Case V130

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 19 August 1988.

P.M. Roach (Senior Member)

This case presents an unusual aspect of tax litigation. By her evidence the applicant asserts that her taxable income should be greater than that assessed by the Commissioner but, for reasons which will appear, she does not ask that her assessment to tax be increased. However, she does ask that the impositions of additional tax for incorrect return should be reviewed and excised or reduced.

2. The respective assertions of the applicant and the Commissioner as to taxable income are:

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TABLE A 

Year ended 30 June       1982            1983            1984           Total
                          $               $               $               $
Taxable Income:
Applicant              16,180          22,525          16,510          55,215
Commissioner           14,605          15,900          13,010          43,515
                       ------          ------          ------          ------
                        1,575           6,625           3,500          11,700
                       ------          ------          ------          ------

The difference between the parties is represented by the sums the applicant claims should have been deducted from her earnings, in accordance with the requirements of the PAYE system, and remitted to the Commissioner by her employer - a company I shall refer to as ``CRAFT-CO''.

3. The assertion of the applicant is that, had CRAFT-CO performed as it ought to have performed, her indebtedness to the Commissioner (questions of interest on moneys overdue and unpaid aside) would have been only $57.17 made up as follows:

TABLE B 

                   1982            1983            1984            Total
                     $               $               $               $
Taxable Income    16,180.00       22,525.00       16,510.00       55,215.00
                  ---------       ---------       ---------       ---------
Tax                3,835.20        6,078.49        3,643.18       13,556.87
LESS Tax Deductions
- Disputed         1,575.00        6,625.00        3,500.00       11,700.00
- Other            2,264.87                        1,161.71        3,426.58
  Rebates             83.00                                           83.00
                   --------       ---------       ---------       ---------
Refund                87.67          546.51        1,018.53        1,652.71
Previously refunded (552.67)                      (1,157.21)      (1,709.88)
                   --------       ---------       ---------       ---------
Now due             (465.00)         546.51         (138.68)         (57.17)

4. Although the applicant claims that her net indebtedness to the revenue over the term should stand at only $57.17 the Commissioner raised assessments on 15 November 1985 which, subject to these proceedings for review, made the applicant liable to the Crown for $14,847.37, made up as follows:

TABLE C 

                      1982           1983            1984            Total
                       $               $               $               $
Income Assessed     14,605.00       15,900.00       13,010.00       43,515.00
                    ---------       ---------       ---------       ---------
Tax Assessed         3,331.20        3,508.03        2,578.62        9,417.85
Additional Tax       1,745.00        3,540.00        1,805.00        7,090.00
                    ---------       ---------       ---------       ---------
                     5,076.20        7,048.03        4,383.62       16,507.85
Tax Deductions       2,264.87                        1,161.71        3,426.58
Rebates                 83.00                                           83.00
                    ---------       ---------       ---------       ---------
                     2,728.33        7,048.03        3,221.91       12,998.27

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                       1982            1983            1984           Total
                        $               $               $               $
Refunds paid          552.67                        1,157.21        1,709.88
                    --------        --------        --------       ---------
                    3,281.00        7,048.03        4,479.12       14,708.15
Unexplained           139.22                                          139.22
                                                                    ---------
                                                                   14,847.37

5. Addressing the problems raised without regard to jurisdictional limitations or similar problems, it is appropriate to observe at the outset that the correct resolution of the differences between the applicant and the respondent depends upon the terms of a contract of employment made between the applicant and CRAFT-CO; and the actions of the parties in the performance of that contract. The terms of that contract were negotiated between two persons: the applicant and James - the man who controlled and directed the affairs of CRAFT-CO. In one sense, the issue to be determined is which of two persons - the applicant or CRAFT-CO - is in default of obligations to pay moneys to the Commissioner. If the applicant is correct in her assertions, the assessment of taxable income against her should be increased in accordance with her claim in Table A and, by bringing to account to her credit all moneys which should have been remitted to her credit by her employer, she would be indebted, subject to any questions of interest, to the Commissioner for $57.17 (Table B). Whether or not that account be the correct account, it is at least clear that the applicant bears the onus of persuading the Tribunal that, on the balance of probabilities, her account is the correct account (sec. 190(b) Income Tax Assessment Act 1936 (``the Act'')). In forming its judgment upon that issue, the Tribunal has to have regard to the evidence which has been presented to it. In doing so it may also have regard, in accordance with the principles expressed by the High Court of Australia in
Jones v. Dunkel & Anor (1958-1959) 101 C.L.R. 298, to the circumstance that one or other or both of the competing parties may not have called in support of their case witnesses whom they might reasonably have been expected to call.

6. In considering those matters, it is of very considerable significance that the applicant attended the hearing and gave evidence. Thereby she submitted herself to and was subjected to cross-examination to the extent chosen by the representative of the Commissioner. James was not called to the witness box. Nor was his wife (Mrs James) called to the witness box even though she was secretary of CRAFT-CO. It might reasonably have been expected that the Commissioner would have called at least James to the stand, but he did not do so. Conversely, it would not have been reasonable to expect that the applicant would call James to the stand to confess his misconduct and thereby exonerate the applicant: assuming that the account of the applicant is true. But, although it was reasonable to expect the Commissioner to have called James to the stand, it was in fact the applicant who sought to call James as a witness. What is more, the applicant, instead of doing what is all too commonly done, taking no formal steps to require the attendance of witnesses, the applicant went to the trouble of taking out a summons directed by the Tribunal to James requiring him to attend. Further, contrary to the altogether far too common and quite unsatisfactory practice of requesting the issue of summonses even as little as two days before a long-appointed hearing date, in this instance the applicant moved to effect service of the summonses well in advance of the hearing. Knowing that the hearing date was appointed for 26 July 1988, the summonses were taken out on 24 May 1988. Thereafter a licensed commercial sub-agent was engaged to effect service. In all, five process servers made 15 attempts to effect service (including four telephone enquiries) in a period commencing on 27 May 1988 and extending to 11 July 1988. All attempts were unsuccessful. Similarly, steps were taken to effect service of a summons issued the same date directed to Mrs James as the secretary of CRAFT-CO requiring her, as secretary of the company, to produce all relevant records. The fact that James was unlikely to have supported the case for the applicant and to have thereby acknowledged the alleged breaches of duty and financial default should not surprise, but the attempts to summons him were, even though it was activated to some extent by the optimistic views of the tax agent representing the applicant. He considered James would have demonstrated himself to be a ``hostile'' witness - as distinct

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from merely an unfavourable witness; that by doing so he would expose himself to cross-examination at the hands of the accountant; and that thereby such cross-examination would lend confirmation to the account of the applicant.

7. As to the failure of the Commissioner to call James, or to attempt to bind James by summons to attend, as a witness before the Tribunal, the representative of the Commissioner stated that it was decided that, as the attempts of the applicant to call James as a witness had failed, there would be no point in the Commissioner attempting to procure the attendance of James. Why that conclusion should have been reached was not explained. There was no suggestion that the company had gone out of existence or that James and his wife had ceased to be associated with the company. Indeed, the ``affidavit of attempted service'' gave several indications that the persons to be summonsed still controlled the company; that the company was still operative; that the offices of the company were still staffed; and suggested that James and his wife were never far away, but rather only not present at the business address or a private address at the time attempts to effect service were made. Furthermore, it would not have been unreasonable for the Commissioner to suppose that the applicant was not keen to have the witnesses attend to give evidence, whether as witnesses called by the applicant or as witnesses called by the respondent. According to the case to be presented on behalf of the Commissioner, the applicant was a deceitful person. (On the other hand, if it be supposed that James was avoiding service, such a reaction might lend support to the applicant.) I shall return to further consider the significance of those matters in due course.

8. The evidence presented at the hearing is such that very little is known about CRAFT-CO. It carries on a specialist business employing craftsmen in the manfacture of a low volume of high quality equipment and, in addition, engages in other ill-defined activities. Its workshops were staffed by up to 20 craftsmen. Its office was managed by James, assisted by his wife and, during much of the period in question, by the applicant. Mrs James had charge of the accounting system. The applicant came to be employed as a personal secretary to James. She was actively involved in customer relations and in a diversity of ancillary and supportive representational and organisational activities. Although she was spoken of in glowing terms in a testimonial provided by James at the termination of her engagement, and although the terms used to describe the range of her responsibilities were extensive, I am not persuaded that her responsibilities called for any particular high level of secretarial or organisational skill.

9. When her engagement with the company commenced, she was in her twentieth year. At the age of about 17 she had undertaken a full year of secretarial studies. Thereafter she had been employed for some months by an accountant and tax agent - a person to be later referred to; and subsequently for some months by a firm of solicitiors. I am not persuaded that either experience gave her any significant measure of commercial expertise or astuteness. Then, for a substantial period extending to the end of January 1982, she was employed in another position in which she was earning at the rate of about $293 per week gross ($253 net). Her salary was paid to her after deduction of tax instalments. That position came to an end late in January 1982. I accept that there followed a short period in which she was engaged in another temporary position in which she earned $366 gross ($322 net). Once again, tax instalments were deducted.

10. Being a lady of some initiative, she advertised seeking employment opportunities and, in due course, was interviewed on two occasions by James. Her evidence was that it was then agreed that she would work on a trial basis without remuneration for two weeks and that, if the appointment was then confirmed, she would be employed at a wage of $300 per week net. She was aware of the obligations of at least two previous employers to effect deductions on account of tax and to remit them to the Commissioner, but she did not profess to know - and I accept that she did not know since it was not suggested otherwise - what level of gross remuneration would provide her with an entitlement to $300 per week net. At that time a salary of about $410 per week would have allowed for $300 per week net.

11. Her evidence was that, following the trial period, the appointment was confirmed and thereafter she received $300 per week. Being conscious of the need to present employee tax declaration certificates to her employer, on

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some day unknown being something of the order of three months from the commencement of her service, she says that she provided such a document to her employer. Nothing more was heard of it.

12. When 30 June 1982 came she said that she made enquiries of James as to her group certificate. She said that she was told that there would not be one, and that she should represent herself to the Commissioner as having been unemployed during the period of her service with the company. She presented this information to her tax agent (her previous employer) and in due course she, on 24 August 1982, completed a form of ``S'' return to 30 June 1982 in which she falsely and consciously asserted that from ``25.2.82 to 30.6.82'' she had been unemployed and receiving no benefits. In due course that return was assessed as presented and she received a refund cheque of $552.67 in December 1982.

13. Meanwhile, employment continued and week by week she received $300. When 30 June 1983 came her evidence was that she again sought a group certificate and it was refused: James stating that there would be no group certificate. She claimed that, troubled by this, she again conferred with her agent, and that as a result it was decided that she should not sign or present any income tax return for the year of income ended 1983.

14. Claiming that she was troubled about these matters, her evidence was that she continued to press James on the issue of the group certificates only to find her claims refused. She said that she received assurances that all she had to do was describe herself as unemployed; and that there would be no trouble about the matter because James had a friend ``high up'' in the office of the Commissioner, who would make sure that there was no trouble. Claiming to be unhappy about these matters, she resigned with effect from 30 November 1983. She claimed that by then she was satisfied that there was no intention on the part of James to rectify matters. The following day she was provided with a glowing testimonial in tribute to the ``invaluable service'' she had rendered to the company ``in all its concerns'' while ``employed as a full-time Consultant to this Firm from 1st February 1982 to 1st December 1983''. Although, according to her evidence, she was in need of money badly at that time she was not able to find any employment until she commenced work with a fund-raising organisation in mid-February 1984. She did not like that position and abandoned it late in March 1984. She then remained unemployed (with the exception of a two-day position: $101 gross) until she commenced work on a long-term basis with a well-known commercial organisation in May 1984 at a gross wage of the order of $365 per week (net about $270). Her remuneration improved substantially later.

15. Even if the applicant is correct in asserting that the terms of her employment were such as she contends for, her conduct in relation to her taxation affairs is far from blameless. Prior to requesting a group certificate for the year of income ended 30 June 1982, unless she had been party to arrangements whereby she had agreed that no tax would be deducted on her account, she would have been in the position of most employees: completely unaware whether the employer was carrying out his statutory duties. But even assuming that she was unaware prior to July 1982 that tax was not being deducted and remitted to the Commissioner, thereafter she had no reason to believe that CRAFT-CO was carrying out its obligations towards the Commissioner. The only conclusion reasonably open on her own evidence is that thereafter she was aware that the employer had not performed and did not intend to perform its obligations to the Commissioner. Secondly, she accepted - however reluctantly - the assurances of James that she had nothing to be concerned about and that it would be ``all right''. Despite widespread cynicism in the community about corruption in public life I am not persuaded that the applicant believed James had a capacity to procure the corrupt administration of the Act. Thirdly, again according to her own evidence, she was prepared to not disclose to the Commissioner the income or even, according to her own assertions, the net income that she had received from the company. In the fourth place, in an endeavour to conceal the fact of her income-producing activities, she lied to the Commissioner. She professed to have been unemployed throughout the period during which she was working for the company. Her conduct in these respects was deceitful. It may even be classified as reprehensible and deserving of punishment, but it does not follow only by reason of that misconduct that her

ATC 833

account of the terms of her employment were incorrect.

16. Her evidence was that, being desirous of keeping her job, and trusting the assurances of her employer - but at the same time doubting the propriety of the conduct proposed - she consulted her tax agent: her former employer. She claims that he was made aware of the circumstances and that he approved the course of action which resulted in a false return being lodged for the year of income ended 30 June 1982. I make no finding as to the awareness of or the involvement of that agent. Such a finding might be material to questions of guilt or punishment upon complaint of an offence or offences, but whether the agent knew of the relevant facts or condoned the proposed course of deceit is not directly relevant to the question of the quantum of income derived by the applicant.

17. The next year progressed and, at the end of the year, once again no group certificate was forthcoming. This time no tax return was lodged. But the applicant said that, as the third year progressed, prompted by her growing concern as to the uncertainties of her position, she contacted the Australian Tax Office, making an anonymous enquiry and arranging to visit the office to discuss the problem. However, she says, she was persuaded by the agent not to attend but rather to accept the risk of detection. Still being worried, rather than continue in an otherwise enjoyable position which provided her with the money she needed for living purposes, she resigned without having arranged alternative employment. It is not without significance that immediately thereafter she became unemployed and had no regular source of income. That her employment had been satisfactory in terms of acceptability to herself and her employer is indicated not only by her own testimony but also by the testimonial provided by the company immediately following the termination of her employment.

18. But having severed that association with her employer, she did not then take the opportunity available to disclose her earlier deceit or breaches of duty to the Commissioner. What is more, following 30 June 1984 she had two further returns prepared for the years of income ended 30 June 1983 and 1984 respectively: the former being necessary to maintain continuity with the return lodged for the year of income ended 30 June 1982. In both returns the applicant again deceitfully withheld information as to her employment with the company; and deceitfully asserted that, throughout that employment, she had been unemployed without being in receipt of unemployment benefits. The former return called for no assessment and none was made. The latter return was assessed as returned and, in consequence, she received a refund of $1,157.21 by reason of tax instalment deductions made by other employers.

19. In October 1984 the Commissioner enquired of her through her tax agent as to income-earning activities in the period during which she was in fact in service with CRAFT-CO. She was not diligent in replying but, after some two months, she did respond and replied, repeating the lies of the past. She claims that before replying she contacted James who advised her to reply as she did. She thereby committed further offences for which she might have been prosecuted and punished, but once again, that deceitfulness does not establish that her account of the terms of her engagement were incorrect.

20. During 1985 an officer of the Commissioner carried out a partial audit of the affairs of CRAFT-CO. He found a neat and ordered set of accounting records which were internally consistent with each other and with the primary records which he examined. He found record of ``wages'' paid to ``employees'' which were consistent with the records of tax deductions made and remitted to the Commissioner. He found a record of amounts paid to some persons without deductions being made on account of tax. One set of the payments so recorded related to a person bearing the name of the applicant. The investigator made enquiries of the company and examined the documents produced. He determined that the amounts recorded as so paid represented the gross amount to which the applicant was entitled by way of remuneration. He believed as true what he learned from discussion with representatives of the company and the examination of its books. He believed it without providing the applicant with an opportuntity to express her view. In so acting, he put aside the possibility that the neatly presented and internally consistent accounting records might be untrue; he ignored the possibility that his informants might have been

ATC 834

incorrect; he ignored the possibility that his informants might have been lying. However, having formed the view that the information he had gathered was correct, he considered the matter to be so clear-cut that he recommended the issue of assessments against the applicant - a person who was thereby judged unheard to be a tax evader - a person whose evidence and personal merits had neither been taken to account nor considered.

21. In short, the evidence of what the investigator saw in the books of account and heard from others did no more to advance the case for the Commissioner than did the mere production of accounting records assist the taxpayer in Case V38,
88 ATC 325 - a decision subject to appeal to the Full Federal Court.

22. Furthermore, the investigator judged the conduct of the unknown person to be so deliberate and blatant a tax evader that he recommended that substantial penalties be imposed for incorrect returns. He formulated his recommendations in accordance with the Commissioner's standard practices of the time whereby it was ordinary practice to impose as a penalty a ``compensatory interest'' component at the rate of 20% per annum of tax avoided for the period of alleged evasion, plus a ``culpability factor'' expressed as a percentage of tax evaded. The investigator's recommendation was that the actions of the applicant were so blameworthy that, instead of the 40% culpability factor commonly reserved for the least, and all but the worst, of tax evaders, the culpability factor in this instance should be 60%.

23. The recommendations were accepted and the assessments issued. The applicant objected and her objections were dismissed. The applicant thereupon requested an independent review: that her evidence be heard and her arguments be considered before being judged. So the matter came before this Tribunal for determination. Before this Tribunal she was entitled to be heard before being judged. Subject to procedural and jurisdictional questions, she will be entitled to the relief which she seeks if she can persuade the Tribunal on the balance of probabilities that her account of the terms of her employment should be believed in preference to what was reported to the Commissioner as to the evidence of persons whom I have not heard and from examination of pieces of paper of which I have heard only second-hand accounts. There is no conflict to be resolved between the evidence of the investigator and that of the applicant. I accept the evidence of the investigator in its entirety. But that evidence was limited to what he was told and what he found recorded in accounting records. That does not establish the evidence of the applicant to be incorrect.

24. The basic issue is whether the applicant's account of the arrangement as to remuneration is correct or not. Two persons could have given direct evidence. One did. That person was the applicant. The other, whom the Commissioner might reasonably have been expected to call - the person on the strength of whose assertions the Commissioner rested his assessment - did not give evidence. The failure to call James was not satisfactorily explained. The Commissioner, who might far more reasonably have called James than the applicant, was content not to try to call him because he accepted that - as it was proper to do - genuine efforts on the part of the applicant to effect service over a prolonged period, utilising the services of supposedly efficient process servers, had failed. But I am not persuaded that that alone made it reasonable for the Commissioner not to try. Having regard to the nature of the business being conducted by the company it seems quite remarkable that the process servers should have failed as they did. Had James and other witnesses given evidence one might have weighed their testimony against that of the applicant - in both cases after cross-examination - and the Tribunal would then have determined that the truth was more probably to be found in the evidence of one side or the other. But the Tribunal was not provided with that opportunity. Instead, the task was left to the applicant of persuading the Tribunal on the balance of probabilities without any competing testimony being opposed to that of the applicant.

25. Unquestionably, the burden of proof lies upon the applicant and so lies for very good reason (cf.
F.C. of T. v. Clarke (1927) 40 C.L.R. 246 per Isaacs J. at p. 251):

``The justice of that burden cannot be disputed. From the nature of the tax, the Commissioner has, as a rule, no means of ascertainment but what is learnt from the taxpayer, and the taxpayer is presumably

ATC 835

and generally, in fact, acquainted with his own affairs. The onus may prove to be dischargeable easily or with difficulty according to the circumstances.''

Very often only the taxpayer knows the relevant facts and no one has any interest or concern to assert any other version of the facts contrary to that put forward by an applicant. In such cases it is to be expected that the evidence on critical issues will only be presented on behalf of the taxpayer. Such evidence must be heard precisely, and critically considered, but there is no basis for presuming that the evidence so presented by or for a taxpayer is untrue. As Gibbs J. said
McCormack v. F.C. of T. 79 ATC 4111 at p. 4121; (1978-1979) 143 C.L.R. 284 at pp. 301-302):

``Although evidence given by a taxpayer as to the purpose with which he acquired property must, for obvious reasons, `be tested most closely, and received with the greatest caution' (Pascoe v. F.C. of T....) it would be wrong for a judge to regard the evidence of a taxpayer as prima facie unacceptable.''

But this is not a case in which the truth could only be directly attested to by the applicant. There was at least one witness with an interest in presenting an account challenging either the accuracy or veracity of the applicant's account or both. That opportunity was not availed of.

26. So the question becomes whether the applicant's account upon due consideration and after assessment of all of her evidence, including her evidence under cross-examination, persuades on the balance of probabilities. There are many reasons for doubting the accuracy and even the honesty of the evidence. Why should the services of a secretary employed at about $300 per week in her previous employment and at about $365 in her next employment which had some measure of permanence have been thought to be worth about $410 per week to an employer? Why did she continue in the employment after being told that there would be no group certificate? In so continuing, did she come to accept revised terms of employment? Was she - a possibility untested by cross-examination - a person who had proposed the facade of a ``consultancy'' with a view to avoiding her tax obligations from the outset? Other considerations which justify suspicion are the absence over nearly 20 months of claims to increased remuneration: and the failure to claim any tax refund which would have been due for the 1983 year if the story of the applicant was true.

27. On the other hand, her claim is not obviously untrue and, certainly, it is not obviously true that the records of the employer are correct. Employers are not always virtuous in tax matters; just as employees are not invariably dishonest. Furthermore, the account given by the applicant in her evidence is not without some measure of support. She produced evidence that in March 1983 the company, in a document executed by the wife of James, acting as secretary of the company, had represented:

``22nd March, 1983

TO WHOM IT MAY CONCERN WITHOUT PREJUDICE

To confirm (the applicant) has been consulting to this Company for over 12 months, annual fee being $22,100 Gross.

These figures do not include bonuses or benefits that occur from time to time.

Yours sincerely.

Company Secretary.''

28. If the statement so made was truly made, the statement substantially confirms the assertions of the applicant. If that statement however be false, it establishes that Mrs James was prepared to entrust the applicant with a document issued under the hand of the secretary on the letterhead of CRAFT-CO which was untrue: something relevant to at least the credibility of that Mrs James, just as the false assertions made by the applicant in her returns of income are relevant to assessment of her credibility. Furthermore, if as the applicant contended, the document was provided to enable the applicant and her boyfriend to raise housing finance and that was known to the company, it then shows a willingness on the part of the company to deceive fellow citizens. If that be so, it is to be observed that there are few indeed who are willing to deceive their fellow citizens, but yet see themselves as owing greater obligations in honesty to the Commissioner.

29. On the balance of probabilities, I am persuaded that the account of the applicant should be accepted. As the evidence satisfies

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me that CRAFT-CO had an obligation to ``deduct'' tax under the PAYE system (sec. 221A and ff.), it follows that the company should have remitted $11,700 to the Commissioner to the credit of the applicant. But such a finding is far from disposing of the matter. If I were to give effect to such a finding I would order that the determinations of the Commissioner upon the objections under review be varied and that the assessments of taxable income should be increased in accordance with the findings I have made. The immediate consequence of such amendment to the assessments would be to substantially increase the amounts of tax to be levied by reason of such increased taxable income. That would leave the applicant indebted in far greater amount to the Commissioner unless it happended that the Commissioner gave credit for tax instalment deductions which should have been made, whether or not remitted by the employer. As to that it is appropriate to say two things: first, that I have no authority to make any determinations as to what amounts should be brought to the credit of the applicant in any account between the applicant and the Commissioner; and secondly, as between the Commissioner and CRAFT-CO, I have no power to make any determination which would bind either of them.

30. That follows from the terms of the legislation. The Act is structured so as to make employers responsible to retain from moneys due as ``salary and wages'' to persons such as the applicant substantial sums on account of tax. Although the Act speaks of ``deductions'' it would have been more appropriate had it spoken of ``withholding'' moneys from the employee or of ``retentions''. By reason of that duty cast upon the employer, employees are denied the right to receive the money which the employer is obliged to withhold. Because employees have no right to receive the moneys retained, it commonly follows that employees do not know during a year of income whether their employer is performing his duties as to the remission to the Commissioner of moneys withheld. That duty to remit is the second obligation cast upon employers. By providing that the employer is obliged to (a) withhold; and (b) remit the moneys withheld to the Commissioner, the Parliament has effectively constituted the employer as an agent of the Commissioner.

31. Having ``deducted'', the employer is obliged to account to the Commissioner either by remitting the moneys or by the use of tax stamps. Failure to ``deduct'' constitutes an offence (sec. 221C(1A)) and renders the employer liable upon conviction to penalties and to payment to the Commissioner of an amount not exceeding the amount which should have been ``deducted'' (sec. 221C(1B)). In addition, where the employer ``refuses or fails... to deduct'' the employer is liable to pay to the Commissioner by way of penalty the amount he should have ``deducted'' plus interest on so much thereof as remains unpaid at the rate of 20% per annum (sec. 221EAA). When a group employer fails to remit amounts ``deducted'' to the Commissioner (sec. 221F(5)), he becomes liable to pay to the Commissioner the moneys ``deducted'' and interest thereon (sec. 221F(12)); and, upon conviction, is liable to a monetary penalty of $5,000, or imprisonment for 12 months, or both (sec. 221F(14)). But bearing in mind that the moneys withheld were the moneys of the employee which, upon receipt by the Commissioner from his ``agent'' the employer, are to be credited to the employee (sec. 221H), it is somewhat surprising to find that the only provision touching the interests of the employee in that regard is sec. 221Q. So far as is material, it provides:

``(1) Where the Commissioner is satisfied that an employer has made deductions from the salary or wages of an employee and has refused or failed to issue a group certificate or to deliver a tax stamps sheet in respect of those deductions to the employee within the period prescribed by this Division, the Commissioner shall apply an amount equal to the amount of the deductions in satisfaction of any tax payable by the employee in the same manner as if a group certificate in respect of the deductions had been received by the Commissioner.''

As no provision is made entitling persons such as this applicant to have such a decision of the Commissioner under sec. 221Q(1) reviewed, it is merely to be hoped that the Commissioner will accept the findings in proceedings such as this and allow an appropriate credit to the applicant when the findings indicate that course to be appropriate.

32. When those limitations were raised with the representative of the applicant, he asked

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that no such increase in taxable income be ordered. Taking a practical view of the matter, that would seem to be an understandable course. But, although it may confine the difficulties, it does not resolve them. Upon that application being acceded to, there will be no alternative but to confirm the Commissioner's determinations upon the objections. That will be done on the basis that, on the balance of probabilities as applied to the evidence before me, I am satisfied that, because the assessments before me are for sums less than I have found taxable income to be, I can only conclude that those assessments are not excessive. The corollary to that is that the assessments of tax are not excessive. The result will then be that, if no credit is given for any part of the tax instalment deductions which should have been remitted to the Commissioner, the tax debt outstanding on the assessments before me (after bringing to account refunds previously made) will be as follows: 
Year ended 30 June     1982            1983            1984           Total
                        $               $               $               $
Taxable Income       14,605.00       15,900.00       13,010.00       43,515.00
                     ---------       ---------       ---------       ---------
Tax as assessed       3,831.20        3,508.03        2,578.62        9,417.85
Less: Deductions
      Rebates         2,347.87            -           1,161.71        3,509.58
                     ---------       ---------       ---------       ---------
                        983.33        3,508.03        1,416.91        5,908.27
Plus: Tax refunded      552.67            -           1,157.21        2,709.88
                     ---------       ---------       ---------       ---------
Tax payable           1,536.00        3,508.03        2,574.12        7,618.15
                     ---------       ---------       ---------       ---------

The disputed tax deductions ($11,700) exceed that figure. In consequence, if the Commissioner fails to give credit for the ``deductions'' which I have found should have been made, the applicant will have been overtaxed. On the other hand, if the Commissioner is to give credit for all the tax instalments which should have been effected, the Commissioner would then be indebted to the applicant for a greater sum than is appropriate upon the assessments presently before me.

33. Nor do the complications end there. Each solution which might be seen to any particular problem would seem to only generate greater problems. This Tribunal cannot resolve the question as to credits to be made in relation to the tax instalment deductions not remitted. Further litigation may be necessary and such litigation might be conducted with a different result, particularly if the Commissioner were then to present the evidence of James and others as he might have done in the proceedings before me. Furthermore, the system for the recovery of tax does not require that the Commissioner should act in relation to the applicant as any other creditor of the applicant would have to. The Commissioner would not necessarily have to institute proceedings to recover the amount claimed, let alone proceedings in which he would bear the onus of establishing the entitlement he claims. He can enforce his claims against the applicant by non-curial proceedings, such as the mere withholding of moneys which in the future might otherwise be refunded; or recovery by unilateral action pursuant to sec. 218 of the Act.

34. The entire situation is quite unsatisfactory and consideration might be given to the question whether, in circumstances such as these, the Tribunal ought not be empowered to not only bring in a definitive finding as to the quantum of taxable income; and as to the quantum of tax; but also as to credits to be allowed by reason of such findings.

35. There remains yet a further question: that is the matter of the imposition of penalties. According to the findings I have made there has been an evasion in so far as the deceits of the applicant have resulted in an under-assessment of taxable income. But, on the other hand, by reason of the same findings of fact, there has been no significant underpayment of tax.

36. In reviewing the imposition of penalties, it is appropriate to observe:

37. In all the circumstances, I consider that additional tax should be wholly remitted.

38. The result being so unusual I conclude by saying:

 

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