Author Archives: Rob

Scary precedents by the ATO


Robert Gottliebsen – in the Australian..

The Australian Taxation Office had already spent $40m of taxpayers’ money on the ‘gold case’. Picture: Bloomberg

Three cheers for the High Court of Australia! Faced with one of the most outrageous appeal requests ever made by a government body, Australia’s highest court declared: “No, we will not hear that Australian Taxation Office appeal.”

I am not surprised. There is no way the High Court I respect would allow itself to be party to a continuation to what appears to be one of the biggest cover-ups in our recent history — the fact that more than $3bn of state GST had vanished because of ATO mismanagement.
And, as I explain below, in that appeal was a secret agenda to further damage Australia’s poor taxation appeals system.

The High Court made the ATO pay both its own and its opponent’s costs, which adds to the $40m of taxpayers’ money the ATO has already spent on the “gold case” as part of the cover-up.
At the same time it was another blow to the Administrative Appeals Tribunal, which was unable to fathom what the “gold case” was all about. Top marks to the full Federal Court which exposed the AAT mistakes.

The ATO wanted the High Court to interpret the law of the land to allow the Australian Taxation Office to undertake actions that, in my view, would be regarded as totally abhorrent by most taxpayers.

READ MORE:Taxman defied own expert to ruin refiners|Risks in taxman’s ‘gold case’ appeal|New chapter in ATO gold case|No silver lining in ATO’s gold fiasco

What the ATO wanted to be able to do was submit in an appeal case tens of thousands of documents — in the “gold case” it was 44,000 documents covering 13 volumes — and declare that every one of the words in the documents could be used to bankrupt taxpayers without any court debate or cross examination. Had the High Court heard the ATO appeal and upheld it, only action by the parliament of Australia would have been able to protect its citizens against what is increasingly looking like a government body where elements have gone feral.

It’s worth recalling some of the facts in the “gold case”.

Among the 44,000 documents submitted were two internal emails between persons who were not a direct party to the case. In those emails there was a reference to “GST loopholes”, which the Federal Court said were unexplained and possibly ambiguous.

A director of the former gold refining company that had been bankrupted by the ATO and a key witness, Phillip Cochineas, was not a party to these emails and in the Administrative Appeals Tribunal was not cross-examined on them. The emails were not the subject of any submissions by the parties during the case hearings but were referred to in the ATO’s final submission to the Administrative Appeals Tribunal.

When the tribunal prepared judgment on the case they plucked these two obscure emails from the volumes of evidence and used them as part of the reasons why they found in favour of the ATO and against the bankrupt gold refiner.

From a community view this was a very dangerous precedent and so not surprisingly the full Federal Court said it “constituted a denial of procedural fairness”.

In the ATO application to appeal this part of the Federal Court decision, the tax collector claimed that it was incumbent on the taxpayer to have addressed the documents in its own evidence without having been taken to them by the commissioner.

If that view was declared law by the High Court then it would have meant that in any tax case involving vast volumes of material, the taxpayer would have to comb through every word because the court could pick out an obscure statement from third parties to find against the taxpayer.
This would have ended any pretence of a fair appeal process in taxation in Australia.

What is disturbing is that the Administrative Appeals Tribunal upheld the ATO’s right to use this horrible practice.

It’s important to remember that all the actual evidence that the ATO had put forward on the gold refining industry was trashed by the Federal Court. Accordingly, the ATO’s entire case to bankrupt the Australian privately owned gold refining industry was declared invalid. It faces huge damages claims.

The ATO did not appeal these findings.

Instead, it selected an area where it believed it could use the gold case to substantially widen its power over the entire business community. It is part of a very disturbing trend developing in the ATO which was gaining momentum — at least until the High Court stopped it.

Now the parliament of Australia must do its job and provide proper rights and systems to collect tax via legislation. Regulations have no impact on a delinquent ATO.

As I pointed out earlier this week in the article headed “Hand grenades lobbed at our taxation system”, the Inspector General of Taxation has concluded that the methods used by the ATO to garnishee taxpayer bank accounts — as applied in the Reid case, which is separate from the “gold case” — were different to what the tax commissioner had told the parliament of Australia.

Misleading parliament is a very serious accusation to be made against a public servant and if there is a guilty verdict it carries heavy penalties. The tax commissioner, of course, will have his chance to explain his position to the parliament.

The inspector general also reveals that the ATO discovered in March 2015 that $2.45bn was missing from state GST revenue. It took the ATO two years to block the loophole.
Instead of chasing the thieves or blocking the loophole, after that $2.45bn discovery the ATO began bankrupting gold refiners, apparently as a cover-up.

The administration of taxation in Australia via parts of the ATO is deeply flawed.
The nation can be very grateful that the High Court of Australia has not substantially increased ATO powers but we now need the parliament to finish the task.