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Evan Whitton
25 July, 2005  
Reliving the glory days of tax ramps

Traditionally tax blitzes fizzle in the courts. Evan Whitton remembers the glory days when Gar Barwick, Harry Gibbs and the boys could always be relied upon to destroy the anti-avoidance provisions of the Tax Act


A lawyer with a briefcase can steal more than a thousand men with guns.

Vito Corleone, The Godfather (1969)

Don Vito, later hilariously played by Mr. M. Brando as a quaint old geezer, no doubt knew whereof he spoke, but he failed to tell us how many thousand men with guns could possibly equal one Humpty armed with a gavel. On tax, for example.

We don’t know much about the current “blitzkrieg” on tax evasion other than to suspect it will fizzle in the courts because of the common law’s bone-headed refusal to try to find the truth.

But as it happens we do know how much tax money was “liberated” from the revenue in the eight years after 1970, when Jack Gorton risked giving a High Court gavel to a judge, Harry Gibbs, who was still enveloped in the odour of his perverse finding that the Queensland police chief was NOT a crook: Justinian July 11, 2005

But first, as the newsreaders say, two views on tax. The House of Lords naturally said the better people have a right not to pay tax, notably in a case involving the 2nd Duke of Westminster, Hugh Richard Grosvenor (1879-1953). Hughie loved Hitler and hated Jews but he had the saving grace of owning much of Mayfair and Belgravia.

Brisbane-born Lord (James Richard) Atkin (1867-1944) had a dome as bald and conical as M. Hercule Poirot’s, and was as prone to talk drivel as the alleged sleuth. In Inland Revenue Commissioners v Duke of Westminster (1936), he said:

”... the deeds were … a device by which [the Duke] might avoid some of the burden of sur-tax. I do not use the word device in any sinister sense; for it has to be recognized that the subject, whether poor and humble, or wealthy and noble, has the legal right to so dispose of his capital and income as to attract upon himself the least amount of tax.”

image Lord Jim (seen here) did not disclose how the poor and humble might contrive to evade tax.

That same year, the Australian Parliament, representing rather more egalitarian people, took the view that fairness requires all to pay their share of tax, and that dodging it may be seen as larceny by trick, the victims being the Treasury and the poor PAYE sods who have to make up the difference.

The instigator was probably not Treasurer R. Casey (1890-1976) and certainly not Attorney General Bob Menzies (1894-1978), whose glorious career as war criminal still beckoned. My guess is it was the cuddly Prime Minister, J. Aloysius Lyons (1879-1939), who was Treasurer until October 3, 1935.

At all events, Section 260 of the Income Tax Assessment Act 1936 said every “arrangement” which has the effect, directly or indirectly, of “defeating, evading, or avoiding any duty or liability imposed on any person by this Act [shall] be absolutely void”.

Unfortunately, Menzies made a super-sinister tax shyster, G. Edward Barwick Chief Humpty in 1964, and in 1970 Gar, Harry, Vic Windeyer, and Bill Owen treated the notion that judges ride to Parliament’s instructions with the contempt it deserved.

They destroyed Section 260 in Casuarina Pty Ltd v the Federal Commissioner of Taxation. In Barwick (Allen & Unwin, 1980) David Marr noted that Casuarina concerned “a wholly artificial scheme … to avoid tax… The Casuarina case became the cornerstone of the tax avoidance industry…”

And in Curran v Federal Commissioner of Taxation, Gar, Harry, and Doug Menzies shot for the accolade of judicial liars of 1974: they said a profit of $2,782 was a loss of $186,046. Nin Stephen put in a scathing dissent.

image By 1978, devices based on Casuarina, Curran et al had relieved the Treasury of $800 million, some $4 billion at today’s rates. The distinguished Treasurer, now regrettably known as Jackie the Lackey, had to resort to retrospective legislation to rip back some of money.

Some who really got into the Gar-Harry spirit went to prison, but that sublime pair were not even charged with larceny by trick. Indeed, Harry got to be Chief Humpty when Barwick, 78, the Mundroola stench heavy upon him, finally did the decent thing in 1981.

Jackies Part IVA addition to the1936 Act in 1981 again purported to bar “blatant, artificial or contrived arrangements”, but a Tax Office survey in the early 90s found “a significant segment of the BRW’s Rich List claimed to have a taxable income below the minimum wage”. Brian Toohey reported in The Fin Review of July 2-3, 2005:

“When the Howard government was elected in 1996, the Income Tax Act was about 3,000 pages. It is now estimated to be more than 10,000 pages, not counting the innumerable interpretative guidelines and rulings issued by the ATO.”

Gar was elevated to a higher court in 1997 and Harry went up last month, but economics professor Russell Mathews had already written their epitaphs. He said in 1985:

“Australian taxation policies have more in common with the protection rackets operated by the Mafia, where relatively poor and defenceless citizens are taxed for the benefit of the rich.”

Don Vito would understand.