Walsh v. Federal Commissioner of Taxation.
Judges:Leslie J
Court:
District Court of New South Wales
Leslie J.
This was an appeal against conviction of the appellant and a fine of $100, with Court costs of $11.50 and professional costs of $400 entered against and imposed by a magistrate upon the appellant on a charge, stated shortly, that -
``on being required by the Deputy Commissioner of Taxation by notice in writing bearing date the fourth day of July, 1979... to furnish him in writing at his office''
with certain information he -
``failed to furnish such information as and when required.''
The charge arose from the provisions of sec. 264(1)(a) and 223(1) of the Income Tax Assessment Act, 1936, as amended.
Section 264(1)(a) of the Act provides that:
``(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority -
- (a) to furnish him with such information as he may require;...''
Section 223(1) of the Act provides that:
``Any person who fails to duty furnish any... information or comply with any requirements of the Commissioner as and when required by this Act or the regulations or by the Commissioner shall be guilty of an offence.
Penalty: Not less than Four dollars or more than Two hundred dollars.''
No question was raised as to the non-fulfilment of any of the formalities required to be observed before the prosecution could validly be launched and no question of my jurisdiction to hear the appeal or as to its nature arose. That jurisdiction I have by the combined effects of sec. 236 of the Act and sec. 122 of the Justices Act, 1902 (N.S.W.), as amended.
The depositions taken before the magistrate were tendered. Those depositions consisted principally of discussion and argument. The Crown relied, pursuant to sec. 243 of the Income Tax Assessment Act, 1936, as amended, upon the averments contained in the information and certain documentary evidence and the only witness called was the appellant.
From those averments, the documentary evidence and the appellant's deposition the following appears.
The appellant described his ``business or profession'' as that of a tax planning consultant and said that he had carried on that occupation for ``some fifteen years''. He said that he acts as ``a tax avoidance broker'' in his profession of tax planning consultancy. Clients come to him with tax problems and he either advises them himself or refers them to lawyers, accountants or ``specialists''.
He constantly advertises and admitted to the preparation and publishing of the circular, which prompted the Deputy Commissioner of Taxation and Delegate of the Commissioner to give to the appellant the notice pursuant to sec. 264(1)(a) of the Income Tax Assessment Act.
He further admitted that copies of the circular have been sent out ``all over Australia''.
He admitted receipt of the notice sent to him by the Deputy Commissioner of Taxation and the sending of a letter, dated 26th July, 1979, in which he stated:
``I decline to answer your questionnaire dated 4th July, 1979.''
The circular above referred to was headed ``TOTAL TAX WIPEOUT'' and the main body of it read as follows:
``ASSIGNMENT OF INCOME
1. This tax scheme assigns all or part of your income for the financial year 1978-1979 to an existing off shore company.
2. The assignment is operative from 1/7/78 under documentation which came into existence in off shore companies on 1/7/78.
3. The assigned income ceases to be taxable in Australia; and becomes taxable in off shore companies where the income tax rate is 1% per annum.
4. THE TAX SCHEME IS FULLY GUARANTEED
If your assessment is unfavourable, the objection is prepared free of charge, and
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if the objection is overruled, the appeal to the Board of Review is handled free of charge. If the appeal is dismissed, the fee is refunded in full.5. $5,000 is the once only fee payable for using the off shore facilities, having the income assigned, and all documentation and advices necessary.
6. The tax scheme has not been mentioned in any anti-avoidance statements from the Federal Treasurer, but is expected to be valid only for this tax year 30/6/79.
7. The validity of this tax scheme has been enclosed by two counsels' opinions which are available for inspection at any time.''
There followed another paragraph which is irrelevant to this appeal.
On 4th July, 1979, the Deputy Commissioner sent an appropriate request for the following information:
``(a) The name of each off-shore company referred to in the circular.
(b) The country in which each company was established and the form under which it was incorporated.
(c) Copies of the two Counsels' opinions referred to in the circular.
(d) The full name and address of each person who has entered into this tax scheme in response to your circular or other advertisement made by you.
(e) Details of all fees, commissions or other income received by you in relation to this tax scheme, from 1 July 1978 to 30 June 1979.''
A copy of the circular was enclosed and on the bottom of the notice was a brief statement of the effect of sec. 264(1)(a) of the Act, and of the penalty for failure to comply.
In addition to declining to supply answers the appellant sought to impose upon himself his choice of penalty, by sending with his letter a money order for $4, for which sum an official receipt was sent to the appellant.
It was conceded by Counsel for the Commissioner that the appellant could not be required to comply with para. (c) of the Deputy Commissioner's notice, because it did not seem ``information'', and no argument was addressed to me that any of the para. (a), (b), (d) and (e) did not require the furnishing of information.
Upon completion of the evidence, when the matter came on for hearing on 10th August, 1981, Mr. Kalaf, who appeared for the appellant, proceeded to outline his submissions to me until he reached the stage of outlining a submission that sec. 264 of the Act was ultra vires the power of the Commonwealth Parliament.
As no notice of that submission had been given, to either the Attorney-General for the Commonwealth or the Attorney-General for the State of New South Wales under the provisions of sec. 78 of the Judiciary Act 1903 (Cth.) I adjourned the appeal to 2nd September, 1981, and ordered that the appellant give such notices.
On the latter date I was satisfied that such notices had been given and that neither of the Attorneys-General wished to take any action upon them, and argument of the appeal proceeded.
Mr. Kalaf's first submission was that unless it was established by evidence that the information required by the Deputy Commissioner in fact existed there could be no conviction for a failure to supply the information.
He proceeded to develop that argument in relation to each of para. (a), (b), (d) and (e) and to point out ways by which the Commissioner could investigate to find such evidence.
It seems to me that there are short answers to that submission.
In the first place the ingredients of the offences, formalities aside, are only two in number, namely:
- 1. a valid requisition for information made by the Commissioner; and
- 2. a failure to furnish such information.
In this case, para. (c) of the requisition apart, it has been proved in evidence that there was such a valid requisition, and it has also been proved that not only was there a failure to duly furnish the information required but a refusal to do so.
As in the case of any other offence, once there is evidence of each of the ingredients required to be proved to make out the
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offence, a prima facie case exists and in the absence of evidence inconsistent with the presentation evidence it then remains for the tribunal of fact to decide whether the prosecution has proved its case to the criminal standard of proof.Here, on the above basis, a prima facie case was made out.
It follows that in my view the Act does not require proof of the existence in fact of any of the information sought.
If it does not so exist the person required to furnish it can say so in answer to the requisition, and, if the Commissioner accepts the negative answers that would be an end of the matter, because it cannot be said that a person ``failed'' to furnish information sought if it does not exist in fact.
If the Commissioner does not accept the negative answers as being true, he could then give notice of a requirement under sec. 264(1)(b) and (2) to further his investigations.
In the second place, there is in this case prima facie evidence in the contents of the circular of the existence in fact of the information required to be given by para. (a) and (b) of the Commissioner's requisition, and, if such evidence, as was submitted should have been given by the prosecution was required, the failure to supply such information as is required by para. (a) and (b) would, in my view, in itself constitute the offence.
The Parliament of the Commonwealth of Australia has chosen to give the Commissioner wide discretionary powers in the investigation of matters pertaining to income tax, the liability of persons to pay income tax and the amounts of such tax which are properly to be paid. Section 264 is a section which is in aid of the investigation of those and similar matters in order that the Commissioner may properly carry out the intention of the Act, as he is entrusted by the Parliament to do.
To paraphrase Southwell J. of the Victorian Supreme Court in
Alva Natona Pty. Ltd. v. Unger (D.F.C. of T.) 81 ATC 4443, at p. 4448, in my view the notice calls upon the appellant to give information as to the income, or disposal of income, in a particular way of the appellant and, perhaps other persons. In the absence of evidence to the contrary, I assume that the appellant, as author and distributor of the circular would have knowledge of the matters as to which information is sought in para. (a), (b), (d) and (e) and of transactions relating to those matters which may have taken place to increase or decrease his own or other people's taxable income. As already mentioned, and as in a nil return of income where no income has been earned if there are no such transactions, or no such companies or countries as are envisaged in the circular then the appellant may say so, and could not then be said to have failed to furnish the information sought.
I, with respect, also adopt, as did Southwell J. the words of Cross J. in
Clyne v. D.F.C. of T. 80 ATC 4527 at p. 4532 and of Stamp L.J. in
Wilover Nominees Ltd. v. I.R. Commrs. (1974) 3 All E.R. 496 at p. 501.
The next submission made on behalf of the appellant was that the notice was invalid on two bases, namely:
- 1. that as regards para. (d) it is a requirement for the validity of the notice that the Commissioner identify the persons where he seeks details of income; and
- 2. as regards para. (d) and (e), that it is a composite requirement which is unclear and ambiguous and requires to a greater or lesser extent the giving of information as to the names and addresses of persons from whom fees, commissions or other income was received by the appellant in relation to the tax scheme from 1st July, 1978, to 30th June, 1979; the professions of such people; the amount or amounts received; the date of receipt; the purpose of the payments; the place of receipt; and further particulars of the payee and, as such a question, it was of such extra-ordinary depth that where the notice has the force of law (as it was submitted was the case here) it was simply so wide as to be unclear and uncertain.
The submissions called in aid the decisions in
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Snow v. Keating 78 ATC 4125; and in
F.C. of T. & Ors. v. The Australia and New Zealand Banking Group Ltd., Smorgon &
Both cases concerned notices given under the provisions of sec. 264(1)(b).
Before considering these cases may I say that I find nothing ambiguous or unclear in the wording of either para. (d) or (e) of the notice. Paragraph (d) requires information only as to the names and addresses of people who had entered into the scheme outlined in the circular and nothing more, while para. (e) requires only details of fees, commissions or other income received by the appellant. In the latter case, in other words, the amount or amounts of any fees, commissions or other income received by the appellant in relation to the scheme. It does not on its plain wording, in my view, go any further than that.
The decision in Snow v. Keating was that a notice purporting to be given under sec. 264(1)(b) which did not specify any person concerning whose income or assessment the recipient was required to give evidence was not a notice within the subsection. The decision is in my view to be explained by the fact that such a notice must by the very terms of the subsection be one to attend and give evidence... concerning his or any other person's income or assessment or in other words must give notice as to the subject matter concerning which the recipient of the notice is required to give evidence.
The High Court in the Smorgon case was concerned with the limitations on the Commissioner's power under sec. 264(1)(b) prescribed in that subsection and not with the Commissioner's power under sec. 264(1)(a). With respect I would adapt the obiter passage from the judgment of Mason J. in that case at p. 4052 as follows:
``Except in one respect the powers given by sec. 264 should be circumscribed only by reference to the limitations which are expressed in that section. Thus, in sec. 264(1)(b) the power to compel evidence is restricted to evidence `concerning his or any other person's income or assessment' and the power to require production is confined to documentary records `relating thereto', that is, to `his or any other person's income or assessment'. However, the power to require information contained in para. (1)(a) is not similarly limited. As it is a power given to the Commissioner for the purpose of enabling him to perform his functions under the Act it must be circumscribed by reference to this purpose.''
In the Smorgon case it was held, inter alia, that sec. 264 empowers the Commissioner to ``fish'' for information: to enable him to determine the amount of taxable income of any person and the tax payable on it.
That, in my view, is precisely what was being done in this case, and the fact that para. (d) does not name any specific persons by name does not matter.
The persons whose names and addresses are required to be given are otherwise designated and are limited to these persons, if any, who have entered into the scheme advertised in the circular. Their identities are thus sufficiently specifically indicated.
A further argument was addressed to me that para. (d) was deficient because it did not identify the ``other advertisement made by you''. Again the other advertisement is, in my view, sufficiently identified in the paragraph as any other advertisement relating to the tax scheme outlined in the circular.
There was then presented an argument that, as I understand it, sec. 264(1)(a) was ultra vires the power of the Commonwealth Parliament because it violated the common law principle that a person cannot be forced to incriminate himself.
Without going into the possible implications of that argument in relation to this appellant, suffice it to say that the principle is applicable only insofar as an Act of Parliament does not derogate it, so that it matters not if sec. 264 does so.
The last submission made is ingenious but in my view incorrect.
It was, firstly, that sec. 264(1)(a) purports to grant legislative power to the Commissioner and so conflicts with the doctrine of separation of powers wherein legislative power is vested in Parliament and by way of delegation through the Governor General.
Secondly, Counsel defined legislative power as being where a body or individual has power to make rules having the force of
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law and as a consequence of the making of such rules bestows a right on one party and a duty on another and as a consequence of a failure to comply with that obligation a legal responsibility arises which has the force of law.Thirdly, it was submitted that in the absence of any identification of the subject heads of information, the Commissioner is required to make policy decisions relating to the obtaining of information rather than administering the Act.
Fourthly, it was submitted that an inquiry made without any corresponding legal obligation to reply to the inquiry would be within the concept of gathering information but that where the notice given itself prescribes the area of legal responsibility it is indistinguishable from the exercise of a legislative power.
I am unable to accept any of those submissions all of which, in my view, are basically fallacious.
In the first place, sec. 264 does not grant legislative power to the Commissioner. It simply grants him a power, which power is conferred upon him by the Parliament, to give a notice requiring a person to supply information. The notice given by the Commissioner does not create any right, or obligation. As I said above the Parliament created in sec. 264 the right of the Commissioner to give the notice and the Parliament in sec. 233, by providing a penalty for the failure to supply the information created the obligation to supply it.
The only limitation upon the power of the Parliament is that what it does must be within the powers of legislation conferred upon it by the Constitution, in this case by sec. 51 placitum (ii), subject to any other provisions of the Constitution and if the powers to make inquiry ancillary or incidental to the exercise of legislative power to make the legislation effective. Then it is within the power to legislate given by the Constitution.
As O'Connor J. said in
Huddart Parker & Co. Pty. Ltd. v. Moorehead (1909) 8 C.L.R. at p. 377:
``In every grant of power by the Constitution to the Parliament of the Commonwealth there is necessarily included the right of enacting such provisions as may be necessary to render the power effective.''
The power there being discussed was a power conferred upon the Comptroller-General of Customs in certain circumstances to require, by writing under his hand any person whom he believed to be capable of giving any information in relation to an alleged offence to answer questions and produce documents in relation to the alleged offence, and it imposed a penalty on any person failing to do so.
All five Justices of the High Court who heard the appeal held such power to be a valid exercise of its legislative power under sec. 51(xx) of the Constitution.
That part of the decision does not seem to have been affected by the decision in
Strickland v. Rocla Concrete Pipes Ltd. & Ors. (1971) 124 C.L.R. 468.
In the present case it would seem that there can be no doubt but that sec. 264 is a power conferred by the Parliament which is necessary to render the legislation as to income taxation effective and is incidental to the power to legislate on that subject matter.
The doctrine of separation of powers as applied to the Commonwealth under the Constitution was not fully discussed by Mr. Kalaf and I do not consider that it is necessary for me to discuss it in this judgment in the light of the conclusion to which I have come that the power conferred upon the Commissioner by sec. 264 is not in any case a legislative power. On the contrary it is a purely administrative power and the issuing of a notice which is valid within the terms of the section is an administrative act.
Those matters are, in my view, sufficient to answer the first three submissions made on behalf of the appellant and, I think, also of the fourth submission, in the tax case with the addition of the observation that the notice issued by the Commissioner does not, in my view, ``prescribe the area of legal responsibility''. Parliament has done so by prescribing that the ``area of legal responsibility is to supply the information required to be given'' provided the information is within the limitation referred to by Mason J. as set out above.
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For these reasons I would dismiss the appeal, confirm all orders of the magistrate and order the appellant to pay costs of the appeal.
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