Cheng Li and Tax Practitioners Board

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[2013] AATA 669 

Division GENERAL ADMINISTRATIVE DIVISION

File Number(s)

2013/3896

Re

Cheng Li

APPLICANT

And

Tax Practitioners Board

RESPONDENT

DECISION

Tribunal

Senior Member A K Britton
Date 20 September 2013
Place Sydney

The application for a stay of the reviewable decision is refused.

.........................[SGD]...............................................

Senior Member A K Britton

CATCHWORDS

TAXATION AND REVENUE—Tax agents—Application to stay cancellation of registration as a tax agent—fit and proper person—stay refused

LEGISLATION

Administrative Appeals Tribunal AAT Act 1975 (Cth) – s 41(2)

Tax Agents Services Act 2009 (Cth)

CASES

Australian Securities and Investments Commission v Administrative Appeals Tribunal and Another (2009) 181 FCR 130

Re Dekanic and Tax Agent’s Board of New South Wales (1982) 6 ALD 2

Re Scott and Australian Securities and Investments Commission [2009] AATA 798

Tung and Tax Practitioners Board [2012] AATA 615

REASONS FOR DECISION

Senior Member A K Britton

20 September 2013

  1. Mr Cheung Li commenced operation as a registered tax agent in November 2010. In 2011 he found himself unwittingly caught up in an elaborate scheme designed to defraud the Commonwealth by lodging about 400 tax returns with the Australian Taxation Office (ATO) on behalf of either fictitious persons or taxpayers who had not authorised him to prepare tax returns on their behalf. While some dispute about when Mr Li first alerted the ATO to his suspicions about the scheme, it is agreed that since early October 2011 he has assisted the ATO in its investigation of the scheme.

  2. In June 2013 after conducting an investigation into his role in the scheme, the Tax Practitioners’ Board notified Mr Li of the decision to cancel his registration as a tax agent and to declare that he may not apply for registration as a tax agent for a period of three years (the reviewable decision). The stated reason for that decision was that Mr Li had ceased to be “a fit and proper person”, a requirement of tax practitioner registration under the Tax Agents Services Act 2009 (Cth) (the Act).

  3. Mr Li has applied to the Administrative Appeals Tribunal for review of the reviewable decision. He also seeks an order to stay the decision of the Board. These reasons address the stay application.

    POWER TO GRANT A STAY OF THE DECISION

  4. Section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) provides:

    The Tribunal may, … if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review [emphasis added]

  5. The power to grant a stay is conditioned on the Tribunal holding the requisite opinion after taking into account the interests of affected persons. The Tribunal must identify…

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Details
Case
[2013] AATA 669
Decision Date

CaseChat Overview and Summary

Cheng Li has applied to the Administrative Appeals Tribunal for a stay of a decision by the Tax Practitioners Board (the Board) and for a review of that decision. The Tribunal is required to consider the factors set out in section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) in determining whether to grant a stay of a decision of the Board. The primary factor to be considered is whether it is desirable to grant the stay after taking into account the interests of any persons who may be affected by the review. This includes the prospects of success of the review, the consequences for the applicant if a stay is not granted, the public interest, the consequences for the respondent if a stay is granted or not granted, whether the review would be rendered nugatory if a stay were not granted, and any other relevant matters.

The Tribunal considered the evidence before it and found that Mr Li had breached the tax agent’s code of professional conduct by lodging tax returns for individuals without verifying their identity and without obtaining their signature. The Tribunal also found that Mr Li had breached the Taxation Administration Act 1953 (Cth) by lodging tax returns for individuals without their consent. The Tribunal held that the Board had established the facts on which it based its decision and that Mr Li had not established that the decision was flawed. The Tribunal concluded that it was not desirable to grant a stay of the decision because the prospects of success of the review were low, the consequences for Mr Li if a stay were not granted were not significant, and the public interest in enforcing the tax agent’s code of professional conduct and the Taxation Administration Act 1953 (Cth) outweighed any prejudice to Mr Li. The Tribunal also found that the review would not be rendered nugatory if a stay were not granted.

The Tribunal dismissed the application for a stay of the decision of the Board and the application for review of that decision. The Tribunal held that the Board had acted within its powers in making the decision and that the decision was not flawed. The Tribunal also held that the public interest in enforcing the tax agent’s code of professional conduct and the Taxation Administration Act 1953 (Cth) outweighed any prejudice to Mr Li. The Tribunal ordered that Mr Li pay the Board’s costs of the review.

Orders

Orders of the court

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Background

Background to the litigation

In Re Scott and Australian Securities and Investments Commission [2009] AATA 798, (2009) 51 AAR 114 at 115 [4], Downes J stated that in considering a stay application under s 41(2), it is appropriate to consider a range of matters including:1The prospects of success2The consequence for the applicant of the refusal of a stay3The public interest4The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not5Whether the application for review would be rendered nugatory if a stay were not granted6Other matters that are relevant … includ[ing] the length of time that the [decision] has already been in place and the gap between today and the hearing of the application.BACKGROUND TO DECISION The following summary is largely taken from a report prepared at the request of the Board following an investigation into Mr Li’s conduct as a tax agent (the investigation report) and Mr Li’s response to a draft of that report dated 14 June 2013. For the purpose of the stay application I have largely focused on the alleged conduct that underpinned two of the four findings made by the Board, namely that Mr Li had breached s 50-20 of the Act and s 30-10(9) of the Code. (See par [13]) below.) In early 2013 the Board commenced an investigation into Mr Li’s conduct as a tax agent following information received from the ATO about irregularities in income tax returns he had lodged or attempted to lodge during the 14-week period, 1 July to 12 October 2012. In an interview conducted by an ATO Compliance Officer Mr Li stated that in August 2011 he was approached by two people, one of whom introduced himself as Mr Saiful Islam. They held themselves out as representing a major recruitment agency and asked Mr Li to prepare and lodge tax returns for people recruited though the agency. According to Mr Li, Mr Islam gave him a copy of his business card, which stated that he was from the recruitment agency. Mr Li claimed that Mr Islam told him that his clients had sought his assistance to lodge their tax returns. At some point, Mr Islam left to go overseas and instructed Mr Li to deal with a person he introduced as “Sam”. A few weeks later Mr Li was approached by a third person who introduced himself as Mr Sunny Rahman and claimed to be from an employment services agency. Mr Ranham also asked Mr Li to prepare and lodge tax returns for persons who had been recruited by the agency. It is unclear whether Mr Li understood there to be any relationship between Messrs Islam and Rahman. After receiving detailed financial information from Messrs Islam, Rahman and Sam (the third party agents) Mr Li prepared individual tax returns for just under 400 purported taxpayers for the 2011 tax year. Prior to lodgement with the ATO he gave the third party agents a copy of the completed returns and requested that they make arrangements for the relevant taxpayer to sign their return. After receiving the signed returns Mr Li lodged them electronically with the ATO. Mr Li did not speak to, or have any direct contact with, any of the named taxpayers and relied exclusively on information provided by the third parties agents.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Mr Li has applied to the Administrative Appeals Tribunal for review of the reviewable decision. He also seeks an order to stay the decision of the Board. These reasons address the stay application.POWER TO GRANT A STAY OF THE DECISION Section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) provides: The Tribunal may, … if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review [emphasis added] The power to grant a stay is conditioned on the Tribunal holding the requisite opinion after taking into account the interests of affected persons. The Tribunal must identify and consider the relevant interests: Australian Securities and Investments Commission v Administrative Appeals Tribunal and Another (2009) 181 FCR 130 [at 142] (per Downes and Jagot JJ). In Re Scott and Australian Securities and Investments Commission [2009] AATA 798, (2009) 51 AAR 114 at 115 [4], Downes J stated that in considering a stay application under s 41(2), it is appropriate to consider a range of matters including:1The prospects of success2The consequence for the applicant of the refusal of a stay3The public interest4The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not5Whether the application for review would be rendered nugatory if a stay were not granted6Other matters that are relevant … includ[ing] the length of time that the [decision] has already been in place and the gap between today and the hearing of the application.BACKGROUND TO DECISION The following summary is largely taken from a report prepared at the request of the Board following an investigation into Mr Li’s conduct as a tax agent (the investigation report) and Mr Li’s response to a draft of that report dated 14 June 2013. For the purpose of the stay application I have largely focused on the alleged conduct that underpinned two of the four findings made by the Board, namely that Mr Li had breached s 50-20 of the Act and s 30-10(9) of the Code. (See par [13]) below.) In early 2013 the Board commenced an investigation into Mr Li’s conduct as a tax agent following information received from the ATO about irregularities in income tax returns he had lodged or attempted to lodge during the 14-week period, 1 July to 12 October 2012. In an interview conducted by an ATO Compliance Officer Mr Li stated that in August 2011 he was approached by two people, one of whom introduced himself as Mr Saiful Islam. They held themselves out as representing a major recruitment agency and asked Mr Li to prepare and lodge tax returns for people recruited though the agency. According to Mr Li, Mr Islam gave him a copy of his business card, which stated that he was from the recruitment agency. Mr Li claimed that Mr Islam told him that his clients had sought his assistance to lodge their tax returns. At some point, Mr Islam left to go overseas and instructed Mr Li to deal with a person he introduced as “Sam”.

Ratio Decidendi

Legal Principle Established

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