Crikey reporter Sophie Black writes:

The tax avoidance
allegedly committed by Robert Gerard’s companies constituted
“indictable offences” which are “the worst a tax auditor will
encounter,” former senior Tax Office audit manager Chris Seage told
Crikey today. Which, he says, raises two fundamental questions:

1. Why did the ATO wipe all the penalties off?
2. Why wasn’t the Gerard matter forwarded to the Director of Public Prosecutions?

who spent 23 years at the ATO, today expressed serious reservations
about the privacy provisions surrounding the Gerard case. He told
Crikey he knew of two cases of political interference in ATO tax
investigations, including a case involving a minister from the previous
government and one involving a current government minister which is
“based on hearsay.”

When asked to categorically deny that the current government Minister was linked to the Gerard affair, Seage would not comment.

Echoing the concerns outlined in today’s Financial Review, Seage told Crikey the Gerard matter should have been forwarded to the Director of Public Prosecutions “because they’re indictable offences.”

matter should have been referred for a number of reasons, says Seage.
“International tax avoidance with the use of a sham company set up in a
tax haven deliberately contrived to deceive the Commissioner of
Taxation,” for a start, followed by “false and misleading statements
made to tax officers and hindrance of tax officers in the performance
of their duties.”

“Besides, it involves a high profile tax
payer,” said Seage. “The DPP want the high profile cases just to
ensure the integrity of the system … to ensure there’s no perception
that favours are done. The Director of Public Prosecutions is quite
entitled to ask Michael Carmody why the Gerard matter was not referred
to him.”

Seage argues that the privacy provisions cited by Peter
Costello as the reason why he didn’t know about Gerard’s fight with the
tax office create major problems with the ATO’s settlement process.
“The secrecy provisions of the Income Tax Act are hiding serious
deficiencies in the administration of tax law in this country,” said

“There’s no authority overseeing the ATO regarding the
settlement of big company audits … There is the potential for
corruption, and serious fraud as the ATO are not accountable to anyone
about the settlement of these large company audits…”

Seage, who also voiced concerns on the Jon Faine program on ABC radio this morning, told Crikey that the privacy
provisions created friction amongst auditors when he was at the tax office as companies
would often complain about the tax assessment they received from ATO
auditors to the ATO’s Canberra office. “Auditors affectionately call
ATO headquarters in Canberra Coward’s Castle … because they always buckle
under pressure.”

“The bureaucrat in Canberra would
settle the case, reduce the amount owing, without any regard to the
facts, to keep the company and the major accounting firms happy … The
main interference in the ATO’s settlement process is by the big
companies and partners in big accounting firms.”

“We need
an independent assessor because of the sheer weight of money involved,
hundreds of millions of dollars are being wiped off tax bills … that
means a lot of roads, schools and hospitals.”

“Australians are potentially losing billions of dollars through the stroke of a pen.”

We rang the offices of the DPP for their response. By deadline, they had not got back to us.