Taxation Law - Hoges v The Taxman - Taxation Considerations
Author(s):Frank Egan B.A., LL.B., A.C.L.A., F.T.I.A. (Notary)
Publish Date: August 05, 2008
Last night I watched a program presented by Sixty Minutes entitled “Hoges v the Tax Man” . They went on to say “…. you’ve never seen Paul Hogan like this – he’s hurt and he’s mad as hell. His reputation and a fair chunk of his fortune are on the line. So, Hoges is taking on the Tax Man. If what Peter Overton saw the other day is any indication, it’s going to be an almighty stoush.” Every taxpayer has the right to protect themselves, however, they need to keep the following in mind in circumstances like this.
Tax is a complicated business and revenue authorities normally do not take action against any taxpayer without first making due search and enquiry. Operation Wickenby is all about trying to ensure that all taxpayers who have come to the attention of the ATO are paying their proper share of tax. The authorities are not concerned with tax minimisation or even aggressive tax planning provided it has been done correctly and fully demonstrates to clients the various guidelines which govern this most complicated area of tax planning. What the ATO is principally concerned about is returning the correct amount of income, that is, assessable income, so that any taxpayer’s liability can be properly determined under the various tax acts. Of course they are concerned where either income or assets are either hidden, concealed or not disclosed leading to enquiries about their genesis and whether or not they are available to be taxed including capital gains.
Any undisclosed income and/or over-claimed deductions together with various arrangements or schemes will lead the ATO to enquire into taxpayers’ affairs. More so where tax havens are involved as they are all about concealment and bank secrecy laws which will hide a taxpayer’s affairs from general view including enquiries by revenue authorities. All revenue authorities get on the front foot where funds are directed to a tax haven and a taxpayer either fails to or refuses to disclose the financial dealings and arrangements in these international business centres.
The ATO may serve an onshore or offshore information notice requesting full details of the taxpayer’s affairs with respect to any perceived taxation non-compliance. Onshore notices have the full force and effect of the law behind them whereas offshore information notices require the co-operation of the taxpayer. Should it subsequently turn out that the taxpayer has failed to disclose income or capital gains then the treatment of their taxation affairs will be much harsher where they do not make a full disclosure.
The Tax Office makes hundreds of thousands of enquiries of taxpayers every year. The majority of taxpayers take the view that they will furnish the information required and should they have overlooked something they will have it independently quantified and pay the amount of the shortfall. There are others who have more complex taxation affairs and as a result this leads to further enquiries including the furnishing of business and other records which are germane to the issues at hand. Obviously high profile persons have more complicated tax affairs as they have available to them a wider range of choice with respect to taxation minimisation.
Kerry Packer has been often quoted about his particular view of taxation minimisation which was basically to pay what was owed and not a penny more nor a penny less. Irrespective whether you happen to be a high profile taxpayer or something less you need to be very sure of your position before you decide to take on the ATO. First and foremost you need to be absolutely certain that your position is properly maintainable and irrespective of what they throw at you, you can substantiate every aspect of your case. After all, the Tax Office needs to be able to carry their message to the public and they do this through the publication of high profile tax cases which will have the desired effect of deterring others from trying to avoid their obligations. There are a raft of cases in this area like the Glen Wheatley one. The lessons to be learnt from these cases are:
- Irrespective of your circumstances never take on the ATO unless you are in the right and have considerable financial resources allowing you to repel them.
- Garnering the press to assist to fight against the ATO is of no consequence unless you can prove them wrong.
- Never publicly disclose your tactics as this weakens your position.
- You never adopt a carefree attitude towards the prospects of arrest and broadcast this.
- Never publicly state that you have no intention of disclosing to the ATO sources of income and the location of assets as they have the legal right to ask you to do so.
- Should the taxpayer get it wrong then the taxation and criminal consequences will be far worse than where a taxpayer makes a true and complete voluntary disclosure even after they have been detected.
- The ATO would see this as obstruction applying an uplift penalty further increasing the taxpayer’s taxation liabilities and would take any or all public statements as being the anathema of contrition and remorse.
- All such conduct would be indicative of a significant degree of criminality leading to a very substantial custodial sentence up to 25 years for money laundering where the amount involved exceeds $1.5M.
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