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John Passant

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August 2010
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Paul Hogan and Departure Prohibition Orders

Newspaper and other reports are describing the Australian Tax Office’s action in issuing a Departure Prohibition Order against Paul Hogan, an order preventing him leaving Australia, as draconian, heavy handed, and even that it makes Australia a police state.

It seems I am the voice of reason in all of this, having been quoted in Saturday’s Australian Financial Review saying that it was perfectly OK to use these orders when there was a flight risk and that the orders weren’t draconian.

For example David Rydon, one of Paul Hogan’s lawyers, says that the Tax Office is holding Hogan to ransom with its order preventing him leaving Australia until his tax claim is settled and that he ‘could be detained for up to four years in Australia.’ Rydon goes on to claim that ‘news of the order could harm foreign investment’. (‘Hogan’s fate hangs in the balance’ The Sunday Canberra Times August 29 p 7).

The ATO very rarely uses Departure Prohibition Orders. In the last 5 years there have been 14 issued, mainly in relation to Project Wickenby, the multi-agency investigation into tax evasion and other criminal matters.

It is the role of the ATO to protect the revenue. DPOs do that by preventing those owing money to the community removing themselves (and often removing their assets too) from our jurisdiction.

The relevant law says that the Commissioner must believe on reasonable grounds that it is desirable to issue an order for the purpose of ensuring that the debtor does not depart Australia without:

·            wholly discharging the tax liability, or
·            making arrangements satisfactory to the Commissioner for the tax liability to be discharged.
Because of the gravity of restricting a person’s freedom of movement, the Commissioner takes into account a range of factors in deciding whether to issue a DPO. These include the existence of a tax liability and the prospects of recovery, whether there are enough assets to pay the debt, if there is evidence to suggest concealment of assets, whether there have been transfers of assets to related parties (including offshore) and if the debtor is under investigation for criminal activities and whether he has been charged.

The Australian claims the amount of income undeclared is $37 million and that the tax not paid plus interest and penalties possibly totals $150 million. One of his advisers has denied the figure but said it is substantial. I suspect the tax, interest and penalties assessed and in dispute will be less than $150 million but still very very large.

 While Hogan is currently under investigation as part of Operation Wickenby he has not been charged with any offence.

The DPO could be revoked if Hogan paid his tax debt or made satisfactory arrangements with the ATO for the debt to be discharged. The solution lies with him. Alternatively Hogan could apply to a Court for an order to revoke the DPO, presumably arguing that the Commissioner did not have reasonable grounds for issuing it.

That may be a high risk strategy for a debtor since it may put into the public arena the reasons the Commissioner had for issuing the DPO. This might lessen public support for the debtor.

As to the DPO harming foreign investment, the idea is laughable. It appears to be nothing more than part of the spin emanating from the Hogan camp in the battle for the hearts and minds of the Australian community.

What we have here is another instance of a very rich person thinking we owe him and that the tax laws that apply to us all are draconian when and if they catch them.  This is the nature of our society.

The main tax burden is borne by ordinary workers. We can’t manipulate our wage income, and we don’t have the money to pay advisors to structure our affairs to avoid or evade tax. This drive of the rich and big business (40 percent of whom pay not income tax) to cut their tax is inherent to capitalism.

Readers might also like to read an earlier article prompted by a court decision to release many documents relating to Hogan’s tax affairs called Hogan’s tax crock and the more general issue of the transfer of our tax wealth to big business and the rich called Fund the ATO to attack big business.



Comment from Auntie Rhoberta
Time August 29, 2010 at 12:31 pm

Do DPOs apply to capital flight generally?

Comment from Ben Courtice
Time August 29, 2010 at 2:23 pm

It’s just a pity that they aren’t so zealous about pursuing corporations that pay no tax due to creative accounting and loopholes

Comment from John
Time August 29, 2010 at 2:42 pm

No Auntie Rhoberta. And I have written about this Ben on my blog in an article called Fund the Tax Office to attack big business. ( The ATO are hamstrung by a lack of resources and laws designed to transfer tax wealth to gig business.

It was the ATO who provided the inforamtion about 40% of big business paying no income tax.

Comment from Frank Roberts
Time August 30, 2010 at 7:33 am

In isolation what you say is rational and correct. However in reality this matter has been ongoing for many years. If report are correct and Hogan denies tax liability then it will go on for another 4-5 years. In total it may be 10 or more years before it is resolved and the only if there is a backdown. Reasons for the delay should be ascertained. Is it inefficiencies of the ATO? Or is some type of official mindset to cause delay as a form of mind torture to those on the other side? Both scenarios are unacceptable. I understand that a recent enquiry by the ATO Ombudsman is about to report on this and other problems. Meanwhile, what is needed is someone like Hogan to take on the ATO policy as a breach of Human Rights so that the reality of the flawed policy can be challenged in the High Court. One thing I have observed is that the organisations such as New South Wales Commission, Australian Crime Commission and the ATO eschews fair treatment. Legal challenges that seek to expose this lack not fair or sustainable and put under scrutiny. In short they are legalised BULLIES. In reality the procedures used are no different than tactics used by the Gestapo, Stalin and other Totalitarian states to modify the behaviour of society. The use of high profile persons like Hogan gets the propaganda message across dramatically. Is that what we really want or need in an Australia society?

Comment from John
Time August 30, 2010 at 7:56 am

Perhaps the fact that he has allegedly concealed undeclared income in bank secrecy jurisdictions (tax havens) might explain the delay. I think the comparison with Stalin et al is ridiculous. This piece of legislation was put in by conservatives. it stops crooks fleeing the country without paying their tax debt. [perfect;y sensible. The really draconian aspects of our society are locking up innocent asylum seekers, not preventing Hogan from flying back to the US.

I’d be interested in seeing the reasons for the Commissioner’s decision. If Hogan challenged the decision in court he could perhaps be free to leave Australia if the Court overturned the decision. Why doesn’t he challenge the decision in Court? Maybe the public release of the factors the Commissioner took into account would in fact be of concern to Hogan so he doesn’t challenge in court; he mounts a spin campaign instead.

Comment from John
Time August 30, 2010 at 7:58 am

The assessments were issued in April. He hasn’t paid, so he can’t leave. If he paid his tax debts he could leave.

Comment from Fran Roberts
Time August 30, 2010 at 10:22 am

In reply to John:
The Stalin comments relate to use of situations such as using a high profile persons such as Hogan for propaganda purposes as an attempt to modify society’s behaviour (one of the stated objects of Wickenby). With regard to your other point “concealing undeclared income….(in) tax havens”. This is what may have been alleged. The facts seem to be that whatever he did was approved by tax advisors who are just as qualified as the ATO to give advice on such matters. Thus there is a difference of opinion. To elevate this difference to a point where the matter requires that the ATO is right until proven wrong and then be denied a human right of free movement is not a society we should be encouraging. Propaganda by persecution in my book. In the same vein that Governments argue that watter treatment is not torture. Denial of human rights for an argument on vague tax principles which should be sorted out in court by denigrating good people is not in a society

Comment from John
Time August 31, 2010 at 5:42 am

Actually Fran it is more than a difference of opinion. he has been assessed to pay tax of up to $150 million according to the Australian. The difference of opinion is over residence, not over concealing income. In fact, despite the fact that your advisers tell you that you are not liable to tax, issuing an assessment means you are, and have to pay it or reach arrangements with the Commissioner to pay it. Hogan has not done that. Why not?

He is currently under investigation. His assets appear to be offshore. Allegedly he has concealed income and assets offshore. 14 orders in 5 years to prevent flight risk doesn’t strike me as draconian or oppressive. he can challenge the order in Court – unlike Haneef or asylum seekers whoa re actually locked up for no crime whatever. He hasn’t challenged the order in court. Why not? Could he be concerned that such an action might reveal the reasons the order has been issued and undermine his saintly status in the eyes of many.

This is about protecting the revenue.

Comment from Frank Roberts
Time August 31, 2010 at 10:28 am


I disagree with your comment. An assessment is the ATO’s opinion and it will be challenged. However because of the inefficiencies in the system it may take years to get to courts (5 already). I said that is the only opportunity he gets to express his opinion. Meanwhile it is draconian that he has the basic Human Right of free movement denied. I suppose there are people who think this is fair, and you may be one. I do not. It is nothing to do with his “saintly status” as you say. It is all do with what type of society we should be allowed to live in. Big Government Bullies stating that someone is guilty without a trial is along way from what the Magna Carta principles which use to be the standard.