Protecting the community and its tax system

Keynote address by the Commissioner of Taxation,
Michael D'Ascenzo to the Institute of Chartered Accountants of Australia,
National Tax Conference, 7 April 2011

The famous American novelist Samuel Langhorne Clemens¹ said the only thing that is consistent in life is change itself. Clemens was a living testament to this philosophy himself and he exchanged his given name for the one that made him famous in his professional writing career - a.k.a Mark Twain. However, more on change later.

Nearly half a century earlier another notable American, Benjamin Franklin, penned: "In this world nothing can be said to be certain, except death and taxes".²

In the movie Meet Joe Black,³ Drew comments that the merger is as certain as death and taxes. Joe Black replies: "Death and taxes?"

Mark Twain once commented that Benjamin Franklin was sometimes prone to use maxims and truisms.⁴ The phrase "death and taxes" is attributable to Daniel Defoe in The Political History of the Devil, 1726: "Things as certain as death and taxes can be more firmly believed".

Arrangements entered into with the dominant purpose of avoiding or evading tax question that belief. According to the 1999 A Tax System Redesigned report:

"[Tax avoidance] is often driven by the exploitation of structured loopholes in the law to achieve tax outcomes that were not intended by Parliament but also includes manipulation of the law and a focus on form and legal effect rather than substance. The way things are done in order to take advantage of structural loopholes, or dress up or characterise something to satisfy form but not substance can also stamp an arrangement as avoidance. Tax avoidance represents a serious threat to the integrity of the tax system and to the revenue. It is also a form of subsidy from those paying their fair share of tax according to the intention of the law to those shirking their similar obligations".⁵

A very thoughtful analysis of the impact of tax avoidance on society was provided by the Rt Hon Sir Edmund Thomas, in "The Evolution from Form to Substance in Tax Law: the Demise of the Dysfunctional 'Metwand'", presented to the New Zealand Institute of Chartered Accountants conference in October last year.⁶

Nation building

Returning back to the context of Benjamin Franklin's 1789 letter to Jean-Baptiste Leroy: that context was the durability of the Constitution of the United States of America.

The antecedent revolt of the thirteen colonies in British North America in 1776 was deeply rooted in taxation. However,

"Without taxing powers, the first Congress of the United State barely lasted seven years; the second Congress, with taxing powers, is still going strong after more than two hundred years".⁷

In essence nation building is the task that falls on all elected governments.⁸ Taxes fund the public goods and services that are required for a properly functioning society - amongst other things they protect the personal and property rights of citizens.

The topic of change

In speaking about Australia's Constitution the Hon Justice Michael Kirby provided the following warning:

"In Australia, we must continue to uphold by law a regime of national taxation that obliges administrators to conform to their legal obligations; to act fairly; to avoid procedures or outcomes that are so disproportionate as to be irrational. At the same time, we must uphold the purposes of our revenue statutes and reject any notion that the paying of lawful taxes is optional. We must do so whether by the use of 'sham' analysis of artificial transactions or by invoking laws rendering defined 'schemes' ineffective at law".⁹

Writing about the period of the 1970s and 1980s former Commissioner Trevor Boucher referred to changes in attitude in the courts and in the ranks of tax practitioners. He also noted a "continuing debate about the extent to which tax professionals have obligations to the broader community as well as to individual clients, as illustrated in the report in February 2002 of the Senate Economics References Committee Inquiry into Mass Marketed Tax Effective Schemes and Investor Protection. The committee wanted this pursued for the integrity of the tax system".¹⁰

In the same context former Commissioner Michael Carmody made the point: "If taxation is the price we pay for civilisation, we tax advisers, lawyers and accountants, each have a key role in advancing our community".¹¹

History has shown us that there is some substance to Justice Murphy's warning of the length to which the Legislature may find itself driven to protect public confidence in Australia's tax system.¹² If the past provides a guide, we need to guard against assumptions that all taxes can be avoided by simply restructuring a commercial arrangement in some other way.¹³

We also need to appreciate that words themselves may be ambiguous, and where this is the case, the endeavour is to match their meaning with the underlying objectives expressed in statute. We need to be cognizant of the commercial context of arrangements other than the payment of fees to facilitators of a scheme, and to consider both form and substance and the nature of those dealings in that wider context. We need to guard against the proliferation of arrangements that are structured in a way that includes steps that fail the test of commercial realism (other than the tax benefit ultimately achieved) or where parties work in concert for their own interests but to the detriment of the community.¹⁴

Tax avoidance schemes damage the integrity of the system and their promotion, whatever its shape and form, has in the past been a contributing factor to the volume and complexity of the legislation. Without an effective general anti-avoidance provision in play, avoidance behaviour will spawn a myriad of specific anti-avoidance provisions as the community seeks to protect itself against abuse. This is often a catch-up game, with new versions of schemes or more boutique arrangements devised to push the envelope beyond the policy intent. This trend has abated in recent years in Australia because the general anti-avoidance provisions in the tax law have generally been seen as an able backstop in protecting the community's interests against tax arrangements that are structured in ways that shift the burden onto others.¹⁵

The promoter penalty provisions

The promoter penalty regime was introduced on 6 April 2006 (five years ago yesterday) to strengthen the integrity of the tax system in an environment where in each new decade some of us seem to forget the lessons of the past.¹⁶

In releasing the promoter penalties draft legislation in 2005, the government was clear on their scope and purpose.¹⁷ It announced that the proposed regime was aimed at targeting "the promoters of schemes that exploit the tax system to personal gain, without facing the risks of tax shortfall penalties and interest changes to which they expose the scheme participants".¹⁸

The deterrent effect of these laws is pleasingly evident. They have stemmed the proliferation of the next grand designs for mass marketed schemes of avoidance.¹⁹

Prior to the introduction of these laws, there was a wide range of publicly marketed arrangements that overtly and deliberately splashed the tax benefits of the arrangements in newspaper advertising, specialist audience publications, such as the magazines of professional associations, and heavily marketed public seminars. The 'too good to be true' features that would generate perceived tax benefits were greatly promoted in the advertising. Consequently the profile of the arrangements was relatively high and the environment reminiscent of the 70s and 80s.²⁰

While there were potential remedies for misleading statements in advertising for widely offered 'tax-effective' investment products, they proved inadequate for the task in the 1990s and early 2000s. Many of the mass marketed schemes of this era may have breached the previous rules that applied under the Corporations Act, but it was always a game of catch-up, and argy-bargy about whether or not there was a technical breach. Subsequently the rules were strengthened to require Product Disclosure Statements for widely offered products which included an explanation of the taxation consequences of the arrangement.

The introduction of the ATO product rulings system in 1998²¹ led many investors to choose to only invest in products that had the certainty provided by a ruling - thus protecting them and the wider tax system.²² It was a step forward. But the weakness in the integrity of the system was the fact that the promoters were outside the tent of efficient and effective compliance action and seemingly Teflon-coated in this environment. While there were potential courses of action that might have been taken by the scheme participants, this was in the realm of possibility but not likelihood.²³

Following the commencement of the promoter penalty laws, two main changes were observed in the market. Firstly, there were fewer public advertisements referring to tax features and secondly, where references to tax features were made, the language was far softer.

Since then the ATO has been trying to work with taxpayers and their advisers to provide a bridge for people and businesses with higher tax risk behaviours to cross over to lower risks and behaviours.

Two new developments are soon to become a part of this story of encouraging, supporting, and protecting the community and its tax system.

Firstly, we are releasing a good governance guide for tax advisors today.²⁴ The Good Governance and Promoter Penalty Laws Guide was co-developed and designed with the National Tax Liaison Group sub-committee on promoter penalties. The Institute of Chartered Accountants of Australia is a member of the sub-committee.

The guide, which has been prepared with tax intermediaries for tax intermediaries, is part of our strategy to encourage practitioners and taxpayers to recognise, reject and bring to the attention of the ATO schemes of avoidance or behaviours which are not within the spirit of the law. The guide is designed to help practitioner firms and financial institutions manage their promoter penalty risks.

As a follow-up to the release of the guide, we will be seeking to meet with key intermediaries to discuss governance and risk management issues with them.

Secondly, we are getting close to commencing court proceedings during this financial year in relation to the promoter penalty laws.

Since 2006, the ground has been surveyed and the pegs are clearly visible in the practice statements co-designed with the industry and which govern our approach to administering the promoter penalty laws.²⁵

In the five years since, with a program of engagement to address risky behaviours and practices, some of which are now being dealt with at the sharper end of the treatment suite, we can see a more conservative risk appetite within the bulk of the tax practitioner, financial advisor, and finance sectors.

The consequence of the changed environment has been that some entities have moved out of the market entirely, others changed their products and some have sought to go to ground. The strong likelihood of being penalised for promoting tax exploitation schemes is deterring would-be promoters from engaging in dodgy behaviour, and encouraging others to curtail their activities. However we are now seeing more tailored and complex arrangements on the landscape as opposed to the mass marketed ones of yesteryear.

Risk management

We have taken a systematic approach to managing risk, through providing:

• extra guidance to the community²⁶
• early warning to the community (usually followed by an ATO view)²⁷
• targeted warnings to identified participants (ranging from encouraging self-correction through to indicating potential for initiation of promoter penalty proceedings)
• differentiated specific warnings to actual and potential promoter entities (voluntary undertakings), and
• civil action against the promoters.

We have reviewed the conduct of over 550 entities potentially involved in arrangements that may contravene the promoter penalty laws. In addition, we have completed over 50 more investigations of what appeared to be contraventions of these laws. We have also completed over 2,500 cases in relation to participants connected with these promoter entities, and also written to more than 80,000 taxpayers²⁸ on tax avoidance issues.

More generally, we have found that in most cases, entities whom we have contacted about specific arrangements have willingly and immediately self-corrected their conduct to respond to our concerns. This has included taking material off websites, changing seminar materials, removing commentary about tax benefits from marketing materials, ceasing to market particular products or services and by modifying the implementation of arrangements to comply with the law.

In addition to this some entities involved in more complex or higher value arrangements have offered enforceable voluntary undertakings (EVUs). EVUs always include an undertaking to cease marketing the arrangement in the future, and may include undertakings to internal governance or control processes for promoter penalty risks, and provide specific training for staff on promoter penalty issues.

We have also strongly encouraged entities involved in widely offered products to engage with us about their products earlier and more fully, in order to obtain certainty about the tax consequences of the arrangements before they are promoted or implemented. This includes encouraging financial institutions to use the ATO product rulings system and asking advisory firms to encourage their clients, if they want certainty, to use the private or class rulings systems.

We have found in the course of dealing with potential promoter penalty cases that we need to use our formal access and information-gathering powers more frequently than for other compliance cases. The reason for this is largely due to two key factors. Firstly, confidentiality is claimed by promoters on client details thereby requiring us to make a formal request for the relevant information. Secondly, many promoters impose contractual duties of confidentiality on the participants in their schemes - so we need to protect these participants from threats of action by the promoter entity if they provide us with relevant information. Some promoters, who often rely on hiding the facts of their activities in the first place, go to great lengths to delay, defer or defeat attempts to secure relevant information.

Between 1 July 2010 and 28 February 2011, we have conducted more than 130 interviews under oath with entities and have used our powers to collect other information from entities on 45 occasions. We have successfully resisted challenges to the use of our powers for such cases on several occasions.²⁹ For instance, in one case, we issued notices regarding the apparent promotion of an arrangement to avoid the deeming of dividends under Division 7A using companies limited by guarantee.³⁰ In this case, some of the entities that we wanted to interview sought judicial review of the decision to issue these notices. Subsequently, in accordance with the Federal Court's decision, we interviewed these entities and they provided valuable information about the activities of the entities facilitating the arrangement.

While we have around 80 review cases underway, there are also 20 more serious matters currently under civil investigation, including three matters heading to the Federal Court in the next few months.

Testing our view of the law through judicial review

The first three cases we are currently preparing for litigation proceedings were identified in different ways. One promoter was found because of information from the community and media articles that indicated an arrangement had been implemented in a way that was materially different to the way it had been put to us in the product ruling request. Another was found through an analysis of input tax credit claims for entities involved with the scheme. The third was detected through information provided by the community both before and after we issued a taxpayer alert about the arrangement and by analysing tax return and third party information already available to us.

We regard the fact that we are only now bringing the first cases forward for judicial review as evidence of an exhaustive process for alternative remedies. Being the first cases and upholding the model litigant requirements for the Commonwealth has meant that we have taken a careful and considered approach to legal action in each of the cases.³¹

Investing in early warnings to the community

We have issued 57 taxpayer alerts over the past five years on aggressive tax planning. Importantly, these early warnings have seen advisors come to us to express their concern about aggressive investment schemes marketed by their competitors. Individual taxpayers too who have been approached to participate in aggressive schemes come forward and provide information for us to follow-up. These developments are critical to the effective administration of the law. ³²Advisors are seeking a more level playing field for the industry and the taxpayers want the system to be fair, as well as seeking to stay free of trouble in their tax affairs. We have a phone number, a web page and an email address to help people provide the ATO with relevant information.³³ We encourage practitioners and taxpayers to talk to us about what they are seeing and hearing that seems at odds with a fair and effective tax system.

Example of a recent scheme

A recent scheme we have seen involved inflated donation claims. Entities were marketing an arrangement that was alleged to provide pharmaceuticals to the needy in developing countries. The means used to structure the arrangement concerned us. The uncommercial financing (50 year, non-recourse loans), how much if any of the pharmaceuticals would ever reach the intended recipients and what value those pharmaceuticals actually had (maybe as little as 1% or as much as 10% of the claims being made)? If seen through the "jaded eyes" ³⁴of experience, there seems to be a similarity with the cartoon below from the 1970's.³⁵

We conducted enquiries about this arrangement after we received various pieces of information from the community. We identified the involvement of the main entities: several Deductible Gift Recipients, some participants who appeared to have been on-selling the arrangement and other people who just participated in the scheme.

We contacted the identified participants to convey our concerns. We tagged their tax returns to prevent receipt of what appeared to be excessive refunds (5.5 times as much in refund as they put down in cash). We issued a taxpayer alert to warn the community about this type of arrangement. We have amended assessments for some participants who had already made claims and we are dealing with the objections that have been lodged.

We have written to those promoting the arrangement, and to those DGRs involved, asking them to cease doing so and made our concerns about potential contravention of the promoter penalty laws clear to them.

Cross border financing

The promoter penalty laws do not just operate in the realm of mass marketed schemes.

We have been particularly concerned about the introduction and rapid take-up across the large market of various cross border financing arrangements that sought to artificially create entitlement to tax benefits. These include the transfer of foreign losses to Australia, and claims for non-assessable, non-exempt income coupled with interest deduction claims.

The sort of features that we see in these arrangements include complex financial mathematics that may conceal the true economic substance of what is happening in the scheme, and non arms length dealings (in the sense of an identity of interest) by scheme participants. In the past couple of years, we have issued Taxpayer Alerts³⁶ on some of these arrangements. We issue these Alerts to publicise our concerns about an arrangement, and follow-up where necessary, by providing our opinion on how the law operates in relation to the arrangement (usually through a tax determination). We are currently undertaking promoter penalty work on specific cases involving larger entities (some of whom may be suitable for EVUs).

Rulings and certainty

Rulings are a good path to certainty. The protection provided by a ruling naturally only applies where the arrangement is materially the same as that on which we have ruled. In other words protection is only afforded where there is full and true disclosure of all the relevant facts.

In our experience, we have seen high risk taxpayers and advisors asking for a ruling on specific parts of a larger arrangement, sometimes spread over multiple steps and years. Such requests are and will continue to be scrutinised closely and tracked over their lifetime to ensure that there is no abuse, including reviews of higher-risk arrangements after implementation. Where there is abuse, we will be looking for appropriate sanctions.

Risk differentiation framework

Many of you will be aware of the framework we are using in the large business market and more recently in the small to medium enterprises market to better differentiate taxpayers in regard to the likelihood and consequence of their tax risk appetite. This approach has a number of benefits, a key one being greater openness and transparency. We can discuss how we see the taxpayer with the taxpayer and explain why we see them this way, and on a more personal basis take on board how they see themselves and why.

We are now applying a similar framework to promoter penalty risks. The risk differentiation framework has two levels: that of the firm and that of the individual adviser.

In this framework we plot likelihood of noncompliance on the horizontal axis, and consequences of non-compliance (including both reputational and revenue consequences) on the vertical axis. This yields four broad groupings: higher risk, medium risk, lower risk and key entities.

• Higher risk intermediaries - these are the entities perceived to have a combination of high likelihood and high consequences with regard to possible contravention of the promoter penalty laws.
• Lower risk intermediaries - these entities have both lower likelihood and lower risk. This is where most entities actually sit when we plot them on the framework.
• Medium risk intermediaries - these entities have a relatively higher likelihood of non-compliance, but the consequences of their non-compliance are not as significant.
• Key intermediaries - these are the entities with a low likelihood of non-compliance, but high risks and consequences associated with their potential non-compliance. For example, larger accounting and law firms providing tax planning advice, and large businesses, including financial institutions providing tax effective products into the retail market. Naturally we have a strong focus on these entities as part of our risk management approach.

The higher we view the likelihood of a taxpayer having a contentious arrangement the more likely we are to look at it. The higher the consequences of a contentious arrangement, the greater the intensity when we look.

The strategies that flow from this framework range from ongoing but light-touch engagement and relationship management at the more compliant end of the spectrum to intensive and visible deterrence and investigation at the high risk end.

What we are seeing using the risk differentiation framework

Our ongoing reviews of key law and accounting advisory groups and financial institutions have identified a relatively small number of firms and individual advisors that appear to be advocating or supporting highly contentious tax positions.

As would be expected of a prudent regulator, we include the behaviour of such advisors as a factor in our overall risk assessment of the firms and financial institutions and that of the taxpayers they advise.

We will also look closely where we have seen highly contentious arrangements in the past to see if that behaviour is still happening and who might be involved in it.

In other words having a history of association with potential tax avoidance arrangements increases the risk profile of both the firm and the clients to whom they provide advice and other services.

We have seen instances where organisations have purchased a business unit from another entity with individuals with a history of involvement with contentious arrangements, or simply hired such individuals on the employment market. In some cases, the new organisation has not recognised or effectively managed the risky behaviours of these new individuals in their existing internal control processes, and exposed the organisation and their clients to additional risks.

A question of responsibility

There are standards that require the tax profession and others to take an interest in the care and management of our tax and superannuation systems.

For example the Code of Ethics for Professional Accountants states the responsibility of the accountancy profession to act not only in the client's interests but also in the public interest.³⁷ More specifically, in direct relation to the promotion of schemes, the code requires that members exercise a duty of care in regard to the workings of the tax system: 'A Member shall not promote, or assist in the promotion of, or otherwise encourage any tax scheme or arrangements where the dominant purpose is to derive a tax benefit and it is not reasonably arguable that the tax benefit is available under Taxation Law. Accordingly, a Member shall not provide advice on such a scheme or arrangement to a Client or Employer other than to advise that in the Member's opinion it is not effective at law.'³⁸ Other codes confirm similar obligations to provide lawful and correct advice and to act in the public interest as well as the client's.³⁹

More generally, there is a shared responsibility for ensuring that the tax system works as intended:

"Taxes are essential to economic and social development. Business has a key role to play and it is important for governments, business and civil society to foster a new collaborative approach to meet the common aims of a fair, stable and sustainable tax system".⁴⁰

Conclusion

As one Harvard Business School commentator once observed, the fusion of high performance with high integrity is the best way to avoid devastating risk and to achieve affirmative benefits in the firm, the marketplace and society.⁴¹

The promoter penalty laws work on the supply side of tax avoidance schemes. They are there to protect you and the community from those less scrupulous.

Footnotes

¹ November 30, 1835 - April 21,1910.

² Benjamin Franklin, 1789, 'Letter to Jean-Baptiste Leroy.'

³ 1998. In the movie Joe Black personifies Death.

⁴ Mark Twain, 'The Late Benjamin Franklin', The Galaxy, July 1820, as reprinted in Essays and Sketches of Mark Twain, ed. Stuart Miller, Sterling, 1995.

⁵ Review of Business Taxation, A Tax System Redesigned - more certain, equitable and durable, report July 1999, p243. Note also Viscount Simon's observation that there is no reason why tax avoidance efforts "should be regarded as a commendable exercise of ingenuity or a discharge of the duties of good citizenship." (Latilla v Inland Revenue Commissioner: [1943], A11 ER 265 at 266). On the other hand, contrast the view of Lord Tomlin in Inland Revenue Commissioner v Duke of Westminster: [1936] 1AC1.

⁶ See also Zoë Prebble and John Prebble, The Morality of Tax Avoidance: Why the Legal Difference Between Evasion and Avoidance Fails as the Foundation of a Moral Distinction, Conference, University of Auckland, New Zealand, 23-25 June 2005, cited by Sir Edmund Thomas, Ibid.

⁷ Charles Adams, For Good and Evil: the Impact of Taxes on the Course of Civilization, Madison Books, 1993, p290.

⁸ See also Neil Gregory and Susan Symons, "Paying Taxes 2011 - The Global Picture", World Bank, International Finance Corporation and PWC, 2011, pp. 6, 15 and 17: "Taxes are the lifeblood of a stable and prosperous society" (p. 17).

⁹ "Of Sham and other lessons from Australian Revenue Law." Melbourne Law School Annual Tax Lecture, 20 Aug 2008.

¹⁰ Trevor Boucher, Blatant, Artificial and Contrived: Tax schemes of the 70s and 80s. Commonwealth of Australia, 2010.

¹¹ Michael Carmody, "Taxes Death and Civilisation - A look at year end 'tax effective products' ", 15 May 2001. See also 'A Question of Balance", 17 September, 1999.

¹² Federal Commissioner of Taxation v Westraders (1980) 144 CLR 55 at 60-61.

¹³ Cartoon by Alan Moir, "The Chartererd Accountant in Australia", February 1981, reproduced from Trevor Boucher, op cit.

¹⁴ Note the comments of the Ligertwood Committee on "Tax Avoidance": Ligertwood Report, Canberra, June 1961, pp xii - xiii.

¹⁵ See for example, FCT v Spotless Services Ltd (1996) 186 CLR 404; FCT v Consolidated Press Holdings Ltd (2001) 207 CLR 23; and FCT v Hart (2004) 217 CLR 216.

¹⁶ Division 290 and Subdivision 298-B of Schedule 1 to the Tax Administration Act 1953.

¹⁷ Assistant Treasurer media release, 10 August 2005.

¹⁸ The second limb of these laws was added during the design phase, focusing on the implementation of product ruling arrangements in ways that resulted in materially different tax outcomes for investors.

¹⁹ The Promoter Penalty laws target schemes involving domestic promoters of abusive tax schemes. Project Wickenby which commenced in 2005 focuses on offshore schemes. As would be expected some overlap exists, mainly in the area of offshore tax schemes that may be promoted by entities in Australia or based in low-tax countries without effective exchange of information arrangements with Australia.

²⁰ See generally Trevor Boucher, op cit.

²¹ See 'Taxing times' or 'Beware the magic pudding', speech by Michael Carmody Commissioner of Taxation, Accounting at the TOP 98 Conference, Australian Society of CPAs, the Third International Conference on 12 June 1998, Darwin; and the speech 'Tax is in the air', by Michael Carmody Commissioner of Taxation, Chartered Institute of Company Secretaries Business Forum, 11 August 1998, Sydney.

²² It is important to note that product rulings only cover the tax aspects of the arrangements, and not their commercial viability nor the commerciality of the fees and management arrangements.

²³ At the height of the mass marketed schemes of the type considered by the 2002 Senate Economics Reference Committee Report, a proposal was suggested for a Commonwealth litigation fund to support claims against the promoters of this scheme - but the proposal was not pursued.

²⁴ Tax advisors - Good governance and promoter penalty laws guide.

²⁵ PS LA 2008/7 Application of the promoter penalty laws (Division 290 of Schedule 1 to the Taxation Administration Act 1953) to promotion of tax exploitation schemes; and PS LA 2008/8 Application of the promoter penalty laws (Division 290 of Schedule 1 to the Taxation Administration Act 1953) to schemes involving product rulings. One of the key controls set out in these practice statements is that only specialists in promoter penalties located in our aggressive tax planning business line and key people in our tax counsel network and legal services branch are authorised to discuss the application of these laws. This keeps our advice and messages consistent, authoritative and strategic. It also addresses the tax industry's concern (albeit unfounded), particularly in the lead up to new law, that the ATO was likely to threaten to invoke PPL provisions unfairly and indiscriminately once the powers were available.

²⁶ See generally, www.ato.gov.au/investing and the following publications:

• Don't take the bait (NAT 8625)
• Investigate before investing (NAT 72936)
• Making tax-effective investments (NAT 73470)
• Recognising and reporting tax avoidance schemes (NAT 72935)
• Understanding tax-effective investments (NAT 73759)
• Investment checklist (web only)
• Good governance and promoter penalty laws (NAT 73779)

²⁷ 57 Taxpayer Alerts over the past 5 years.

²⁸ Including providing guidance to participants about the tax effects flowing from the collapse of various responsible entities for agribusiness managed investment schemes. We will be issuing more of these letters this year, due to further such collapses.

²⁹ See for instance, Williment & Ors v Federal Commissioner of Taxation [2010] FCA 808, where Perram J denied injunctive relief in a challenge to the use of our powers.

³⁰ The arrangement covered by Taxpayer Alert TA 2011/1.

³¹ Once a matter is in court, the alleged contraventions move into the public domain. The alleged schemes being marketed are revealed for others to consider and the individuals and entities promoting them are named in court documents.

³² The vision in the ATO's Strategic Statement 2010-15 is "Australians value their tax and superannuation systems as community assets, where willing participation is recognised as good citizenship."

³³ The phone number for reporting potential contraventions of the PPL is 1800 177 006. Our website contains information on aggressive tax planning and links to an email address to assist in reporting. In addition, the Tax Practitioners Board operates the Tax Agent Integrity Line and this number is 1300 362 829.

³⁴ French J in Vincent v. Federal Commissioner of Taxation (2002) ATC 4490 at 4498. In that case at p. 4492 his Honour highlighted "the need for clear, reliable and independent advice for persons considering participating in mass marketed schemes which promise tax benefits.

³⁵ Cartoon by Patrick Cook, The National Times, 8-13 August 1977. Reproduced from Trevor Boucher, op cit.

³⁶ For instance, Taxpayer Alert 2009/9 on 'Contrived cross-border arrangements that seek to generate debt deductions for non-assessable non-exempt income' or Taxpayer Alert 2008/18 on 'Arrangements to shift foreign business losses into Australian branches or resident entities'.

³⁷ Accounting Professional and Ethical Standards Board Code of Ethics - APES 110, Section 100.

³⁸ Ibid, section 5.4 of APES 220.

³⁹ For example the Financial Planning Association's Code of Ethics and Rules of Professional Conduct and The Australian Bankers' Association Code of Banking Practice. Duties to uphold the law and to give proper advice to clients are contained in the professional rules governing solicitors and barristers in each State and Territory of Australia.

⁴⁰ Neil Gregory and Susan Symons, "Paying Taxes 2011 - The Global Picture", World Bank, International Finance Corporation and PWC, 2011, p.1.

⁴¹ Ben W. Heineman. High Performance and Integrity, Harvard Business School Press, 2008.