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19 Jul 10 Subsidised taxi fares entitled Govt dept to input tax credits - Secretary, DOT (Vic)

The Full Federal Court has, by majority (Kenny and Dodds-Streeton JJ, Jessup J dissenting), dismissed the Commissioner's appeal from the decision of Gordon J, who held that the Department of Transport (Victoria) (the DOT), registered under the GST Act 1999, was entitled to input tax credits under s 11-1 of the Act for the GST component of the payments which it made to taxi-cab operators under its "Multi Purpose Taxi Program" (MPTP).

The purpose of the MPTP was to subsidise the cost of taxi travel incurred by Victorian residents who suffer from a severe and permanent disability (MPTP member). Under the MPTP, the MPTP member paid the taxi-cab operator 50% of the metered fare and the DOT subsequently paid the balance (up to specified maximums).

The Commissioner’s argument before both Gordon J and the Full Court was that the DOT made only one relevant acquisition. This was the acquisition made at the time the taxi-cab licence was granted, when the DOT acquired the right to have the obligations under the licence performed, including those under the MPTP. According to the Commissioner’s argument, the consideration for this acquisition was the grant of the licence.

In the Full Court, Kenny and Dodds-Streeton JJ rejected this argument. They said, at para 46: "Once the trip became an MPTP trip, the MPTP Member was carried effectively at the request of the DOT." They then said, at para 47:

"Once the trip became an MPTP trip, the DOT assumed liability to make a MPTP Payment. As senior counsel for the DOT put it, every time a Member MPTP Card was inserted into the EFTPOS terminal and the trip authorised, it was as if the DOT was sitting in the taxi-cab too, because the authorisation told the driver and the passenger that the DOT would pay the MPTP component of the fare. Equally, once the trip became an MPTP trip, the MPTP Member assumed liability to pay only the non-MPTP component of the fare. In this circumstance, the DOT acquired from the taxi-cab operator a service, being the transport of the MPTP Member, which the DOT sought when the Member MPTP Card authorised the trip as a MPTP trip. This service was fundamental to the operation of the MPTP."

In dissent, Jessup J said at para 82:

"It seems that the position for which the Department contends starts from the silent proposition that, having undertaken an obligation to make a payment, it most likely paid for something. When you search for what that thing was, you find that the only service that was supplied to anyone was the transportation of an MPTP member. You conclude, therefore, that the Department paid, or at least made a part payment, for that service. However, where the payer is a government giving effect to social welfare policy, there is no reason to commence with the likelihood that it need receive something in return. Transfer payments by governments are a commonplace. I do not consider it at all unnatural that a government department would make such a payment – even bind itself to do so in defined circumstances – without acquiring anything in return. I am of the view that that is what occurred when the Department paid half the taxi fare of an MPTP member."

On the basis of the decision of the majority, the Commissioner's appeal was dismissed: FCT v Secretary to the Department of Transport (Victoria) [2010] FCAFC 84 (Full Federal Court; Kenny, Jessup and Dodds-Streeton JJ; 9 July 2010).

 


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