Outgoing staff say corporate tax cheating could become rampant, as the Australian Tax Office has its workforce “gutted”.

Departing insiders, victims of public sector job cuts, say the ATO will struggle to regulate the industry.

Fairfax Media reports say there has been a cultural shift away from a “revenue focused” ATO to a “light touch” approach to tax enforcement.

The former tax officers say it poses a grave danger to federal revenue streams.

The leaks come at the same time as the Abbott government denies reports that ATO cuts would cost $1 billion in tax revenue.

Federal budget papers show it will cut ATO's staff numbers from 21,390 to 19,068 in the next 12 months, even after the agency lost 900 staff last year.

Two compliance managers were reportedly willing to spill the beans to journalists after being sacked in the leaving tide.

They painted a picture of over-tightened belts leading to neglected duties.

“Toward the end, a lot of our risk reviews weren’t converting to an audit process, we were getting a really bad conversion rate,” the manager said, adding that compliance teams were “lucky” to get two or three audits from every 20 corporate tax risk reviews.

“It’s an exception more than the rule that you’ll get an audit up,” he told the Sydney Morning Herald.

“The cases we were selecting weren’t the optimum cases where you’d be able to find issues that you could then convert into an audit.

“But as you lose the expertise, how are you going to pick the right cases?”

Another manager said the downsizing process was ridding the Tax Office of its experienced veterans and specialists.

“Some very senior capable people are going out the door and there are some others who were pushed to the side because they were too 'revenue focused', which means it was felt they didn’t understand the commerciality of a transaction,” he said.

“In Box Hill, about 10 EL2s (executive level two) from one area have gone out the door, and that area has been gutted.

“What’s left has not necessarily been the best.”

The manager warned that ATO’s tax compliance capability was virtually the only thing keeping tax avoidance and evasion in check, and warned of anarchy if it broke down.

“The Commissioner [of Taxation] says that 95 per cent of the revenue comes walking through the door, but it comes through the door because the compliance ability is there, the stick is in the cupboard,” he said.

“But if the stick is not in the cupboard, if people know there’s no cops on the beat, then it's going to lead to anarchy down the track then someone is going to realise that they’re going to have to go out and recruit these people again.”