May 1, 2012

The war is over: how Hoges and Cornell settled with the ATO

The most expensive tax investigation in Australia’s history is officially over. But Chris Seage, a tax consultant and former ATO audit manager, reports nobody is really happy with the outcome.

The most expensive tax investigation in Australia’s history is officially over. After an investigation lasting eight years, last night the solicitor for Paul Hogan and John Cornell issued a press release advising that his clients “and their related entities have reached a settlement with the Commissioner of Taxation on a ‘without admission’ basis”.

Hogan, Cornell and the ATO have agreed that the terms of the settlement are to be confidential. But as part of the settlement, the Departure Prohibition Order issued against Hogan has been revoked by the Commissioner. The settlement was reached following mediation before former High Court Judge Michael McHugh AC QC, who was brought in by both parties to break the impasse.

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3 thoughts on “The war is over: how Hoges and Cornell settled with the ATO

  1. Suzanne Blake

    Lawyers are the winners again

  2. Jim Wright

    In the late 1980s, the then Tax Commissioner Trevor Boucher instituted a system of bonuses or other rewards for ATO officers, based upon the money they brought in. During the downturn of the early 1990s, the ATO caused huge damage to taxpayers (especially small businesses and independent contractors). If you were days late in submitting your tax return (because clients were not paying you), the ATO would assume a return generating maximum tax and it was always a huge fight to get them to accept a return reflecting the true sequence of events. To bully you into making a quick capitulation, they would start charging interest (12% per annum compounded daily) and/or would take steps to bankrupt you, including any provisional tax in the amount claimed. The then Special Tax Advisor to the Ombudsman, Mr. Peter Haggstrom, received so many complaints that he hadn’t enough money to investigate them all, so he instituted an ‘own motion’ investigation of a few hundred typical cases with the little money he had left. Unfortunately, he left his job shortly afterwards (I wonder why?) and his report was quietly buried. A one-line comment in the ATO annual report said “we must do better” or words to that effect.
    Given this background, is it not fair to ask whether the hard line taken by the ATO is still being adopted in pursuit of personal rewards for ATO officers ? Given the substantial failure rate, one might argue that a more nuanced and gentler approach would have provided a greater return to the government exchequer. Someone should ask the ATO whether this regime is still in place. If it is, surely the amount handed over to employees ought to be a matter of public report.

  3. scottyea

    Suzanne – just like a plumber is a winner when your system fails. Law is actually hard, hard work.

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