How fair is a tax
enforcement system that enables a high-profile Liberal donor to settle
his $75 million tax avoidance problem out of court, yet sends a first
time offender to jail for three years for a tax fraud of $85,000?

How
does a case of the magnitude of Robert Gerard’s slip through the net
when a mother of three is taken to court and sent to jail?

Surely the public perception that Gerard “got away with it” by avoiding
prosecution is a major embarrassment for the Australian Tax Office and
has the potential to wreak irreparable damage on their reputation.

The ATO’s official 2005/06 Compliance Report
acknowledges that “evasion and serious fraud threaten the integrity of
the revenue system – directly because of the threat to revenue and
indirectly through the impact this behaviour has on community
confidence in the system.”

But over the last year, only 117
briefs have been referred to the Director of Public Prosecutions by the
ATO. Nine matters were referred to the Australian Federal Police.And
somehow the Gerard case, which appears to be one of the worst cases of
tax avoidance in Australian history, was never referred to the DPP. So
how many other cases of tax fraud go unreferred?

“Our aim is to deterevasion
and serious fraud before it occurs …by publicising that any person
contemplating committing fraud or evasion stands a good chance of being
identified, convicted and imprisoned for a lengthy period,” says the
ATO. But what kind of message does it send the public to see a high
profile case of the magnitude of Rob Gerard’s escape referral and
prosecution?

Instead, the ATO point to this case as an example of one of their referrals to the DPP:

Maroochydore District Court Judge John Robertson sentenced
a 36-year-old mother of three on 1 December 2004 to three years
imprisonment for submitting false activity statements. She was
convicted of defrauding the Australian Government of more than $85,000
and attempting to defraud a further amount. The Sunshine Coast Daily reported
Judge Robertson as saying that while it was difficult to sentence “a
person of exemplary background who has made a real contribution”, the
Tax Office could not be expected to check every statement and tax
invoice, and “…the system depends on the integrity of taxpayers”.

Compare
the mother of three’s offence, a first time offender perhaps without
the means to acquire adequate legal representation, and who could be
described as a soft target, with a 14 year investigation into Rob Gerard’s Caribbean tax-haven deal labelled “tax evasion” by investigators.

The
ATO audit team demanded the highest possible tax penalties for Gerard’s
allegedly false and misleading statements, including several by Gerard
during the investigation. Normally, lying to ATO auditors should automatically
guarantee referral.

Gerard
settled with the ATO in mid 2003, for around $75 million. Given that
the ATO’s secrecy provisions mean that the public can’t know
the details of the Gerard case, we still don’t know why this matter was
never referred to the DPP for prosecution.

The ATO Prosecution Policy states that “cases which fall into the following categories are referred to the DPP:”

· all offences where the maximum penalty available includes a term of imprisonment exceeding 12 months;
·
any case where, in the ATO’s view, there is a realistic possibility of
the court sentencing the defendant to a term of imprisonment in the
event of a conviction;
·
all prosecutions where the Commissioner elects to treat an offence otherwise than as a prescribed taxation offence;
· any cases which involve prominent or high profile figures or which, for any reason, are likely to attract public attention.

“Prominent or high profile figures” which are “likely to attract public
attention”? Robert Gerard surely doesn’t fit that description, does he?

Peter Fray

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