Tax Office won’t prosecute Australia’s worst tax cheat
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Last Friday Second Commissioner of Taxation Bruce Quigley gave a speech to the Tax Institute of Australia in Tasmania. He let a sizeable cat out of the bag, telling his audience that in one case a $242million dollar assessment was raised against a high wealth individual involved in Operation Wickenby. The tax office refuses to identify the individual concerned, citing privacy and tax secrecy concerns. A spokesman for the Commonwealth Director of Public Prosecutions told Crikey they were unaware of the matter. Crikey understands the case was settled by the ATO with the tax cheat concerned willing to cough up the money owed. The tax office has granted the cheat what I call a quasi indemnity from prosecution. This is because the ATO have settled the matter for a monetary amount without referral to the DPP. The DPP never got to look at the file and cannot judge the case in accordance with the prosecution policy of the Commonwealth. We have been told by tax commissioner Michael D’Ascenzo that Wickenby involves some of the worst tax cheating he has seen. False documents, hidden bank accounts and international profit shifting are just some of the descriptions he has used to describe the transgressions against our country’s tax laws. So you can only imagine the sort of shenanigans this cheat was involved in to have to pay a $242million tax bill. And what does Glenn Wheatley, the trophy boy for Operation Wickenby, think of all this? He was convicted in 2007 and sent to jail for 15 months for avoiding $318,092 in tax. Let’s look at some recent tax office prosecutions. In May they prosecuted a Sydney woman and she was sentenced to seven years jail in the Sydney District Court for GST fraud of $506,511. In April a Southern Highlands man has today been sentenced to three years jail in the Downing Centre Court in Sydney for GST fraud totalling $227,660.58. Where is the consistency? Or is there a different rule for the rich and powerful in this country? Last year I told Crikey readers that it was time to name and shame our worst tax cheats after details emerged on the ABC’s Four Corners program of tax cheating on a grand scale by Australia’s high-wealth population. Former Assistant Treasurer Chris Bowen said at the time:
There is something wrong with the system when Wheatley and other prosecutions have the book thrown at them and a “high-wealth individual” who cheated $242million isn’t referred to the prosecutor. It’s time for new Assistant Treasurer Nick Sherry to have a look at the prosecution guidelines between the ATO and the DPP and fix them up. Sherry did not respond to questions put to him by Crikey. On Friday Mr D’Ascenzo appears before Parliament’s Joint Committee of Public Accounts and Audit for the Biannual Public Hearing with the Commissioner of Taxation. Chair Sharon Grierson’s first question to him should be: why did you prosecute Glenn Wheatley for avoiding $318,092 in tax and not the cheat who avoided $242million? Let’s see. |
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25 Comments
One law for the poor, one for the rich and no law for the connected
Has anyone ever looked at the possibility of malice in these cases ? A former Commissioner, Trevor Boucher, introduced substantial rewards for tax officials, based on the money they brought in. If they were ever deprived of their bonuses, due to delays stretching over the fiscal year end or whatever, many of them used their powers to attack the taxpayer out of spite. In my own case, a tax official tried to make me and my wife bankrupt by including a huge amount of provisional tax, even though this would have evaporated within three months. The legal expenses to fight him off cost us our home. I later had some interesting correspondence with the Special Tax Advisor to the Ombudsman, Mr. Peter Haggstrom. He told me that we were but one of thousands and he was so angered that he was doing an “own motion” investigation of several hundred selected cases. He offered to send me a copy of his report when finished, but he left soon after (probably out of despair!) and the report never appeared. When I enquired about this, I was told that there was no report, but that the ATO had taken action to improve their processes in the light of Mr. Haggstrom’s investigations.
The disparity between the treatment of those who can cough up the money promptly compared with the avalanche of trouble tipped on those who can’t - and for comparatively small amounts, resonates eerily wiht our own experiences. Eighteen years later, I am still angry at the behaviour of the ATO, partly because at the same time, while they were attacking us for a $50,000 liability, a well-known lady pop singer of the day who owed $300,000+ was let off with a payment of about 20% of that amount. (I still have the newspaper clipping!). Its not the tax, its the unfairness that gripes.
Surely someone with the author’s background and experience can imagine the Commissioner’s answer which would, I guess, be along the lines of “A. I don’t decide on that sort of prosecution but, setting that aside, B. what should I rationally do when the taxpayer says - and I believe him - ‘I am not in Australia now and, rather than spend a day in gaol with a criminal conviction to my name I will go further than spend millions and several years in court defending myself - something I also want to avoid as I do gaol - I will happily live in Greece, Italy, Switzerland, Israel, Shanghai, Brazil, or wherever and, as well, you won’t get a cent out of me because anything I have in Australia is already mortgaged to a bank or otherwise untouchable by you to pay my tax debts’? “
Julius
For B: They should charge them, convict them in absentia and restrict their ability to travel and do business in the future.
I imagine many countries have restrictions on how convicted tax cheats can operate.
Surely this is better than taking the money and not charging as where is the deterrent for tax theft in the future if you can just threaten the law enforcers and do a deal?
Whilst I understand that pragmatism leads to out-of-court settlements, I am absolutely gobsmacked that such an egregious intention to avoid taxation is not punishable other than by payment of a financial obligation. It would seem that for the rich, coughing up their just deserts is seen to be sufficient punishment.
This disgusting individual should be outed for the low life that they are, living in Australia and taking all of its benefits whilst indulging in what can only be described as massive tax fraud. I can only hope that some investigative journalist can find out who this disgusting individual is and make sure that they receive the appropriate level of publicity commensurate with their disgusting behaviour.
Furthermore such a settlement process is only made feasible because the avenues of legal defence, aided and abetted by lawyers whose only interest is money, could drag out such a recovery case through the legal process over years. There is something seriously wrong with our judicial governance processes if this crime remains unpunished.
It would seem that the Tax Office never let ethical considerations get between them and the dollars.
I certainly don’t condone the actions of the tax cheat in any way, but if these are “high wealth” individuals, can we assume that perhaps what happens to them may affect the overall economy in a negative fashion - something the government would be quite averse to in the current climate?
Dear Nerida
Surely you are not proposing letting the rich steal with impunity so as not to upset the economy?
Not at all, Heathdon - just trying to find all the angles. Is my suggestion credible or ridiculous?
Maybe it’s a judgement call between deterrence and recoupment if they have to choose between them. If every jail term for a $100,000 evader convinces 100 potential offenders not to offend, that’s $10 million recouped. But the ATO might reason that the quarter-of-a-billion evasion is an outlier, and that the risk of losing it all if they prosecute outweighs the number of similar offenders to be deterred by an example.
If the tax laws were reasonable, many of you might have an argument.
The tax laws are not reasonable, and your arguments thus fail.
I am an aged pensioner, my assets are less than $500,000, but I have every sympathy with whoever copped the $242 million assessment, as the laws are so convoluted and abstruse as to invite both ridicule and non-compliance (the latter often by inadvertant omission or ignorance).
That’s why the ATO won’t disclose the particulars - they know most fairminded Australians would laugh in their face.
I mean, Nerida’s right. The DPP’s job is to uphold the law, but they were never told about this case. The ATO’s job is to bring in the bread.
You know the old saying; if you owe the ATO $318,092, you’ve got a problem. If you owe the ATO $242million, the ATO’s got a problem.
That’s what I was trying to say, Ben. Bravo. There’s no evidence of ATO corruption in this story.
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There is not only know evidence of ATO corruption, there is no evidence the ATO’s conduct was not entirely sensible and proper. Even if possible for the Commissioner to insist on prosecution I am not sure what could be achieved if the taxpayer (i.e. non-payer) was not on remand or on bail with all his passports in police hands and his alternative issuers of passports warned against letting him have anot foreign one. If he was not in that situation I am not aware that the Commissioner or DPP could get him convicted in absentia. In fact I am sure he would have to be extradited and I am not sure if any countries will extradite someone to us on a charge of tax fraud. Anyway there are too many exceptions for it to matter.
BTW nearly everyone seems to assume that the evil one is actually guilty of some major moral offence and a legal offence. I wonder, though undoubtedly there are some big tax frauds. We just don’t know how certain the Commissioner was of his being able to prove his case.
I fear that the person in question is not prima facie likely to be gravely hurt by being outed and pestered by the media. By the time he has a million or two a year going to the best PR people he won’t even have to resign from his favourite racing clubs and a big donation or two should have him dining with the PM. OK not quite, at least for a few years, but ALP bagmen will certainly be after him to duke and duchess him.
Now be honest with yourself, wouldn’t you put up with a lot of abuse and defamation for the chance to enjoy the other hundreds of millions?
Seriously how hard would it be for investigative journalists to find out who this is? There aren’t that many indivduals around who even have a net worth of $200+ million let alone a personal level of wealth that could result in incurring a tax bill of that much and being able to obviously pay it off easily.
Let’s put the prosecution question to one side. Isn’t it time for Australia to name and shame our worst tax cheats? A long time ago the tax commissioner used to publish the names of serious tax cheats in his annual report. The media loved this as it usually identified well known people. The ATO stopped this sometime in the early eighties - I’m not sure why.
The American lawyer Jack Blum who is one of the world’s foremost authorities on international tax haven avoidance put things into perspective . He said:
Settlements in these situations must be made public. And they must be made public for two reasons, first to ensure that there isn’t a cosy deal between the government and some very rich politically influential people, on one side. And on the other side as a deterrent to anyone else who might be thinking of doing this. Because as you can imagine if someone is out there cheating on taxes and he’s been publicly exposed he won’t become a knight.
He won’t exactly be an honoured citizen who’s given awards. He won’t be appointed to State business and State Commissions. And that’s very important.
Shaming them in their own community. And that is how it should be, because paying taxes is an essential civic responsibility. And the rest of us are the ones who pay for what these people don’t pay.
I think that, at least on balance Mr Seage, you are right. I can remember a father-son conversation of many years ago, of a kind in which I can imagine myself many times over as father or son, in which insouciant son was warned by reference to the “honours list” in which a well-known title businessman had appeared that “it is one thing for Sir X Y : for you it wouldn’t be the same thing at all”, the reference I think being to career and reputation with the implied assumption being that Sir X Y and his like would probably not be too fussed about the publicity - though I think he would have been wrong if he meant that in the case I think was being referred to.
Yes, restore the “honours list” then it will be the turn of the defamation lawyers to be wheeled in for bargaining over the terms of the listing!
Dear Nerida
Sorry about that. On re reading I see that you could also be criticising the governments rule by pr policy among many other things.
He or She must be on the rich list (or all of them ) and is a large donator to the Labor Party and probably the Liberal/National Party or you would think the Liberal Party would be jumping on this???? If you cheat the govt. and other tax payers , you should be named and shamed. This shows you have to cheat BILLIONS of dollars from the people and you can get away with it.
Or the ATO could argue that when making an example by prosecuting non-compliers, it should name and shame. But when making a deal to recover large amounts in return for not prosecuting, it should keep this as secret as possible, otherwise billionaires will realize they’re above the law. That means Bruce Quigley has screwed up big-time by spilling the beans.
Surely the person should be named and I would think that might be achieved by a good journalist, if the ATO refuses to do so. This episode is absolutely disgusting and shows how rotten the ATO has become along with its political masters.
Maybe James McDonald you are just being logically cute but the point is worth considering. On the whole it seems most likely that billionaires, and lesser members of the seriously rich, will start with the presumption that money can be deployed with a good chance of making them more or less immune to serious harassment by the forces of law and order. And their well paid advisers should make them feel that there are alternatives to honesty if money is the measure. However, actual and determined prosecution - by a significant margin over naming and shaming - would be quite a deterrent if it led to a few of the very rich going to gaol. (Gaoling failed formerly almost-very-rich like Rene Rivkin and Rodney Adler doesn’t quite meet the requirements I guess).
So it does look as though, assuming (a big assumption) that the Commissioner had a strong legal case, he was faced by someone who could stay offshore and didn’t have assets at risk in Australia. Come to think of it, we could start there and make some rude guesses. Setting aside the fact that all these people might be totally honest let’s have a go just on the principle that we are looking for people with an Australian connection that could qualify as those who might not be touchable in practice. Greg Norman? Not rich enough probably. Rupert Murdoch? Too well advised and protected by lawyers and, anyway his mother would be very cross with him. The Pratt estate? One can quite see how glad the Commissioner might be to pocket the $240 million (especially if his case was only strong because Pratt was being brought down by cancer and the ACCC) and not name the taxpayer and be seen to be preying on the weakened, if not weak. A member of the Lowy family? Well the Liechtenstein connection didn’t prove to be such a well-advised one. (The only merit of that suggestion is that it points to another clue to follow up, viz. what people with Australian connections were outed by the thefts from the Liechtenstein bank?) Perhaps Stephen Mayne could provide us with a longish list of those who might be rich enough to qualify to start with.
My money( if i had any) would be on a member of the Lowy family, you dont get that rich without some dodgy deals and is a donater to polical parties , Exchequer Eddie. Did know some staff that worked in the ATO, but the filthy rich have bars put on their accounts, to stop workers looking up their details and is all traced.