PLENO Applicant And TAX AGENTS BOARD
[2010] AATA 526
•13 July 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 526
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/5695 &
GENERAL ADMINISTRATIVE DIVISION ) 2010/0543 Re MARIO PLENO Applicant
And
TAX AGENTS BOARD
Respondent
DECISION
Tribunal Mr D Letcher, QC, Senior Member Date13 July 2010
Place Sydney
Decision Both decisions under review are affirmed
................[SGD]..........................
Mr D Letcher, QC
Senior Member
CATCHWORDS
Tax Agents Board- The Tax Practitioners Board- cancellation of registration as a tax agent- registration as a nominee of the partnership- fit and proper person
LEGISLATION
Fair Trading Act 1987
Income Tax Assessment Act 1936 (superseded) s 251BC(d), 251JC, 251K, 251KE,
Tax Agents Services Act 2009
The Tax Agent Services (Transactional Provisions and Consequential Amendments) Act 2009
CASES
AXO3D and Tax Agents Board of NSW (2004) AATA 552
Briginshaw v Briginshaw (1938) 60 CLR 336
Mason CJ in Australian Broadcasting Tribunal v Bond & Ors (1990) 170 CLR 321 at 348-349)
Morrissey and Tax Agents Board of Queensland (2004) AATA 1078
Pappalardo and Tax Agents Board of Victoria (2003) AATA 990
Re Su and Tax Agents Board (SA) (1982) ATC 4284 at 4286-4837
Stasos v Tax Agents Board (1990) 21 ALD 437
Toohey and Tax Agents Board (2008) AATA 262
REASONS FOR DECISION
Mr D Letcher, QC, Senior Member 1.The Applicant, Mario Pleno, seeks a review of two decisions by the Respondent, the Tax Agents Board (now the Tax Practitioners Board) (the Board). First, on 19 November 2009, the Board cancelled Mr Pleno’s registration as an individual tax agent (Appeal 5695 of 2009) and, secondly, on 27 January 2010, the board cancelled his registration as a nominee of the partnership “GST BAS & Accounting Professionals” (Appeal 0543 of 2010). These matters were heard together.
2.Legislation
Section 251K of the Income Tax Assessment Act 1936 (ITAA 1936) at the relevant time, provided as follows:
251K Cancellation or suspension of registration of tax agents
(2)A Board may suspend or cancel the registration of any tax agent upon being satisfied that:
(a) ...
(b) the tax agent:
(i) ...
(ii)has been guilty of misconduct as a tax agent; or
(c) a registered nominee of 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.;
(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;
251KE Cancellation of registration of nominees
(1)A Board may cancel the registration of a nominee of a tax agent if the Board is satisfied that the nominee is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters.
3.The jurisdiction of the Administrative Appeals Tribunal conferred by s 43(1) of its Act permits exercise of all powers and discretions of the original decision maker. The Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 abolished the Tax Agents Board which had made the decisions in relation to Mr Pleno. However, s 15(1) of that Act provides that an act of a Tax Agents Board is taken to have been done by the new Tax Practitioners Board, so that the Tribunal’s powers and discretions are those of the present Board, if they differ at all from those of the previous Board. In fact s 30.20-30 of the new Act, the Tax Agents Services Act 2009, continues for the new Board the same range of powers as given to the old Board, including “termination of registration” so that there is no significant difference.
4.The phrase “fit and proper person” takes meaning from its context. Whilst s 251JC Income Tax Assessment Act 1936 requires the Board to consider re-registration if it is satisfied the Applicant is a “fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters”, the “concept comprehends matters other than the financial, technical and management capabilities necessary to provide an adequate and comprehensive service”. It must extend to any aspect of fitness and propriety that is relevant to the public interest (Mason CJ in Australian Broadcasting Tribunal v Bond & Others (1990) 170 CLR 321 at 348-349).
5.The new Code of Professional Conduct under the new Tax Agent Services Act is contained in Part 3. Section 30.10 states:
(1)You must act honestly and with integrity; and
(2)You must not knowingly obstruct proper administration of the taxation laws.
6.These obligations are not new, being comprehended in the meaning given to the “fit and proper” phrase as applied to tax agents. In Stasos v Tax Agents Board (1990) 21 ALD 437 Hill J said:
“... A person is required, before being registered as a tax agent to demonstrate that he is a fit and proper person to prepare tax returns and transact business on behalf of clients in tax matters and, inter alia, that as at the time of application he is of good fame, integrity and character ... he will, almost invariably, have dealings with the officers of the Australia Tax Office and perhaps the boards and tribunals to which I have already referred. Those dealings must be able to be carried on in an atmosphere of mutual trust. The commissioner and his officers must be able to accept that, to the best of the ability of the tax agent, returns have been prepared that are true and accurate. This is particularly true now that the Commissioner has moved to a system of self-assessment ... it is imperative that the honesty and integrity of the tax agent not be called into doubt ...”
7.Similar expressions appear in the decisions of Re Su and Tax Agents Board (SA) (1982) 82 ATC 4284 at 4286-4837 and Toohey and Tax Agents Board (2008) AATA 262.
8.The decided cases show a consistent approach that, as well as competence and knowledge, qualities of character and ability to meet obligations of truthfulness and respect for the law are required of a tax agent, given his privileged position. Serious departures from those standards may be met with sanctions including a refusal to re-register or cancellation of registration.
5695 of 2009 Individual Tax Agent
9.The Board alleged that Mr Pleno had been “guilty of misconduct as a tax agent” under s 251K(2)(b)(ii), and that he was “not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters” under s 251K(2)(d) of the ITAA 1936. For proof of misconduct the Respondent relied largely upon the Applicant’s letter of 22 April 2009 responding to its questionnaire of 15 April 2009. Those responses amounted to admissions by Mr Pleno that a Marcelo Sebastian was “known to be a tax preparer for 25 years” although he had never been registered as a tax agent, that Mr Pleno never employed him, that Mr Sebastian maintained his own office and prepared tax returns in his own time with control over his own work hours, that Mr Pleno allegedly supervised his work although he did not work at that office, that he did not know Mr Sebastian’s work hours, that Mr Pleno lodged returns prepared by Mr Sebastian for a fee of $25 per return not knowing how much Mr Sebastian charged his clients and that Mr Sebastian “may have” invoiced clients on Mr Pleno’s letterhead. By letter dated 28 April 2009, Mr Pleno asserted that he had lodged 190 returns in 2007 and 252 returns in 2008 prepared by Mr Sebastian in the circumstances set out above. Those returns were lodged from Mr Pleno’s computer as though prepared by him using his individual agent’s number.
10.This arrangement occurred on a background that on 21 August 2000 the Board had refused to re-register Mr Pleno, alleging that he had lodged numerous tax returns prepared by the unregistered Jeffrey Nirens, and thus allowed himself to be “used as a post box”. However, the Board had invited a new application for registration accompanied by signed undertakings which Mr Pleno gave namely:
“(2) Tax Agents’ Board, NSW:
…
(a)I will not operate a branch without written approval from the Tax Agents Board;
(b)I will not associate myself with [sic] unregistered tax agent.”
11.I did not allow the Respondent to call evidence concerning the nature and extent of the arrangement with Mr Nirens because no particulars had been given nor notice of such intention and Mr Pleno was not represented. However, Mr Pleno himself asserted the giving of the undertakings. The Respondent alleged misconduct by breach of both undertakings, and also alleged those breaches were evidence that Mr Pleno was not a fit and proper person. Its case was that he lacked the integrity and honesty in matters relevant to the role of a tax agent, rather than lacking the requisite knowledge to act in that capacity.
12.Mr Pleno’s explanations to the Board and the Tribunal in fact constituted admission of breach of clause (2)(b) of the undertaking. He admitted his prior knowledge that Mr Sebastian was a long time unregistered preparer, that Mr Sebastian’s work was carried out distant from his own office, that he had little knowledge of Sebastian’s hours and methods of work, that he had lodged Sebastian’s returns as his own for a fee of $25, that Sebastian had obtained fees from clients and that he might have used Mr Pleno’s letterhead for invoices. This provided ample proof of associating with an unregistered preparer. It constituted misconduct in that he was assisting a person he knew to be unregistered in conducting a business as though he were a tax agent, with at least 190 returns for one year and 252 the next, all in breach of s 251K of the ITAA 1936.
13.As to the undertaking not to operate a branch without approval, clause (2)(a), it was not clear to me that Mr Pleno exercised any control over Mr Sebastian’s office or activities sufficient to regard Mr Sebastian’s Pendle Hill office as a “branch”. There were elements of suspicion, but not of sufficient weight to make out a clear breach of that undertaking. I find against the Respondent on that allegation.
0543 of 2010 Nominee of Partnership
14.Under s 251KE ITAA 1936 the Board may cancel the registration of a nominee of a partnership if it is satisfied that the nominee is not a fit and proper person to prepare tax returns and transact business on behalf of taxpayers in income tax matters, and s 251BC(d) ITAA 1936 provides that he is not fit and proper if he is not of good fame, integrity and character (among other matters). The integrity and character of Mr Pleno was a central issue in this case.
15.Mr Pleno was registered as sole nominee of the partnership “GST BAS & Accounting Professionals”, which was registered as a tax agent from 1 September 2008 but did not prepare any tax returns thereafter. Instead, one of the partners, Mr Sebastian, prepared returns, Mr Pleno lodged them and Mr Sebastian received the clients’ fees. The Board alleged that Mr Pleno showed his unfitness by his continued association with Mr Sebastian, despite his undertaking not to associate with unregistered preparers. The Board also alleges that Mr Pleno failed to exercise proper control and supervision of those returns, but lodged them under his own tax agent’s number, and, in breach of s 251N, had allowed the unregistered Mr Sebastian to prepare returns on his behalf, directly or indirectly, and to conduct a tax agents business on his behalf. These allegations relied on the same picture put forward in the other case 5695 of 2009 case, namely that he and Mr Sebastian operated a scheme where Mr Sebastian prepared returns, unsupervised, and Mr Pleno for a fee lodged returns as though they were his own work in breach of his prior undertakings.
16.Mr Pleno was first registered some 17 years ago. He used to be a registered accountant and has been made aware of the legislative requirements, if by no other means than repeated correspondence from the Board since 2000. Unfortunately, he was either dissembling or confused about those requirements when he addressed the issues of supervision of Mr Sebastian’s work, role of the partnership and the possible harm of submitting returns prepared by Mr Sebastian but lodged by him from his computer and using his registration number as though they were his own work. In cross-examination he was asked:
“Did you understand in 2007 that under section 251 an unregistered preparer could not charge a fee for preparation of tax returns?
A: Yes”.
17.Further, he asserted that Mr Sebastian’s returns were in fact the product of the partnership although the unregistered Mr Sebastian was the person billing for the work, the partnership lodged no returns and the work was not carried out at partnership premises.
18.Mr Pleno’s view expressed to the Tribunal was that if the partnership was registered under the Fair Trading Act 1987 (NSW), then all its partners should be able to act as tax agents without further approvals. This is manifestly contrary to the Act and to the clear intention of Parliament in passing that Act. Mr Pleno appeared unwilling or unable to grasp the concept of a requirement of individual qualification as a prerequisite to acting as a tax agent. If Mr Pleno understood the requirement and reasons for requiring registration, then when it did not suit the conduct of his business, he was prepared to breach those requirements.
19.In fact, Mr Pleno fostered the situation of Mr Sebastian preparing and charging for tax returns by agreeing to lodge such returns using his tax agent’s number and his own computer as though he had prepared the returns himself. Also, by charging a fee of $25 for each which amount was consistent with Mr Pleno acting as a post box and inconsistent with personal close supervision of the preparation of each return. His testimony that he closely supervised the work of Mr Sebastian could not be accepted, and it was clearly in conflict with his statements about his lack of knowledge how Mr Sebastian’s work operated. The evidence of Mr Pleno assisting an unregistered Mr Sebastian and breaching his undertaking is not disputed. I am conscious that an adverse decision will deprive Mr Pleno of his livelihood as a tax agent. I am satisfied to a Briginshaw v Briginshaw (1938) 60 CLR 336 standard, of the facts making up the allegations, which are serious and with serious consequences. The facts showed that he did not understand or perhaps did not care to comply with his personal obligations and the relationship of trust that should exist between himself as tax agent, and the Commissioner of Taxation.
20.Mr Pleno made several lengthy written submissions to the Tribunal. He was encouraged to consider seeking an adjournment for legal assistance but declined and he addressed the Tribunal on the law and the merits of his case at the conclusion of the evidence.
21.Mr Pleno submitted that other tax agents had been found to be fit and proper despite having breached their obligations in serious respects. It is trite law that each case depends upon its own facts, and the cases he cited illustrated the wide range of factual situations rather than establishing any principles of assistance to his position.
22.In Toohey and Tax Agents Board (2008) AATA 262, the agent repeatedly failed to lodge his own tax returns on a background of continuing severe physical and psychological health problems, plus family and business financial concerns regarding claims of special circumstances, but the Tribunal found against him and he was not found fit and proper.
23.AXO3D and Tax Agents Board of NSW (2004) AATA 552 was a re-registration case involving an unregistered preparer said to be in partnership on legal advice but clearly not so. Tax debts were owed but paid before the hearing and there were delays in replying to Board letters and negligent dealings with a client. The Tribunal accepted strong evidence of prior good professional standing, a temporary health and marital crisis and a significant change of circumstances and as such, allowed a re-registration. Other cases, such as Morrissey and Tax Agents Board of Queensland (2004) AATA 1078, resulted in suspension. Further, the case of Pappalardo and Tax Agents Board of Victoria (2003) AATA 990 affirmed cancellation where there were multiple serious taxation offences, questionable competence, lack of contrition and untruthfulness.
24.Mr Pleno assisted others to conduct businesses while unregistered and breached his undertaking not to do so. There were no special circumstances in Mr Pleno’s situation to mitigate the seriousness of his breaches of his obligations as a tax agent. There was no evidence as to any factors of health, finances or other pressures which might constitute a feature out of the ordinary to distinguish this case from the usual category. Mr Pleno engaged in conduct calculated to subvert the tax agent system, repeated that misconduct, and offered no exculpatory explanation beyond a wish that the law were otherwise.
Conclusion
25.In relation to matter 5695 of 2009 I find that the Applicant is not a fit and proper person to prepare income tax returns and transact business on behalf of taxpayers in income tax matters, and that he engaged in serious misconduct as a tax agent. I affirm the decision under review.
26.In relation to matter 0543 of 2010 I find that Mr Pleno is not of good fame, integrity and character in relation to matters concerning his position as a tax agent. He acted in breach of his obligations by assisting an unregistered preparer of tax returns to conduct his business, he misused his privileged position as a tax agent and he knowingly breached his undertaking not to associate with unregistered persons. He is not a fit and proper person to be the nominee of the partnership in these circumstances. I affirm the decision under review.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr D Letcher, QC, Senior Member.
Signed: ................[SGD]...........................................................
Associate B. DhanasarDate/s of Hearing 23 March 2010
Date of Decision 13 July 2010
Representative for the Applicant Mr M Pleno (Self)
Representative for the Respondent Ms J Gleeson (Counsel)
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