Publication date: 20 Aug 97 |
Source: THE TAX INSTITUTE
Witch-hunt of the wealthy unjustified, according to The Tax Specialist.
Although the Australian Tax Office has every right to pay careful attention to the 'high-wealth' sector of the taxpaying public in the same way that they target other market segments, it is quite another matter when the individuals are targeted in a witch-hunt atmosphere, with the outcomes pre-empted.
According to The Tax Specialist article by Mark Leibler, Senior Partner in Arnold Bloch Leibler, the witch-hunt against a fairly limited number of individuals originally instituted by former Treasurer, Ralph Willis just after the 1996 Federal election was called, was based on allegations founded on false premises which could not be substantiated.
"That witch-hunt atmosphere has demonised and seriously undermined the standing in the community of high-wealth individuals as major contributors to the economic national interest, suggesting their involvement in socially unacceptable activities detrimental to the overall economic well-being of Australia and carried on at the expense of the 'ordinary taxpayer'", Mr Leibler said.
"Are individuals who are wealthy, or who indirectly control wealth, necessarily practising tax avoidance or engaging in 'blatant abuse of the tax system' simply because they personally return little in the way of taxable income?" he said.
In many cases, the individual will pay little tax if he or she lives off capital with all income being derived by, and subject to tax in the hands of the relevant associated companies, trusts and individuals. A light tax burden could be attributable to the receipt of fully or partly franked dividends or to accelerated depreciation on certain items of plant and equipment and from deductions for capital expenditure on buildings.
"In future, whenever the ATO talks about blatant tax abuse or artificial schemes being prevalent among high wealth individuals, one should always raise the potential application of the general anti-avoidance provision, Part IVA of the Income Tax Assessment Act," Mr Leibler said.
"It is clear, since the decision of the High Court in the Spotless Services Case, that Part IVA possesses teeth and is a powerful weapon in the armory of the Commissioner. If Part IVA cannot be applied to counter the schemes in question, then perhaps they are not in fact as artificial, contrived or blatant as the ATO would have us believe!"
It is unlikely that high wealth individuals will cease to be fair game for the ATO. But in their treatment of these people, the ATO must not contribute to the very negative perception of high wealth individuals unless and until it has completed its investigations and is able to speak with authority and knowledge about the nature and extent of tax avoidance practices in that segment of the community.