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Tuesday, 25 November 1986
Page: 3706

(Question No. 988)

Mr Lee asked the Treasurer, upon notice, on 8 May 1985:

(1) Did the Auditor-General's Efficiency Audit Report on Collection of Sales Tax by the Australian Taxation Office substantially confirm the claim made in the NSW Legislative Assembly on 18 and 23 September 1982, by the former Member for Cronulla, Mr Egan, MP that no effective action had been taken by the Fraser Government against sales tax avoidance schemes which had been identified within the Australian Taxation Office as early as June 1979.

(2) How did each of the 3 principal schemes referred to by the Auditor-General operate.

(3) When were each of the schemes identified within the Australian Taxation Office.

(4) Were repeated requests made by Branch Offices that action be taken against the schemes; if so, why was no effective action taken until Mr Egan's speeches to the NSW Legislative Assembly in September 1982.

(5) What was the loss of revenue in respect of each scheme prior to September 1982.

(6) Have assessments now been issued in respect of all identified incidents of attempted sales tax avoidance under each scheme.

(7) When was each assessment issued and (a) what was the amount of each assessment and (b) which amounts are still to be recovered.

(8) Will he table in the House the names of each company or individual to whom these assessments were issued; if not, why not.

(9) Have any of the companies or individuals to whom the assessments were issued gone into receivership, liquidation or bankruptcy.

(10) What is the assessed tax owing in respect of each such company or individual.

(11) Is the Australian Taxation Office satisfied that assets of the companies or individuals have not been disposed of for the purpose, or with the effect, of avoiding payment of tax under the assessments.

(12) If not, what action can the Australian Taxation Office take to recover the amounts owing from the beneficiaries of any such disposition and has any such action been taken.

(13) In view of Statements by the former Commissioner of Taxation that the schemes referred to Mr Egan were ineffective evasion schemes what action is being taken to institute criminal prosecutions against persons associated with the schemes.

Mr Keating —The answer to the honourable member's question is as follows:

(1) The Crimes (Taxation Offences) Act 1980 was enacted to counter tax avoidance arrangements, including sales tax avoidance schemes of the kinds to which the question relates, whereby companies and trustees were rendered unable to pay tax. Although sales tax schemes designed to avoid the operation of that Act continued after 1980, intensified administrative activity by the Australian Tax Office in 1981-82 brought them to an end. The Commissioner of Taxation and his predecessor referred to the matter in their Annual Reports for 1981-82, 1982-83, 1983-84 and 1984-85.

(2) All three schemes were basically similar (and are described in the Commissioner's 1982-83 Annual Report). In a series of artificial and contrived sale transactions, goods or property were allegedly passed through entities controlled by the scheme promoter, with the claimed result that the taxable sale value of the goods was reduced to insignificance. Equitable charges, collapsible loans, options to purchase goods, and assignments of interest in goods were among the techniques used to allegedly bring about a reduction in sale value. In addition, the schemes were intended to have the safeguard that, if the reduction in sale value was challenged, sales tax liability would fall upon a promoter entity being a person or company of straw.

(3) In June and September 1979 and July 1980.

(4) Early assessment action on Branch Office recommendations was taken in December 1979 but was later found to be based on an incomplete examination of the operation and documentation of the schemes. When full details were obtained and examined a different assessment action was taken. This action was instigated in June 1982 and is supported by the subsequent advice of senior counsel. Assessment in each case was possible only after a detailed investigation was carried out.

(5) The Commissioner is of the view that the schemes were not effective and did not circumvent the existing provisions of the law. Loss to the revenue will occur only to the extent that assessed tax finally proves to be irrecoverable.

(6) Assessments amounting to $68m (approx.) in primary tax have been issued to 98 participant wholesalers in the three schemes. Assessments amounting to $12m (approx.) in primary tax were issued prior to 18 September 1982. Assessments of the 7 remaining identified participants amounting to some $3m in primary tax are in course.

(7) and (8) The secrecy provisions preclude the Commissioner from divulging details of individual taxpayers' affairs. By way of general comment, the Commissioner advised that most of the assessments had been disputed by taxpayers under objection and appeal procedures. As at 30 June 1986 $6m in tax had been paid and $4m in primary tax was the subject of settlement negotiations and/or arrangements. Recovery action is being initiated once the objections are determined and the tax assessed remains unpaid.

(9) Yes-11 companies and no individuals.

(10) See (7) and (8).

(11) and (12) Where there was any indication that assets of the participant taxpayers were being or had been transferred away from the taxpayer, appropriate action was taken under the sales tax law. In addition, the application of the relevant provisions of the Crimes (Taxation Offences) Act 1980 is being considered in appropriate cases.

(13) As outlined in the Commissioner's 1983-84 and 1984-85 Annual Reports a number of joint task forces comprising members of the Australian Federal Police, the Australian Taxation Office and the office of the Director of Public Prosecutions have been established to investigate suspected breaches of the law by persons implicated in the schemes. Such investigations encompass the possible application of the Crimes (Taxation Offences) Act. Several persons have already been charged with and prosecuted for offences under Crimes Act 1914.