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Tuesday, 31 March 1987
Page: 1513

To the Honourable the President and members of the Senate in Parliament assembled.

The humble petition of the undersigned elector respectfully showeth:

1. That there is no provision in the Income Tax Assessment Act for an independent tribunal of first instance to hear and determine disputed questions of liability in tax matters before liability (if any) is determined and before payment (if any) is ordered to be made.

2. That under the British and American tax systems tax disputes are heard by an independent judicial tribunal of first instance, before liability (if any) is determined and before payment (if any) is required to be made, and before penalties (if any) are imposed.

3. That under section 201 of the Income Tax Assessment Act payment of income tax and penalties (if any) are required to be made notwithstanding any review or appeal against an assessment, and non-payment carries an additional penalty of 20% interest which is not tax-deductible.

4. That section 167 of the Act empowers the Commissioner to make an assessment `of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person'.

5. That the powers of the Commissioner are in fact delegated to large numbers of persons employed in the Taxation Department, who are thereby empowered to levy income tax, additional tax, and penalties, in respect of sums of money which are in dispute and may not in fact be taxable income within the meaning of the Act, and who are therefore empowered to confiscate the capital assets of the taxpayer, until such time as a tribunal sets aside the incorrect assessment, which may run into several years.

6. That in the event of interest being payable on any refund, such interest is taxable in full in the year in which the refund is made, and is not averaged out over the period between payment to the Commissioner and refund by the Commissioner.

7. That in the case of additional tax being imposed, the amount of primary tax and additional tax may exceed 100 per cent of the taxable income in question, the surplus being, of necessity, a tax on capital.

8. That in fixing the amounts of additional tax and penalty interest under the Act, no or no sufficient consideration was given to the effect on the finances of the taxpayer of the provisions of section 51 of the Act in disallowing as deductions losses and outgoings of a capital, private, or domestic nature; or of the increases in the rates of tax that have occurred since the provisions for additional tax and penalties were first imposed in the Act vis-a-vis the rates of tax then in force; the maximum rates of primary tax and additional tax then in force being not more than 75 per cent of taxable income.

9. That the powers vested by the Act in the Commissioner and the large numbers of persons exercising delegated powers of the Commissioner, the periods for which investigations may be made, and the amount of penalties imposed, are excessive and oppressive by comparison with British and American tax standards.

10. That the construction of Assets Betterment Statements as used by the Commissioner and Boards of Review, in the investigation of taxpayer's affairs, is incorrect in fact and in contravention of a number of provisions of the Act, and results in the artificial creation of alleged understatements of income, alleged by the Commissioner and Boards of Review to be from an unidentified source, whereas in fact no such understatement has occurred, the error being due to the incorrect construction of the Assets Betterment Statement by the Commissioner and/or the Boards of Review, whereby taxpayers are wrongfully assessed to Income Tax and Additional Tax.

11. That an attempt to correct such error by a taxpayer was thwarted by the breach of duty to the Court and the taxpayer by certain barristers acting in a tax appeal to a Court from a decision of a Board of Review, in suppressing evidence and argument in support of the wrongful construction of the Assets Betterment Statement, even though the said Barristers knew of the nature of the incorrect construction and the breach of provisions of the Act causing or contributing to such incorrect construction, and were instructed to put such material before the Court, and invited by the Court to submit such material.

12. That the breach of duty of the said barristers caused or contributed to an incorrect decision being given by the Court, whereby the use of incorrectly constructed Assets Betterment Statements has been continued by the Commissioner and Boards of Review, and large numbers of taxpayers have been wrongfully assessed to Income Tax and Additional Tax arising out of the use of such incorrect Assets Betterment Statements.

13. That one of the said Barristers was subsequently appointed to a Commonwealth Court, and the other was a known recipient of Briefs in tax matters from the Commonwealth.

14. That in the said Tax Appeal the said Barristers were also instructed to submit to the Court arguments in support of an objection by the Taxpayer to the legal validity of section 26 (a) (now section 25A (1)) of the Act, and similar wording in the definition of ``income from personal exertion'' in section 6 of the Act, and/or the interpretation and administration of such sections against the taxpayer in the case in question, but the said Barristers failed to do so, in breach of their duty to the Court and the taxpayer. In so doing the said Barristers caused or contributed to an incorrect decision of the Court, whereby the taxpayer and other taxpayers have been subjected to incorrect assessments based on a continuance of the legally incorrect wording of such sections as a basis of liability. The legal invalidity of such sections has continued, notwithstanding the subsequent enactment of section 26AAA (property purchased and sold within 12 months), and Part 111A (Capital Gains Tax), provisions of the Act.

15. That in 1986 the jurisdiction of Boards of Review was transferred to the Administrative Appeals Tribunal on the recommendation of the Administrative Review Council pursuant to its Report No. 17 to the Attorney-General of the Commonwealth, notwithstanding the opposition to such transfer by the Commissioner of Taxation, the then present Chairmen and most members of the Boards of Review.

16. That the said Barrister who was appointed a Commonwealth Judge, and a member of the Board of Review who adjudicated in the said incorrect decision on the construction of the Assets Betterment Statement, and the alleged invalidity of section 26 (a) of the Act, are or are entitled to be members of the Administrative Appeals Tribunal, and the said Judge is entitled to be a member of a Federal Court which may hear appeals from the Administrative Appeals Tribunal.

17. That the breach of duty of the said Barristers in the said tax appeal amounted to a prevention or hindering of the administration of justice in the matters the subject of the said tax appeal.

18. That in exercising their powers and functions under the Administrative Appeals Tribunal and in the Federal Court, in relation to tax appeals, it is believed that the said Judge and member or members of the Taxation Appeals Division of the Administrative Appeals Tribunal (formerly acting as Boards of Review), will be constrained by bias into continuing to confirm incorrect assessments made or issued upon incorrectly constructed Assets Betterment Statements, and section 25a (1) assessments, in contravention of the law that justice should not only be done but also appear to be done.

19. That the Administrative Review Council, in its said Report to the Attorney-General, failed to set out the comparative methods and procedures in Tax Appeals, applying in Britain, America and Europe, by way of comparative analysis for the information of the Attorney-General and Parliament, in their consideration of the matter, even though knowledge of administrative appeals in such other countries was known to the said Council, as indicated in an earlier Report.

20. That the said Barristers in the said tax appeal failed or refused to have a pre-trial conference with the Commissioner of Taxation or his legal representatives with a view to defining the issues in dispute and or to achieve a settlement of the dispute, and increased the time and cost of the litigation to the detriment of the taxpayer.

21. That the said Barristers in the said Tax Appeal demonstrated an inadequate understanding of the constitutional relationship in tax matters between Parliament and the Commissioner acting on behalf of the Executive Government, and the constitutional rights of the public not to be subjected to unlawful and arbitrary taxation, and indicated a bias in favour of the Commissioner against the taxpayer to the point of preventing or hindering the administration of justice, whereby the taxpayer was subjected to considerable loss and detriment.

22. That in view of the Commissioner's Annual Reports indicating annual tax evasion recoveries of about $200 million (apart from additional tax and one-off recoveries such as bottom-of-the-harbour schemes), as against annual increases in Government Expenditure of about $5000 million on a straightline average basis, and the large amounts of income exempted under the Act from Income Tax and Special Services Contribution, and the possibility that many claims of tax evasion are not contested because of the legal expenses of lawyers and accountants, and the non-tax-deductibility of such expenses, tax evasion in itself is not a significant cause of high taxation in Australia, to warrant the taking away of the rights of taxpayers to fair treatment and natural justice.

23. That non-compliance with general constitutional requirements with respect to taxation contributes to illegality oppression and abuse of power by or on behalf of the Commissioner and his delegates, and by Boards of Review, and to the general levels of taxation being higher than need be, and to increases in Commonwealth Expenditure.

24. That the inequalities and oppression in the Australian tax system, and the immunity of Barristers from liability for negligence in the handling of cases in the Courtroom, generates a lack of confidence in the Australian tax and legal system, and is a disincentive to investment in Australia.

25. That although the said errors of fact and law in the construction of Assets Betterment States appear to have been made over a long period of time bona fide by the Commissioner and his delegates, and by Boards of Review, they are nevertheless continuing errors of fact and law artificially creating alleged understatements of income which impose considerable losses and hardship on affected taxpayers, in favour of the Commissioner and to the detriment of taxpayers.

Your petitioner therefore humbly prays:

1. That the Senate do refer to the Senate Committee on Finance and Government Operations or to the Committee on Constitution and Legal Affairs, the aforesaid matters for investigation and report, or otherwise cause the said matters to be investigated and reported to the Senate.

2. That the Income Tax Assessment Act and other relevant legislation be amended, and administrative action be taken to correct the aforesaid matters in the interests of justice.

3. That appropriate steps be taken to require the Commissioner of Taxation to refund to affected taxpayers primary tax and additional tax imposed on them in respect of alleged understatements of income artificially created within the Taxation Department by the use of incorrectly constructed Assets Betterment Statements or other financial documents, and therein incorrectly alleged to be understatements of income from ``unidentified sources.''

4. That assessments made and issued by the Commissioner of Taxation based on Assets Betterment Statements or other financial documents prepared within the Taxation Department be limited to identified omissions of income only.

5. That the maximum periods of time for investigation of taxpayer's affairs be limited to that adopted in Britain (namely, not more than six years subject to leave being obtained from a Tribunal for any further period up to a total maximum of ten years for good cause to be shown by the Commissioner); or in the United States of America (namely not more than three years, subject to further periods in the case of fraud, the onus of proving which is on the Revenue authorities); or to a maximum period of seven years in Australia being the period for which taxpayers are obliged under the Act to keep records.

6. That the Act be amended to provide that primary tax and additional tax should together not exceed 75% of the taxpayer's taxable income in respect of a year in question.

7. That section 167 of the Act be amended by omitting therefrom the phrase `the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied' and substituting therefore the phrase `the Commissioner may make an assessment of the amount of taxable income of that person upon which taxable income, income tax has been imposed by the Parliament'.

8. That section 201 of the Act be amended to provide that a taxpayer shall not be obliged to pay primary Income Tax or additional tax in dispute until such dispute is determined by an independent tribunal of first instance, and that penalty tax (if any should not commence to run on unpaid tax (if any) until from the date of such determination.

9. That interest payable by the Commissioner on refunds of tax be averaged out over the relevant years between dates of payment to the Commissioner and refund by the Commissioner.

10. That additional review and appeals tribunals of first instance be appointed pari passu with the numbers of such tribunals operating in Britain and America, on a relevant population ratio basis.

11. That the costs of the taxpayer incurred in contesting a tax assessment be made allowable deductions under the Act.

12. That in respect of assets acquired prior to 19th September 1985, the present provisions of section 25a (1) including as assessable income profit arising from the sale by the taxpayer of any property acquired by him `for the purpose of profit-making by sale, or from the carrying on or carrying out of any profit-making undertaking or scheme' and words to the same effect contained in the definition of `Income from Personal Exertion' in section 6 of the Act be repealed with respect to assets acquired prior to 19th September 1985; or alternatively that there be substituted therefor objective time-periods from date of acquisition not exceeding six years (in the case of real estate), and three years (in the case of other assets); or alternatively to otherwise remove the subjective purpose of the taxpayer as determined by the Commissioner of Taxation or his delegates or by a Board of Review, as a basis for liability, and substitute therefor the objective test of specified time-periods of holding determined by the Parliament as the basis for liability, indexed for inflation, where the period of holding exceeds the period of one year presently enacted in section 26aaa of the Act as a criterion of liability.

13. That with respect to Reviews of Assessments by Boards of Review and the Taxation Division of the Administrative Appeals Tribunal, and appeals to Courts, adequate pre-trial Directions hearings and Settlement Conferences between the Commissioner and the Taxpayer be available to either party on request, and in any event be made mandatory prior to a hearing; the person conducting such pre-trial hearings and conferences to be under a duty to reconcile the parties to the dispute to achieve a satisfactory settlement and to limit the areas in dispute, and not simply to perform the function of chairing such pre-trial hearings and conferences perfunctorily.

14. That Part VIIIA of the Judiciary Act be amended to provide that in all Courts, Boards, and Tribunals, exercising Federal Jurisdiction, Barristers be made liable for negligence in their conduct of proceedings before such Courts, Boards, and Tribunals, including Solicitors appearing as Barristers.

15. That the conduct in the Courtroom of the said Barristers in the said Tax Appeal be investigated as to whether such conduct prevented or hindered the administration of justice, and caused or contributed to a judgment which was incorrect in fact and wrong in law, and should be set aside, or otherwise nullified by legislative or administrative action.

16. That the procedures in operation in Federal and State Jurisdictions in the United States of America for the appointment to and removal from office of persons as Judges be investigated and reported to the Senate.

17. That a Judicial Appointments Commission be set up to provide for the calling of applications for appointment to fill judicial and Tribunal vacancies arising in the exercising of exclusive Federal jurisdiction, and for the hearing of objections thereto and the making of recommendations for appointment to the Governor-General, subject to ratification by the Senate, as in force in the United States Senate Judiciary Committee.

18. That a Judicial Conduct Commission on the lines of similar Commissions in the State and Federal Jurisdictions of the United States of America, be set up to provide for the lodging and hearing of complaints with respect to the continuing competence and conduct of Judges and members of Boards and Tribunals exercising Federal Jurisdiction, and the making of recommendations as to their removal from office or otherwise, to the Governor-General and Parliament (in the case of exclusive Federal Jurisdiction), and to State Governors (in the case of State Courts and Tribunals and Boards exercising invested Federal Jurisdiction).

19. That the Senate investigate and report whether or not the responsible Minister and the Senate were misled into transferring jurisdiction in Tax Reviews from Boards of Review to the Administrative Appeals Tribunal, by inadequate reports from the Administrative Review Council, and in particular by the failure of such Council in its Report to include statements as to the comparative practices adopted in Britain, United States of America, and Europe, for the hearing and determination of tax appeals; the relative numbers of tribunals of first instance to hear and determine such appeals; and the failure of such Report to indicate the desirability of adequate pre-trial directions hearings and settlement conferences, and of the making of certain amendments to the Act and Regulations with a view to expediting and shortening the hearing of Tax Reviews and Appeals by Boards of Review and the Courts, to save the parties the risk of uncertainties and costs; and the relevance of removing the immunities of Barristers and Solicitors from liability for negligence in the hearing of tax appeals and other aspects of the civil jurisdiction of Courts and Tribunals and Boards in respect of their conduct of the cases in the Courtroom, and incidental thereto.

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