Cain (Federal Commissioner of Taxation) v. R.L. Smith

Judges:
Wallace J

Court:
Supreme Court of Western Australia

Judgment date: Judgment handed down 3 November 1972.

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Wallace J. This is a taxation prosecution under sec. 233 of the Income Tax Assessment Act of the Commonwealth. The facts are not in dispute. Within sec. 230(1) the defendant knowingly and wilfully understated his income for the years 1966/67, 1967/68 and 1968/69. The income returned by the defendant, actually earned by the defendant and tax avoided is as set out hereunder -

                               Actual
                  Income       income         Tax
                 Returned      derived       Avoided
      1966/67     $6437       $13,689        $3887.35
      1967/68     $4135       $14,449        $5248.19
      1968/69     $3535       $ 9,714        $2716.02
        

The defendant knowingly and wilfully understated his taxable income for the three years the subject of the prosecution in a total of $23,745 and thereby avoided total tax of $11,851.56.

Not directly irrelevant it is to be noted that in the preceding three years the defendant understated his income in the amounts of $2,200, $3,350 and $2,000 respectively. He has yet to pay the tax thereon and suffer any penalty imposed by the Commissioner. For that reason it would not be proper for me to increase by reason thereof the penalties which would otherwise be proper in respect of the three years with which I am concerned. It does demonstrate, however, that clearly over a long period from 1964 until 1969 the defendant was engaged in a systematic course of conduct of defrauding not only the Commissioner but taxpayers generally. He was devious in his endeavours in the process of which he opened fictitious savings bank accounts and was unco-operative with the plaintiff's investigators who were involved in ascertaining the position from May 1969 until January 1971 - again no doubt at considerable expense to the taxpayer.

The principles involved in inflicting punishment arising out of the convictions sought appear to involve the fact that such punishment shall act as a deterrent to others that heavy penalties are called for to deter others from resorting to unlawful means of evading taxation where it is so heavy that it might appear to be worth the risk and again that such punishment should not be so crushing as to deprive the taxpayer of his whole estate and his means of earning a livelihood. Counsel for the defendant was unable, for the simple reason that such did not exist, to put forward any excuse or extenuating circumstances although he obviously said everything that it was possible to say for his client. It does not appear to me to be possible to point to any substantial fact or matter which should influence me towards clemency. It is, I believe, a glaring case.

The interest which the defendant failed to disclose as having been received from savings bank accounts credited in the name of Richard Dundas would suggest, at an interest rate of 3% that the defendant's asset therein rose from $14,733 to something in excess of $18,066 over a period of three years. Again interest at 7% on tax avoided and compounded from the 1st July 1967, would have returned a capital sum of $16,024.08 today.

The defendant is 48 years of age an able and experienced horse-trainer and breeder and a successful butcher owning his own business. His statement of assets and liabilities discloses a net position of in excess of $78,000 included in which are horses of a value of $25,000, his home property and butchery business.

On the principle that a maximum penalty is intended for a case of maximum gravity, I propose to impose a fine in respect of each of the three years of $1,000. I further propose that in addition thereto the defendant be ordered to pay the Commissioner the following amounts being not double the amount of tax avoided, namely for the year 1966/67 $6774.70, for the year 1967/68 $9496.38 and for the year 1968/69 $4432.04. The total punishment is therefore $23,703.12 and is imposed notwithstanding the fact that the defendant will still have to pay the actual tax avoided of $11,851.56.

The actual orders of the court, therefore, would appear to be as follows. Declare that the defendant ``knowingly and wilfully'' understated his income in his return of income derived in the years ended 30 June 1967, 1968 and 1969. That convictions be recorded in respect of each breach. Order that plaintiff do recover a penalty of $1000 in respect of each offence and order defendant to pay to the

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ATC 4253

Commissioner the sum of $20,703.12 being a sum not double the total amount of tax avoided. Order that defendant pay plaintiff's costs of these proceedings. Liberty to either party to apply.