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John Passant

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September 2010



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Tax terrorism: re-thinking Wickenby

Tax terrorists are a greater threat to Australian society than individuals wanting to blow up public buildings and kill tens of people. 

Tax terrorists deny the Australian community billions upon billions in revenue which could be used to build much needed infrastructure in health and education and to address climate change. They do this in a number of ways.

The evaders scam the system, hiding income offshore for example or engaging in round robins a la Glen Wheatley that involve fake invoices and payments for services that were never provided but were the claimed as deductions.  The money is then ‘loaned’ back.

Often evasion is the working man’s tax avoidance. Estimates vary but some put the black economy – often in the building and taxi industries and small retailers – at up to 15% of GDP. This could be in the order of $200 billion, or tax of around $70 billion.

Wickenby is the name given to the operation and the project aimed at certain offshore activity that has both a criminal and a tax component. 

According to the ATO, as at 31 July 2010 Project Wickenby has collected just under $200 million in tax, raised liabilities of $855 million and produced a compliance dividend of just over $300 million.

This latter is the claimed extra revenue raised in later years from those under Wickenby investigation. It looks too convenient a figure to be anything but a guess to bolster the figures for Wickenby.

However, having been highly critical of Wickenby in the past let me say that I was wrong.

There are currently 26 investigations under way. 58 people have been charged – many are awaiting trial – and 11 convicted. 1519 people to date have been audited. 

The important revenue figures are both the cash collected to date and  the liabilities raised.

$200 million is a lot of money to have in the bank. $855 million is a lot to have on the way, even though it is not yet collected.

The ATO doesn’t raise assessments willy nilly and much of this $855 million will be collected once the rich and powerful exhaust their legal and PR avenues.

Indeed the success of Wickenby can perhaps be measured by the increasing shrillness of the response. Much of the media for example have jumped on the bandwagon of Paul Hogan in his battle against a rumoured multi-million dollar tax assessment issued in April.

Much of it is unadulterated bullshit. But let’s put this into a different context. Perhaps what is worrying the rich and powerful is not the inadequacies of Wickenby but its successes to date and looming successes over the next few years.

As Wickenby slowly grinds away collecting information and money, and I might add prosecutions, the rich and powerful have begun to use their media to denounce the project.

Apart from the scammers and evaders another stream of tax terrorists play games with our tax laws to avoid tax. Avoidance is using legal means in sophisticated ways to reduce the tax otherwise payable.

It helps to explain for example why 40 percent of big business pays no income tax.

It explains why half of all world trade passes through tax havens – no or low tax jurisdictions with bank secrecy provisions that prevent those countries, under pain of jail for the workers in the banks in the havens, providing  information to revenue and other agencies in places like Australia.

That is changing as a consequence of the global financial crisis and now havens are entering into agreements to provide information in certain circumstances to developed countries like Australia.

Finally the ruling elite have captured the development of tax policy and legislation and shackled the Tax Office to such an extent that tax law is neoliberal for us and keynesian for them. The tax system for example transfers about $100 billion of our wealth to big companies and the mainly well off in society.   

What drives tax terrorists of either variety? Self interest. In the case of the above the board tax terrorists the driver is profit. Reducing the tax payable by one company at the expense of other companies gives the avoider an edge over their competitors.

Of course what is good for the individual company is bad for community overall. And it is the community from which the tax terrorists and the ruling elite draw their profit.

 So, like much of the rest of the story of capitalism,  individual benefit threatens community well being.

Short of a revolution to democratically overthrow the profit system, the State could give up its ambiguous attitude to increasing profit by reducing tax and move to strengthen the Tax Office and the laws its applies to recoup hundreds of billions more in revenue.

This would involve not just beefing up the tax administrative arm of the state but also changing the whole orientation of tax policy over the last 4 decades from cutting tax on the well off to taxing the rich till their pips squeak. 

Making the 40 percent of companies who pay no tax, and the rest of the profit bludgers who pay less than the headline 30 percent rate, would be a good first step.

Adopting some of Ken Henry’s more progressive tax suggestions – like a real resource super profits tax and  death and gift duties on the well off would be another tiny step towards tax justice.

Stop tax terrorism. Make the rich pay.



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Time September 7, 2010 at 1:47 am

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Comment from John McRobert
Time September 7, 2010 at 10:14 am

With respect to the venerable Mr Passant, his entire article is, to use his own words, ‘unadulterated bullshit’. It’s the tax system, stupid. The entire tax system is fundamentally flawed. It punishes production. It penalises success. It is the lead in the saddlebags of prosperity. May I recommend Mr Passant throw away his tired old Marxist politics-of-envy textbooks and read Understanding Personal and Economic Liberty by Ronald Kitching. A Passant epiphany would spare is of any future articles such as this. To read in The Weekend Australian of the pre-dawn tax raids on the homes of Wickenby suspects was a shocking indictment of how far this country is descending into a police state.

Comment from Frank Roberts
Time September 7, 2010 at 10:37 am

There you go again John. Condoning strong arm Police Sate tactics when there are better solutions. I agree that there is nothing wrong with Wickenby as an initiative. It is poor execution that is the problem. Using the AFP as the storm troopers of the ATO can only lead to a sorry end and it has. They are very good in finding drugs and the cash sitting next to it. easy convictions. Using the same policing methods for white collar crime has been there undoing. Dawn raids restricting other human rights arrests with out proper enquiry has made the excercise inefficient and very expensive. having the AFP collecting truck loads of documents which need processing and given to the CDPP to sort out is not the ideal method run an efficient operation. The expression of not being able to see the word from the trees comes to mind. No doubt in years to come better analytical techniques will emerge. Meanwhile despite the impressive numbers you quote no one except old ATO hacks and spoon fed journalists think they are real. A non lawyers explanation as I see it is that the ATO is behind the 8 ball because of the rules it has to play under. The fact is the tax positions of the individuals are much more complicated than simply using offshore to avoid tax. My understanding is that there is a clash between the common law of fraud and the application of such by the ATO. To charge someone with fraud allows the common law to overide what the ATO calls a sham as the courts have already decided that a sham probably does not exist in criminal law in Australia for commercial transactions. So that leaves the ATO in a position to do a “”deal”” with a taxpayer. However because of its penalties and GIC interest sometimes going back many years no one wants to play. so we have someone who thought they were in a commercial transaction faced with a huge tax bill which is cheaper to fight than agree to a ridiculous assessment. The correct and win win for every one is to reach a reasonable settlement with out criminality. My observation is that peopel are paying the assessments and also going to jail. I can not see this helping the situation For the reasons given above most matters will be held up in the courts for years,

Comment from Gavin R. Putland
Time September 7, 2010 at 11:15 am

Under a properly designed revenue system, both avoidance and evasion would be impossible. Cracking down on cheats is a fig leaf to cover the refusal to implement a properly designed system.

Comment from John
Time September 8, 2010 at 7:12 am

Gavin, cracking down on tax cheats is a consequence of not properly implementing a properly designed system. Such as system won’t exist because it threatens the profit bludgers.

Comment from Arjay
Time September 8, 2010 at 7:03 pm

The reason why the Govt has no tax base is that our Govt insists on curbing production.The really big issue which you fail to address John is the banking system.In 08/09 the RBA paid the Aust Govt a dividend less than $6 billion.Ross Greenwood revealed that our economy now has a GDP of $1.4 trillion ,or $127,000 worth of production for every worker.
In other words with inflation and GDP our money supply increases by $91 billion pa.This $ 8,200 for every working person.

Who owns our GDP and do the banks have the right to depreciate our currencies via the fractional reserve system of banking?

The Commonwealth Bank used to create a lot of this new money but Keating sold it off.It used to reduce our taxes.

Our banks can create 10-12% additional money above deposits to equal our inflation + productivity.This is not enough so they have to borrow from the Global Reserve banks who create it in their computers.This is why we are in so much debt and don’t have a tax base for infrastructure.

The other rerason is the growth of the credit card.Our mint used to produce lots of cash,but now this new money is created as debt via Visa & Master Card in conjunction with the banks.

So this $ 91 billion of new money should be created as a tax credit by the RBA and not as debt via the private banking system.

Inflationary money created as debt via the banks is like you having a licence to counterfeit $49 billion pa.

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