be no prejudice against officials that provide information to the inquiry.

On the other hand, ATO officials insisted that its computer systems are in order and it will not cause undue delays once taxpayers start filing returns in the new financial year.