When appearing before the House of Representatives Select Committee inquiring into the Australian Print Media Industry in November 1999 Kerry Francis Bullmore Packer famously said:
“If anybody in this country doesn’t minimise their tax they want their head read because, as a government, I can tell you you’re not spending it that well that we should be donating extra.”
“I pay what I’m required to pay, not a penny more, not a penny less.”
There might be the odd ATO officer who would take issue with that statement.
KP wasn’t the first, and he certainly won’t be the last, to arrange his affairs in such a way as to minimise tax.
In fact, he could’ve taken a page out of the Vestey tax avoider’s almanac.
When it was revealed in 1980 that the Vestey family had paid almost no tax for the previous 60 years while amassing a family fortune of £1.4 billion, Edmund Hoyle Vestey (pic), a deeply religious man, declared:
“We paid exactly what we were obliged to pay … We have certainly kept to the letter of the law … Let’s face it, nobody pays more tax than they have to … We’re all tax dodgers, aren’t we?”
Many, including some leading lawyers like Tony Hooper QC (dec’d), Dr Clifford Pannam QC, Stephen Archer (ret’d hurt), Clarrie Stevens QC (ret’d hurt) and Michael Brereton (AWOL) have run foul of the law of late, although none has suffered the ultimate indignity, yet!
This august group of citizens was recently joined by a couple of chippies from Drummoyne and Castle Hill who signed up for one of accountant Robert Agius’ Vanuatu-based scams, only to find themselves sentenced to seven months in chokey and ordered to pay $2 million in compensation and penalties.
Which leads me to ask, what is going to become of George Haritos and Alex Kyritsis and their company AES Services (Aust) Pty Ltd?
On September 7 and 18 the Deputy Commissioner of Taxation hauled AES and its assorted hangers-on before Justice “Jack” Forrest in the Victorian Supreme Court seeking the continuation of a freezing order made by Justice Phillip Mandie on June 10.
According to Justice Forrest:
“The genesis of DCT’s claim is the asserted failure by AES and the directors to disclose over $30 million in assessable income in the financial years ending June 2005, 2006, 2007 and 2008. DCT contends that AES and the directors have already alienated funds or assets to the third parties and there is a real likelihood that absent a freezing order, it will be unable to recover outstanding amounts of income tax owed by AES and the directors, as well as GST owed by AES. This is said to amount to over $28 million (including additional taxes, penalties and interest).”
AES was in the cleaning business in Melbourne and had lucrative contracts with MTE/Connex, Yarra Trams, RMIT, United Group, Resolve, Holmesglen TAFE, CSIRO, and others.
Between October 2004 and May 2006, Haritos and various third parties became the registered proprietors of 10 properties in Prahran, Toorak, Caulfield North and South Yarra – costing about $13.5 million.
The ATO claims that most of the income derived by AES was deposited into an account with the CBA, which was also used to pay the vast majority of the business expenses of AES.
Payments from three major clients were deposited in a Westpac account.
Random samples of Westpac vouchers demonstrated that 95 percent of the vouchers were made out to cash, with the balance going to a particular contractor.
On the other hand, only one of the CBA vouchers was made out to cash, with the balance appearing to be business-related payments.
Forrest went on:
“The allegation by DCT, reduced to its simplest, is that a large amount of income received by AES and paid into the Westpac account was not declared as income and therefore avoided income tax and GST.
An audit by ATO officers concluded that AES and the directors had understated their income for the four financial years ending June 2005 through to June 2008. The ATO assessment of AES’s taxable income was increased by $25,756,137, Mr Haritos by $7,733,388 and Mr Kyritsis by $343,991.”
The judge continued the freezing order on that occasion and again on November 20.
If the DCT is able to prove up even half of the sums alleged, then it’s pretty clear that Haritos and Kyritsis should get used to the idea that they’ll be doing jail time in the near future.
Accommodation at one of Her Majesty’s penal institutions will not be as comfortable as the Haritos’ pad in St Georges Road, Toorak, or the Kyritsis’ pile in Chastleton Avenue in the same suburb.
Fortunately for the DCT, it appears that most of AES’ diverted cash found its way into local real estate rather than offshore accounts in the Dutch Antilles.
Speaking of the Dutch Antilles, it looks like the ATO missed the boat on the proceeds of the Myer float.
Private equity investor TPG, and its legion of advisers, employed an “efficient” tax structure to whisk the bulk of the proceeds of the float, sans CGT reduction, out of the country before the ATO had time to serve an assessment.
The DCT now alleges that $452 million plus penalties of $226 million are owed on a capital gain of $1.3 billion.
It’s not suggested, of course, that TPG did anything illegal, indeed a spokesperson said the company had “met all Australian tax obligations”.
Finally, the big four Aussie banks seem to have got themselves into a spot of bother with some arrangements quaintly called “asymmetric swaps”.
The Oz recently reported that the big four face a $2 billion tax bill from the NZ Revenue over “structured finance transactions”, whatever they are.
The ATO is making inquiries.