Additional Comments - Senator Winston Crane, Liberal Senator for Western Australia
Whilst I find myself in agreement with my Government
colleagues who have appended a minority report to this report, I have a number
of additional comments I wish to make in respect to the level of concessions
being offered to affected investors.
I have listened to many constituents who have made
representations and attended the Committee’s pivotal public hearing in
Kalgoorlie and read many of the submissions and letters sent to the inquiry. As
a result, I have come to the conclusion that the vast majority of people caught
up in the ATO’s crackdown on tax effective investment schemes are not
professional tax avoiders. Rather, they are just everyday Australians who were
trying to secure their futures and that of their children. They should be
treated as such, not as tax avoiders and rorters.
My comments should not be interpreted as being intended to
give tax avoiders a way of avoiding their obligations. That is not my intention
or that of any of my colleagues on the Committee. My intention is simply to try
and help find a way of handling a delicate and difficult situation, of helping
ordinary, everyday Australians whose lives have been destabilised, whose
livelihoods, health and marriages have been threatened. Some have even felt
that their situations are so beyond repair that they have threatened to commit
suicide – it is alleged some already have. This is too high a price to pay.
In my view, the real villains in this affair are those
promoters who marketed schemes they knew were just tax avoidance rorts; and
members of the legal fraternity who provided irresponsible and incomplete
opinions. This gave dishonest and dubious schemes the appearance of
respectability
One of the more important tasks facing regulatory
authorities such as ASIC is bringing these people to account and charging them
where there has been any breach of the law.
The ATO has announced that it will offer reduced penalties
and interest to some investors using guidelines yet to be determined. Drawing
the line between the innocent and those who deliberately avoided tax will be
very difficult. The potential for getting it wrong and excluding people who
should be offered the concessions is high. While I appreciate the concessions
that have been made by the ATO, I do not believe they go far enough and I am
concerned that they leave many people uncertain about their futures.
I am also concerned that these people may be being penalised
now when ultimately they might win their cases. I do not consider it
appropriate that the ATO pre-empt the findings of the courts by imposing
penalties or interest on disallowed deductions. The ATO should freeze all
penalties and interest from the denial of assessment until such time as the court
cases have been heard and ultimate findings have been handed down. Further, it
may be applicable for this issue to become part of the arrangements of the new
assessment body being proposed next.
After the test cases, matters will become clearer. If judgement
is with the ATO, and there is expert legal opinion that it has a strong case,
we will still have a situation where many people will have difficulty meeting
their liabilities. It is my view that the ATO should not force people into
bankruptcy or to sell their houses and possessions in order to pay any
resulting tax debts. The ATO has advised the Committee it will work with people
who have difficulties paying, in order to establish suitable repayment
arrangements over an appropriate period. The ATO also told the Committee that
people who face serious financial hardship could apply to the Taxation Relief
Board for release from payment. While I appreciate the intent of these
arrangements, I am of the view that since so many people are now distrustful of
the ATO, these arrangements are insufficient.
I believe that the Government should remove hardship
assessment functions from the Tax Office and establish an independent authority
to undertake the task. The independent authority should also be charged with the
responsibility for assessing fair payments that taxpayers could make while
maintaining a reasonable standard of living for themselves and their families.
The evidence presented to the Committee is that some,
perhaps many of the schemes are nothing more than tax avoidance devices and of
no merit. Other evidence suggests, however, that some arrangements may have
legitimate underlying businesses and the ATO may have disallowed them because
of a limited range of features it considers unacceptable. (I note that the ATO
itself distinguishes between schemes, classifying them according to the level
of tax mischief). A further function of the independent authority proposed in
the previous paragraph could be to identify schemes that might lend themselves
to restructuring that would make them acceptable. If this proved feasible, the
authority could then perform a mediation function between the ATO and scheme
designers who undertook to restructure.
I emphasise that in putting forward this suggestion, I do
not intend to give any comfort to designers and promoters of schemes that have
set out to blatantly defraud the tax system or exploit investors. Rather, I
intend that the initiative is taken to ensure as many investors as possible are
rescued from the circumstances in which they are currently embroiled, and to
ensure any project with real underlying merit proceeds. However, the Authority
would have to approach its task cautiously to ensure investors' problems were
not compounded.
In conclusion, I believe that the ATO should agree to a
freeze on penalties and interest accrual and support the establishment of the
independent hardship assessment authority to deal with the very large number of
individuals who are now in very harrowing and difficult circumstances.
It is my personal view that had the ATO been more vigilant
and proactive, the spread of schemes that led to this disaster could have been
nipped in the bud.
Senator
Winston Crane
Participating
member and Liberal Senator for Western Australia
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