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Thursday, 5 February 2009
Page: 534


Dr KELLY (Parliamentary Secretary for Defence Support) (10:32 AM) —I rise to support the Foreign Evidence Amendment Bill 2008, which was introduced by the Attorney-General, the Hon. Robert McClelland, in the last session. This bill appears at first glance to be rather technical but it is in fact a very important piece of legislation. It is important because it will enable the Taxation Office and the government to see that our taxation laws are fairly and efficiently executed and that all Australians pay their fair share of the tax burden—increasingly important in these circumstances that we face at the present time. At a time when many Australians are facing the possibility of hardship as a result of the global economic downturn, it is important that everyone has confidence in the fairness and integrity of our taxation system. Nobody likes paying taxes, but the Australian community understand why we need a taxation system and they have confidence in the way our tax system is administered. That is why Australians are among the world’s most conscientious taxpayers. Support for the taxation system will, however, rapidly erode if taxpayers become convinced that some individuals are able to dodge their responsibilities. Ordinary Australians will soon ask why they should pay their taxes when a handful of wealthy individuals are able to avoid paying theirs.

This bill will make the task of ensuring fairness in our taxation system easier. It will do so by enabling the Commonwealth Director of Public Prosecutions to gain access more easily to business records and other forms of evidence from foreign countries, thus making easier and quicker the prosecution of those who have sought to avoid paying their fair share of taxation. Although this bill applies only to the Commonwealth, the Attorney expects to have discussions with his state and territory counterparts to examine the extension of its terms by way of regulation to state and territory proceedings as well.

The use of evidence gained from foreign countries in Australian courts is governed by two pieces of legislation, the Mutual Assistance in Criminal Matters Act 1987 and the Foreign Evidence Act 1994. These acts enable the Commonwealth Attorney-General to request certain types of information from foreign countries for use as evidence in Australian court proceedings. But, in the years since these acts were passed, certain limitations in their scope and application have become apparent, particularly in relation to taxation cases, which can be very complex and which frequently require extensive documentation. This bill seeks to remedy these deficiencies.

It is particularly important that these deficiencies be remedied now, because the Taxation Office and the Australian Federal Police are currently engaged in Australia’s largest ever campaign to crack down on tax evasion, known as Operation Wickenby. This campaign began in 2004 and is still ongoing. It is targeting the minority of wealthy individuals who have sought to avoid or evade their tax responsibilities. By the end of 2008, Operation Wickenby had resulted in the launching of 23 criminal investigations involving 249 completed tax audits. As a result of these investigations, 28 people have been charged on indictable offences and more than $200 million in tax liabilities has been discovered. Nearly $150 million in unpaid tax has been collected.

Operation Wickenby is part of the international campaign to stamp out tax evasion and money-laundering through the use of various bogus offshore investment schemes. One of the largest of these is based in the Channel Islands, a well-known tax haven. Recently we saw the arrest in Jersey of Mr Philip de Figueiredo, head of the Swiss tax haven firm Strachans and one of the alleged principals in the offshore tax schemes used by a number of prominent and wealthy Australians. Australian authorities want to extradite Mr de Figueiredo to face charges of tax fraud. It is important to note in passing that Operation Wickenby was begun under the previous government, presumably with the support of all the members of the Howard cabinet. It is not an ideologically motivated attack on the wealthy; it is an effort to enforce the existing tax law and to ensure that all Australians, wealthy or otherwise, pay their fair share of tax.

The Commonwealth DPP has advised the government that the current provisions of the Foreign Evidence Act are inadequate for the purpose of gathering the evidence from overseas which is necessary for the successful prosecution of a number of cases arising from Operation Wickenby. Most importantly, the current act makes it difficult to gain access to foreign business records, which are frequently the central pieces of evidence in cases where tax has been evaded through the transfer of money to other countries or where money has been earned through business activity in another country. If this bill is not passed in a timely manner, there is a risk that some of these cases will be put at risk. I am sure that it is an outcome that no-one in this House would desire.

To make it clear that the terms of the Foreign Evidence Act apply to foreign business records, this bill amends part 3 of the act to ensure that foreign business records may be made available to Australian authorities unless they are found by a court to be unreliable or privileged. The bill also creates a presumption that such records meet the requirements for admission as evidence to Australian courts unless evidence to the contrary is produced. In other words, where a judge, magistrate or other officer in a foreign country has certified that testimony was given in accordance with the law of that country, the responsibility for proving otherwise will rest with those wishing to challenge this rather than with the Australian authorities. This will make it much easier for Australian authorities to obtain such records and to use the evidence contained in them to prosecute individuals who have evaded their tax responsibilities.

This does not mean that business records obtained from overseas will be automatically admitted as evidence in Australian courts. The courts will retain their current discretion to refuse to admit such evidence at the application of a party to the case. In fact, this bill gives the courts greater flexibility in determining the use to which such material may be put. This bill expands the scope for retaining such material, not the scope for its use as evidence in Australian courts.

To reinforce this point, the bill before us removes the obligation on the Attorney-General to certify that material received from a foreign country in response to a request under the Foreign Evidence Act satisfies the requirements for testimony. This question will now be left entirely to the discretion of the courts. The court will have the power to reject such material completely or to limit the use which may be made of any given piece of evidence in the case before it. The bill says:

The court may limit the use to be made of foreign material if there is a danger that a particular use of the foreign material might be unfairly prejudicial to a party to the proceeding concerned.

So this bill actually increases the safeguards for defendants in such cases.

The bill also addresses some other areas in which the current law has been found to be inadequate for the purposes for which it was intended. The bill makes it easier to admit as evidence testimony taken overseas by clarifying the question of whether such testimony must have been given under oath. Some countries do not require evidence to be given under oath or affirmation but instead impose an obligation to tell the truth by some other means. In some cases testimony given in a foreign country in this manner has been challenged on the grounds that it does not comply with Australian procedures for the giving of evidence, even though the testimony was given in conformity with the law of the country in which it was given. This bill provides that testimony will be admissible if it was given under an obligation to tell the truth that complied with the law of the country in which it was given. The admissibility of such evidence will still be at the discretion of the court but it will no longer be deemed to be inadmissible merely because it was not taken under oath.

The bill also amends the Foreign Evidence Act to broaden the definition of ‘testimony’ so as to take into account the rapid changes in technology which have occurred since the act was passed in 1994. Where the act says ‘audio or video tape’ it will now say ‘a tape, disk or other device from which sounds or images are capable of being reproduced’. This is a sensible provision which reduces the possibility of relevant evidence being ruled inadmissible on the grounds that it was recorded on a medium which did not exist in 1994, such as a mobile phone text message or a posting on a website.

Tax evasion is a serious criminal offence. Not only does it deprive the Commonwealth of revenue needed for the many vital functions carried out by the federal and state governments, such as national defence, the payment of pensions and benefits, and support to our health and education systems; it also undermines confidence in the integrity of our taxation system thus encouraging other people to also evade their tax responsibilities. We all know of countries where there is no social consensus about the payment of tax, where most people feel that it is legitimate to avoid and evade paying tax or where corruption enables people, particularly wealthy and powerful people, to avoid taxation altogether. This is the path to lawlessness and social breakdown.

Everybody dislikes paying tax and that is why it is all the more remarkable that most Australians are conscientious about meeting their tax obligations. They obey the law because they know their taxes are being spent on important and necessary programs and because they have confidence that the tax system is being administered fairly and honestly. That is why cracking down on the small minority of tax evaders is so important. Campaigns like Operation Wickenby are not vendettas against the wealthy. They are a necessary part of maintaining public confidence in the integrity and fairness of the tax system.

If ordinary Australians—people like the wage earners, farmers and small business operators of Eden-Monaro—whose hard work has built the prosperity we now enjoy, see wealthy lawyers, celebrities and company executives avoiding tax with impunity, they will quite reasonably ask: ‘why should I pay my tax or obey the law in other areas if the law is not being enforced against these people?’ This is all the more important as we face the current difficult economic circumstances in which many people face the possibility of losing their jobs, their investments and even their homes. At such times people are quite rightly angry when they see a handful of wealthy individuals enriching themselves by evading their tax responsibilities. That is why it is the responsibility of this parliament to see that the conscientious and diligent officers of the ATO, the AFP and the Office of the DPP do not have unnecessary obstacles put in their way as they investigate and prosecute such individuals. Where legislation is inadequate or out of date, it is our job to see that it is strengthened and brought up to date in a way which makes it easier for these agencies to do their job while, of course, safeguarding the right of defendants to argue their innocence before the courts. That is what this bill does, and I congratulate the Attorney for bringing it forward. It will also complete another vital aspect of the sound regulatory regime that exists in this country which has put us in a much better position in terms of the global financial situation. Therefore, I urge both this House and the Senate to pass this bill without delay.