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Taxation Institute concerned on Tax Commissioner's "unlawful" settlement tactics

Publication date: 23 Feb 00 | Source: THE TAX INSTITUTE

The Taxation Institute of Australia has raised concerns regarding the settlement tactics of the Commissioner of Taxation, Mr Michael Carmody in offering lesser penalties to taxpayers who admit to tax avoidance. Mr Carmody's actions have been declared "unlawful" by the Federal Court. The Federal Court, in a decision handed down on 17 February, found that the Commissioner of Taxation, Mr Michael Carmody, acted "unlawfully" by laying down an inflexible policy as to how taxation officers were to resolve certain tax arrangements.

"The decision has highlighted the concerns the Taxation Institute of Australia has about the Tax Commissioner's practice of issuing press releases announcing that the Tax Office will audit taxpayers who do not voluntarily forgo deductions claimed in return for lower penalties," said Taxation Institute President, Gordon Cooper.

"By implication, audited taxpayers will face much higher penalties, and these could be 10 times those applied to taxpayers who accept the ATO offer," he said.

The Federal Court case, Young v Commissioner of Taxation, concerned the issue of a press release on 15 June 1999 headed "Tax Office to Disallow Linked Bonds Tax Deductions". The Court found that by issuing the press release, the Commissioner had bound himself and his officers to disallow tax deductions in arrangements of this kind irrespective of the particular facts of the case. This, said the Court, amounted to an "unlawful" act.

The Taxation Institute's particular concern is that the Commissioner's practice of issuing press releases of this kind is contrary to the express undertakings in the Taxpayers' Charter "to treat you as an individual, listening to you and taking all relevant circumstances into account". In this regard, the Court found that an assertion by the Commissioner that, notwithstanding the clear terms of the press release, he would treat each case on its merits was "window dressing".

Mr Cooper said that while the Taxation Institute supported the Commissioner taking pro-active steps to deal with blatant tax avoidance, this had to be done in accordance with the Taxpayers' Charter. "Whilst global settlement offers may be a legitimate part of good tax administration, all taxpayers are entitled to be treated fairly in accordance with the law," he said.

The Taxation Institute of Australia calls on the Commissioner to review all existing "press release guidelines" for resolving tax claims to ensure that they do not lay down inflexible rules for tax officers to follow and that all tax officers are aware of the requirements of the Taxpayers' Charter to consider each case on its merits.