Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (No.2) (Rd)

[2004] NSWADTAP 27

Appeal Panel - Internal

CITATION:	Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (No.2) (RD) [2004] NSWADTAP 27
PARTIES:	APPELLANT Chief Commissioner of State Revenue RESPONDENTS Incise Technologies Pty Ltd & Incise Sales Pty Ltd
FILE NUMBER:	039082
HEARING DATES:	18/03/2004
SUBMISSIONS CLOSED:	06/07/2004
DATE OF DECISION:	06/30/2004
DECISION UNDER APPEAL:	Incise Technologies Pty Ltd & Anor v Chief Commissioner of State Revenue [2003] NSWADT 246
BEFORE:	O'Connor K - DCJ (President); Seve J - Judicial Member; Bennett C - Non Judicial Member
CATCHWORDS:	Pay roll tax - liability to pay interest
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	026045
DATE OF DECISION UNDER APPEAL:	11/17/2003
LEGISLATION CITED:	Taxation Administration Act 1996
CASES CITED:	Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19
REPRESENTATION:	APPELLANT I Mescher, barrister RESPONDENTS A Galazzo, agent
ORDERS:	The Commissioner’s decision to refuse to remit the premium rate component of interest is affirmed.

1 In the case of Chief Commissioner of State Revenue v Incise Technologies Pty Ltd & Anor (RD) [2004] NSWADTAP 19 the Appeal Panel allowed in part an appeal by the Chief Commissioner of State Revenue (the Commissioner) against a decision of the Revenue Division of the Tribunal. The Commissioner had rejected objections from two taxpayers over his Office’s decision to impose penalty tax at the rate applicable to disclosure after notice of investigation and interest at both the market rate and the premium rate in respect of default in payment of pay-roll tax. The Tribunal upheld the taxpayers’ application for review as it related to the imposition of penalty tax (and reduced the amount to the rate applicable to disclosure before notice of an investigation); and as it related to the payment of interest at the premium rate (waiving that amount). The Commissioner appealed.

2 The Appeal Panel upheld the Tribunal’s decision as it related to the first matter, but set it aside in relation to the second matter (waiver of payment of interest at the premium rate). The Appeal Panel held that the Tribunal had misconstrued the law as it related to the circumstances which could be taken into account by it in respect of the question whether to remit the premium rate component of interest payable by a taxpayer who fails to pay tax when due. The Tribunal had confined its attention to the circumstances affecting the default as they existed at 17 August 2000, the date when the taxpayers’ objection had been rejected by the Commissioner. The Tribunal failed to have regard to any circumstances that might be relevant that had arisen since that date.

3 The Commissioner’s discretion to remit interest in respect of late payments is found in s 25. This provision and the considerations that might be relevant to the exercise of this discretion were dealt with in our earlier decision (see paras [52] and following) and will not be repeated here. The Appeal Panel made the following observations as to the objective of the market rate and premium rates of interest:

61 … [T]he premium rate is a form of penalty. Its purpose, as we see it, is to provide an additional economic deterrent against taxpayers failing to meet their obligations on time. The ‘market rate’ component approximates ordinary lending interest rates. Taxpayers may withhold tax simply to invest the money in schemes and projects that have a higher potential earnings; and may be content to carry the late payment surcharge were it only at the market rate. The ‘premium rate’ is intended as we see it to operate as the key disincentive to delaying tax payments. For that reason, the TA Act imposes both the market rate component and the premium rate component in respect of late payment. The Commissioner is then given a discretion to remit the market rate component or the premium rate component or both by any amount (s 25).

4 In the course of dealing with the question of extending the appeal to the merits, and deciding it on the papers, we noted:

81 One aspect of the application for review must be reconsidered: the decision by the Commissioner to refuse to waive the premium rate component of interest on the overdue amount. All the material relevant at that time of its hearing was placed before the Tribunal. In our view, for the reasons we have already given, waiver of the premium rate component should only occur in special circumstances. There is little utility in returning this issue to the Tribunal for reconsideration. Our provisional view is that there is nothing in the material considered by the Tribunal that would justify remission of the premium rate component especially as the taxpayers have not paid the primary tax that is not in dispute in full.

5 The decision was published on 26 May 2004. The following direction in relation to this matter was given:

82 The Commissioner’s application for leave is granted, and the parties will be given 14 days in which to file and serve any additional material going to the question of remission of the premium rate component. The Appeal Panel will then dispose of the matter on the papers, unless it considers there is a need to hold a further hearing.

6 The Commissioner has filed detailed submissions. There have been no submissions filed by the taxpayers.

7 In our view there is nothing in the circumstances as revealed by the totality of the material placed before the primary Tribunal (including material after 17 August 2000) that would justify remission of the premium rate. The Commissioner in his written submissions to the Appeal Panel refers to numerous interactions between his Office and the taxpayers over the period 21 August 2000 to 28 November 2002. The critical factor is that the principal tax was never in dispute yet it has still not been paid. We also agree with the Commissioner that the following factors also militate against the exercise of discretion:

- the slowness of the taxpayers in providing relevant information in the period 11 October 1999 to 20 April 2000

- the lengths to which the Commissioner has had to go to enforce the debt - through correspondence, protracted Local Court proceedings, and attempts to obtain payment via an instalment plan.

8 There was a further matter raised by the Commissioner, going to the form of the second Order made by the Appeal Panel on the last occasion. The Order as made reads:

2. Tribunal’s decision to relieve the applicants from payment of the penalty tax at the 80 per cent rate and instead substitute the 20 per cent rate affirmed.

9 The Commissioner submits that it should be altered to read:

2. The Tribunal’s decision to reduce the penalty tax by 80% to an amount of 5% under s 28 of the Taxation Administration Act 1997 [sic] (NSW) is affirmed.

10 The wording of the Appeal Panel’s original order on penalty tax is consistent with and ties in with the form of expression used by the Appeal Panel in para [2] of its reasons for decision. The order firstly refers to relieving the applicants from the penalty tax at the 80% rate, that is, penalty tax at ‘80%’ of the 25% rate imposed under s 27(1) (such 25% rate having only been reduced by the Commissioner by 20% pursuant to s 29). It then refers to substituting the 20% rate, that is, substituting penalty tax at ‘20%’ of the 25% rate imposed under s 27(1) (such 80% having been reduced by 80% pursuant to s 28).

11 While we see no difficulty with the original expression of the order, we are agreeable to acceding to the Commissioner’s request as his Office must implement the order. The change requested does not have any substantive effect on the outcome but is seen by the Chief Commissioner as more clearly expressing the order.

12 The original Appeal Panel decision will be revised to reflect that change.

Order

The Commissioner’s decision to refuse to remit the premium rate component of interest is affirmed.