Iacono and Tax Agents' Board of Victoria
[2006] AATA 136
•17 February 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 136
ADMINISTRATIVE APPEALS TRIBUNAL № V2005/503
GENERAL ADMINISTRATIVE DIVISION
Re: BIAGIO GIOVANNI IACONO
Applicant
And: TAX AGENTS' BOARD OF VICTORIA
Respondent
DECISION
Tribunal: Mr E. Fice, Member
Date:17 February 2006
Place:Melbourne
Decision:1. WHEREAS on 16 January 2006 the Tribunal determined the applicant's name should be the subject of a confidentiality order under the provisions of s 35(2) of the Administrative Appeals Tribunal Act1975.
The Tribunal has now decided that that Order be varied so that the applicant will be known by his name, Bagio Giovannia Iacono, in the Tribunal’s Decision and Reasons for Decision, but that otherwise the Order dated 16 January 2006 is confirmed.
2.The Tribunal affirms the decision under review.
(sgd) Egon Fice
Member
ADMINISTRATIVE APPEALS TRIBUNAL № V2005/503
GENERAL ADMINISTRATIVE DIVISION
Re: BIAGIO GIOVANNI IACONO
Applicant
And: TAX AGENTS' BOARD OF VICTORIA
Respondent
DIRECTION [2006] AATA 136
Tribunal: Mr E. Fice, Member
Date:2 March 2006
Place:Melbourne
1.By letter dated 28 February 2006, the respondent's representative notified the Tribunal that there is an error in its reasons for decision.
2.Being satisfied that there is an obvious error in the written statement of reasons for the decision of the Tribunal made on 17 February 2006, the Tribunal therefore directs, pursuant to s 43AA(1) of the Administrative Appeals Tribunal Act 1975, that the Registrar alter the said statement of reasons by substituting paragraph 26 with the following:
Mr Athanasiou submitted that Mr Iacono's suspension as a tax agent should be for a period of less than three months. In my opinion, a period of three months is appropriate in this case.
(sgd) Egon Fice
Member
TAX AGENT – registration – convictions - suspension of registration as tax agent – fit and proper person to prepare income tax returns and transact business on behalf of taxpayers – failure to lodge personal income tax returns – exercise of discretion
Income Tax Assessment Act 1936
Stasos v Tax Agents Board (1990) 21 ALD 437
Re Carbery & Associates Pty Ltd and Tax Agents' Board of Queensland (2001) ATC 2025
Re Pappalardo and Tax Agents' Board of Victoria (2003) ATC 2207
Re Reichert and Tax Agents' Board of New South Wales 2005 ATC 2066
Re Su and Tax Agents' Board, South Australia 82 ATC 4284
REASONS FOR DECISION
17 February 2006 Mr E. Fice, Member
1. By letter dated 1 March 2005, the Tax Agents' Board of Victoria (the Board) invited Mr Biagio Giovanni Iacono to show cause why his registration as a tax agent should not be suspended or cancelled pursuant to s 251K(2) of the Income Tax Assessment Act 1936 (ITAA). After receiving Mr Iacono's response on 29 April 2005 the Board determined that Mr Iacono's registration as a tax agent should be suspended for a period of three months. Mr Iacono was informed of that decision by letter dated 19 May 2005. On 9 June 2005, Mr Iacono, pursuant to s 251QA of the ITAA, applied to the Tribunal for review of the Board's decision to suspend his registration as a tax agent.
2. By consent of the parties, on 4 July 2005 the Tribunal stayed the implementation of the Board's decision. On the day of the hearing, the Tribunal also agreed to a confidentiality order regarding the disclosure of Mr Iacono's name until such time as a final decision was made.
BACKGROUND
3. Mr Iacono was first registered as a tax agent on 14 February 1979 and since that time he has conducted a practice as an accountant and tax agent.
4. In or about 1989 Mr Iacono had a bitter partnership dispute which resulted in him commencing practice as a sole proprietor, trading as John Iacono & Associates.
5. On 12 December 1991 Mr Iacono was convicted on one count of breaching s 8C(1)(a) of the Taxation Administration Act 1953 (the TAA) for failing to lodge his income tax return with the Commissioner of Taxation (the Commissioner) for the income year ending 30 June 1990. According to Mr Iacono, the introduction of the Goods and Services Tax (GST) in 1999 caused a substantial increase in the amount of taxation compliance work which he had to undertake. He said that he could not cope with the volume of that work and that his health suffered, despite the fact that he employed additional staff to deal with the increased volume. Mr Iacono claimed that he has suffered from hypertension; that he has severe ulcer problems; and that he has suffered from sleep apnoea for the last five or six years.
6. Mr Iacono failed to lodge his personal income tax returns for the years ending 30 June 2000 and 2001. The Board sent him a letter dated 23 May 2002 indicating that it was aware of his failure to lodge those income tax returns. The Board also cautioned Mr Iacono about his failure to lodge personal income tax returns, stating that this was an indication to the Board that he may not be able to look after his own taxation affairs. The Board also stated that any conviction recorded against Mr Iacono for failure to lodge personal income tax returns would reflect on his fitness and propriety to act as a tax agent. He was referred to s 251A and s 251BC(1)(e) of the ITAA relating to the issue of a fit and proper person where a tax agent has been convicted of serious taxation offences during the previous five years. Mr Iacono was asked to provide the Board with an explanation for the delay in lodging his personal income tax returns. In response, Mr Iacono stated that the introduction of the GST and the resulting increase in clients' demands for his services was the reason for his failure to lodge his personal income tax returns for the years ended June 2000 and 2001. He made no mention of any medical problems. Mr Iacono also told the Board that he would lodge the late income tax returns on 28 June 2002 and 8 July 2002. He also said that he would employ two further accountants in order to alleviate any problems which had arisen in the past regarding his personal income tax returns and clients’ returns.
7. On 27 July 2004, a company of which Mr Iacono was the sole director, J.I. Accounting & Taxation Pty Ltd (J.I. Accounting), was convicted in the Magistrates' Court at Broadmeadows on one count of failing to lodge its company tax return for the income year ended 30 June 2002. The company was fined $351.
8. In August 2004 Mr Iacono applied for re‑registration as a tax agent. On 23 August 2004, the Board noted that: Mr Iacono had failed to lodge personal income tax returns for the years ending 2001, 2002 and 2003; he had also failed to lodge a business activity statement for the period ending June 2004; he had an outstanding income tax debt of $11,773.14; and he had an outstanding debt on his Integrated Client Account of $44,513.81. The Board cautioned Mr Iacono again regarding the possibility of a conviction and he was asked for an explanation for his failure to meet his outstanding tax obligations. In a letter dated 24 September 2004, Mr Iacono said that the tax returns were in the final stages of completion and that they would be lodged by 30 September 2004. Mr Iacono also said that the business activity statement due for the quarter ending in June 2004 would be lodged on 24 September 2004; and that his outstanding tax liabilities would be paid within two weeks. Mr Iacono again complained about his heavy workload due to the introduction of the GST and associated compliance requirements; and, for the first time, he stated that he had health problems which contributed to the difficulties he was experiencing. He stated that an additional qualified accountant would be engaged within one month and that all future requirements would be met.
9. Despite the assurances given by Mr Iacono, he did not complete his tax returns for the years ended 30 June 2001, 2002 and 2003. On 18 January 2005 he was convicted in the Broadmeadows Magistrates' Court on three counts of breaching s 8C(1)(a) of the TAA and he was fined $2000. Mr Iacono said that he was not represented in the Magistrates' Court proceeding and because he fell ill on the ferry from Tasmania on the night before the matter was to be heard in the Broadmeadows' Magistrates' Court, he did not attend the hearing. Mr Iacono believed he would not have been convicted had he been well enough to attend the Magistrates' Court on 18 January 2005 and offered an explanation for his failure to complete his income tax returns.
10. On or about 4 February 2005 the Board was also notified by an officer of the Commissioner of Taxation that Mr Iacono had been served with a Bankruptcy Notice in order to enable the Commissioner to recover debts owed. The debt had been paid out on the issue of the Bankruptcy Notice, but it raised further cause for concern regarding Mr Iacono's fitness to act a tax agent.
11. The issues before the Tribunal are whether Mr Iacono is a fit and proper person within the meaning of the ITAA and should the applicant's registration as a tax agent be suspended.
CONSIDERATIONS
12. The cancellation or suspension of the registration of tax agents is dealt with under s 251K of the ITAA. In particular, the Board relied on s 251K(2)(d), which provides:
(2) A Board may suspend or cancel the registration of any tax agent upon being satisfied that:
(a)…
(b)…
(c)…
(d)if the tax agent is a natural person - the tax agent is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters;
…
13. Persons who are not fit and proper to prepare income tax returns are, as far as it is relevant, defined in s 251BC of the ITAA, which provides:
(1) Without limiting the generality of an expression used in this Part, but subject to this section, a person is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, as at a particular time, if:
(a)…
(b)…
(c)…
(d)the person is not of good fame, integrity and character;
(e)the person has been convicted of a serious taxation offence during the previous 5 years; or
(f) …
14. A serious taxation offence is relevantly defined in s 251A of the ITAA as:
…
(c) an offence that is:
(i)a taxation offence within the meaning of Part III of the Taxation Administration Act 1953; and
(ii)punishable on conviction by either or both of the following:
(A)a fine exceeding $2,000;
(B)imprisonment.
15. The prescribed penalty for conviction of a single breach of s 8C of the TAA is a fine not exceeding $2000 (s 8E(1)). A second offence for breaching s 8C of the TAA results in a maximum penalty of a fine not exceeding $4000. As is explained in s 8B(2) of the TAA, a person who is convicted of an offence against s 8C (referred to as the subsequent offence) is treated as having been previously convicted of a relevant offence (the earlier offence) if the person was convicted of the earlier offence on an occasion earlier than, but not more than five years earlier than the person's conviction of the subsequent offence. Where a person has previously been convicted of two or more offences against s 8C, the maximum penalty which may be imposed is a fine not exceeding $5000 or imprisonment not exceeding 12 months, or both. Given that Mr Iacono was convicted of three offences for breaches of s 8C of the TAA on 18 January 2005, there can be no doubt that, as the second and third breaches carry the maximum possible penalties of $4000 and $5000 respectively, the offences committed by Mr Iacono fall within the definition of serious taxation offence, as is set out in s 251A of the ITAA. That being the case, Mr Iacono is not a fit and proper person to prepare income tax returns and to transact business on behalf of the taxpayers in income tax matters, as is described in s 251BC of the ITAA.
16. Although the Board also submitted that Mr Iacono is not a person of good fame, integrity and character, no specific submissions were made in respect of that claim. Although Mr Iacono was previously convicted (in 1991) of an offence against s 8C of the TAA, and he was the sole director of J.I. Accounting at the time when that company was convicted on 27 July 2004 of breaching s 8C(1)(a) of the TAA, no evidence was led regarding Mr Iacono's good fame, integrity and character. For that reason, I am unable to find that Mr Iacono is not a person of good fame, integrity and character.
17. The fact that Mr Iacono is not a fit and proper person to prepare income tax returns on behalf taxpayers in income tax matters as at a particular time does not necessarily require suspension of his registration. That sanction, under s 251K of the ITAA, is clearly discretionary. Therefore, the most important issue in this case is whether the Board made the correct decision in suspending Mr Iacono's registration for a period of three months.
18. In Stasos v Tax Agents Board of New South Wales (1990) 21 ALD 437 Hill J said that (at 443):
The legislature has chosen in s 251L of the Act to confer upon registered tax agents a virtual monopoly in the preparation for reward of income tax returns and objections and in relation to the transaction of any business on behalf of a taxpayer in income tax matters for reward.…
Accordingly, his Honour continued:
The conferral of this privilege upon registered tax agents carries with it a consequent set of obligations and responsibilities. A person is required, before being registered as a tax agent to demonstrate that he is a fit and proper person to prepare income tax returns and transact business on behalf of clients in tax matters and, inter alia, that as at the date of application he is of good fame, integrity and character.
Hill J also pointed out that in addition to the tax agent dealing with his client, he must invariably have dealings with officers of the Australian Taxation Office and the Tax Agents Board, and possibly the Tribunal. He said that those dealings must be able to be carried on in an atmosphere of mutual trust. His Honour also referred to what Davies J said in Re Su and Tax Agents Board, South Australia 82 ATC 4284 (at 4286):
…
The function of tax agent is to prepare and lodge income tax returns for other persons. A person is a fit and proper person to handle the affairs of a client if he is a person of good reputation, has a proper knowledge of taxation laws, is able to prepare income tax returns competently and is able to deal competently with any queries which may be raised by officers of the Taxation Department. He should be a person of such competence and integrity that others may entrust their taxation affairs to his care. He should be a person of such reputation and ability that officers of the Taxation Department may proceed upon the footing that the taxation returns lodged by the agent have been prepared by him honestly and competently.
19. Although Mr Iacono said that there had been no complaints made against him by his clients, in the course of the hearing, he conceded that there had been one small complaint against him in the time that he had practised as a tax agent. However, Mr Iacono's ability as a tax agent in dealing with his clients' matters has not been called into question by the Board. It is his personal tax affairs which have caused difficulty. However, as Davies J said in Re Su (at 4287):
…A tax agent who allows his own tax affairs to get into a state of disorder, who has constant problems himself with the Taxation Department, may not be a proper person to handle clients' affairs for there may come a time when dissatisfaction which officers of the Department may have with the tax agent personally may be reflected in their handling of his clients' affairs. Clients who seek extensions of time should not be embarrassed by the fact that the tax agent acting for them is himself continually late in complying with the time limit imposed by the Act and the Regulations. Undoubtedly, even minor offences, if sufficient in number, can so interfere with the tax agent's standing that he is rendered not a fit and proper person to be registered as a tax agent.
The Tribunal has, on a number of occasions, made comment that a failure by a tax agent to manage his own taxation affairs, by failing to lodge accurate tax returns on time, indicates a lack of competence and that such failure is tantamount to a gross dereliction of a fundamental duty (Re Pappalardo and Tax Agents' Board of Victoria (2003) ATC 2207 and Re Carbery & Associates Pty Ltd and Tax Agents' Board of Queensland (2001) ATC 2025).
20. In Re Pappalardo, the Tribunal said that the relevant authorities set out the following matters as being relevant to the exercise of the discretion in s 251K(2) of the ITAA:
…
(i)failure to lodge the tax agent's own tax returns;
(ii)failure to respond adequately to correspondence from the Board;
(iii)lack of contrition;
(iv)competence and conduct as a professional tax agent.
Of the above matters, only (i) is relevant to Mr Iacono's case. He has not demonstrated a failure to respond adequately to correspondence from the Board and he has apologised on a number of occasions for the late filing of his tax returns. His competence and conduct as a professional tax agent have not been called into question.
21. What most concerns me is the fact that Mr Iacono was warned by the Board in its letters of 23 May 2002 and 23 August 2004 that a failure to lodge his personal income tax returns would reflect on his fitness and propriety to act as a tax agent. In response to the 23 May 2002 letter, Mr Iacono said that he would lodge his 2000 income tax return by 28 June 2002 and his 2001 income tax return by 8 July 2002. However, he only lodged the 2000 income tax return. The 2001 income tax return was not lodged until just prior to the breaches of s 8C of the TAA being heard in the Broadmeadows Magistrates' Court on 18 January 2005. Similarly, Mr Iacono failed to lodge income tax returns for 2002 and 2003 until immediately prior to the Broadmeadows Magistrates' Court hearing. Although Mr Iacono apologised in his correspondence, his actions in waiting until immediately prior to the hearing before the Broadmeadows Magistrates' Court would, on balance, tend to indicate that he did not consider the situation to be serious. In addition, Mr Iacono did not seek legal assistance to defend the charges before the Magistrates' Court and, in fact, because he felt ill, he did not appear on his own behalf. A simple telephone call to the Magistrates' Court seeking an adjournment would possibly have allowed him to appear and to argue his case. It must have been apparent to him that, without an appearance, convictions would be entered against him. Equally, it must have been apparent to him that such convictions would reflect on his fitness and propriety to act as a tax agent and that the Board might seek to suspend or cancel his registration.
22. By way of ameliorating factors, Mr Iacono pleaded that his ill-health and the extra work imposed on him by the introduction of the GST should be taken into account. He also pleaded that he would suffer financial hardship if he were suspended for a period of three months. In Re Reichert and Tax Agents' Board of New South Wales 2005 ATC 2066, Deputy President Purvis, when dealing with the special circumstances provision of s 251BC(3) of the ITAA, said (at 2070):
…
20. The taxation legislation is designed to give protection and to guard the welfare of those who would rely upon the professional assistance afforded by tax agents. Clients rely upon their agent to proffer appropriate advice and attend to their affairs in a timely and proper manner. Commission of a serious taxation offence is taken to be an indicia of a lack of fitness and ability to discharge the duties and responsibilities of a tax agent. It is only where strict enforcement of the prohibition created by the Act would be unjust, unreasonable or otherwise inappropriate that re‑registration should be permitted.
21. In my opinion Mr Reichert was well aware of the fact that he had not prepared and lodged his own taxation returns over the relevant 15 years. He prevaricated. He deferred their preparation. Other factors entered his life, which he looked upon as more pressing, more urgent. No one of the events relied upon by him as explaining the delay was itself exceptional, unusual or uncommon. They were each such as many people experience. Considered together they take the matter no further…A tax agent who is competent and who is to obey the law should be able to lodge his own tax return within the time allowed.
23. Although Re Reichert was dealing with an application for re‑registration, in my view, the statements made by Deputy President Purvis are apposite for the purpose of examining the ameliorating factors relied upon by Mr Iacono. I note that Mr Iacono did not raise the issue of his health until 2002. I also note that regarding the increased workload problem which undoubtedly resulted from the introduction of the GST, Mr Iacono indicated on two occasions that he intended to engage two additional accountants to facilitate the timely lodgement of all future personal and client income tax returns. Nevertheless, he did not lodge his 2001, 2002 and 2003 returns until January 2005.
24. Mr Athanasiou submitted on behalf of Mr Iacono that Mr Iacono would suffer serious hardship if his registration as a tax agent were suspended. Mr Iacono said in evidence that his losses would be substantial if he were unable to work as a tax agent for three months. Be that as it may, it seems to me to be a little late in the day to be making such a submission. Mr Iacono was well and truly warned of the consequences of his failure to lodge his personal income tax returns, but he failed to act upon those warnings.
CONCLUSION
25. In my opinion, Mr Iacono is not, at the present time, a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters. Accordingly, the discretion exercised by the Board to suspend Mr Iacono's tax registration for a period of three months is appropriate.
26. Mr Athanasiou submitted that Mr Iacono's suspension as a tax agent should be for a period of less than three months. However, s 251K(3B) of the ITAA provides that the period of suspension under subsection (1) shall not be less than three months.
27. Therefore, the Board's decision should be affirmed.
I certify that the twenty‑seven [27] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr Egon Fice, Member
(sgd) Catherine Thomas
Clerk
Date of Hearing: 16 January 2006
Date of Decision: 17 February 2006
Solicitor for the applicant: Mr A. Athanasiou, Rigby CookSolicitor for respondent: Mr S. Small, Australian Government Solicitor