Saba and Deputy Commissioner of Taxation
[2004] AATA 264
•15 March 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 264
ADMINISTRATIVE APPEALS TRIBUNAL )
) NS2003/70
SITTING AS THE SMALL TAXATION DIVISION ) Re Tony Saba Applicant
And
Deputy Commissioner of Taxation
Respondent
DECISION
Tribunal Mr J. Block, Deputy President Date15 March 2004
PlaceSydney
Decision The objection decision under review is affirmed.
[Sgd] Mr J. Block, Deputy President
CATCHWORDS
Goods and services tax - wilful understatement of earnings - appropriate rate of penalty – decision affirmed
A New Tax System (Goods and Services Tax) Act 1999 (“GST Act”) s 9-5
Taxation Administration Act 1953 (“TAA”) Schedule 1 s 284-75, s 284-80
REASONS FOR DECISION
15 March 2004 Deputy President J. Block
1. The objection decision which is under review in this matter, is the disallowance, dated 16 October 2003, of an objection, dated 14 October 2003, against an assessment of penalty referable to goods and services tax (“GST”) dated 12 August 2003.
2. The Applicant was self-represented; Ms Jill Gatland who is an officer of the ATO Legal Practice, Sydney, represented the Respondent. The Tribunal had before it the “T-Documents” and also “Supplementary T-Documents” lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. All of the documents are numbered sequentially and so it is not necessary to refer to the two sets of documents separately.
3. The Respondent’s contentions are clearly set out in his Statement of Facts, Issues and Contentions; clauses 1 to 18 inclusive under the head of “Facts” are set out in these reasons as follows:
“FACTS
1.The Applicant is a taxi driver who drives for other operators through TCS Taxis.
2. The Applicant was registered for GST from 1 July 2000, accounting for GST on a cash basis and lodging Business Activity Statements (BAS) quarterly.
3.The applicant lodged the following BAS for the year ending 30 June 2001 (the relevant period):
GST quarter Date Lodged Total Supplies GST Payable (gross) Non-capital acquisitions Input Tax Credits Net GST payable September 2000 4-11-00 8249.00 749.00 6812.00 619.00 130.00 December 2000 8-2-01 6435.00 585.00 5290.00 480.00 105.00 March 2001 25-4-01 N/a N/a N/a N/a 105.00* June
200110-7-01 N/a N/a N/a N/a 105.00* Annual return to June 2001 1-3-02 12 215.00 1 110.00 9 795.00 890.00 10.00 *the applicant elected to pay quarterly instalment amounts and then accounted for these periods in the annual return
4The Applicant was the subject of a Field Review by the respondent which examined the BAS lodged by the Applicant which included the relevant period.
5.On 8 April 2002, the Applicant was interviewed by the officer of the respondent at the premises of his accountant.
6.At the interview on 8 April 2002, the Applicant produced a cash book and advised the officer of the respondent that this was an accurate record of his supplies and acquisitions for the relevant period.
7.The information provided by the Applicant was checked against the records of shifts driven by the Applicant held by TCS Taxis. The information provided by TCS Taxis regarding shifts driven by the Applicant for the period under review did not correspond with the information provided by the Applicant as follows:
Quarterly Tax Period Shifts recorded in Applicant’s cash book Applicant shifts from TCS radio log reports 1.07.00 - 30.09.00 48 60 1.10.00 – 31.12.00 36 53 1.01.01 – 31.03.01 33 62 1.04.01 – 30.06.01 40 63 Total 157 238
8.On 23 August 2002, the Applicant was again interviewed by the officer of the respondent and shown the information received from TCS Taxis about the shifts he had driven during the period under review.
9.The Applicant admitted at interview that the cash book which he presented on 8 April 2002 had been made up a few days before that date. The Applicant stated that this was made up by his accountant based on his verbal instructions.
10.At interview on 23 August 2002, the Applicant further admitted that he knew he had not declared the earnings from all the shifts he had driven. The Applicant also admitted that he knew he was required to declare earnings from all shifts.
11.The Applicant was unable to supply accurate records of his supplies and acquisitions for the shifts driven during the relevant period.
12.On 26 March 2003 the respondent issued Notices of Assessment of GST net amounts in relation to the BAS revisions for the relevant period as follows:
Tax Period Original net amount payable ATO assessed net amount payable GST Shortfall 1/07/00-30/09/00 $130 $460 $330 1/10/00-31/12/00 $105 $406 $301 1/01/01-30/06/01 $10 $738 $728 Total $245 $1604.00 $1359
13.The respondent imposed administrative penalties at the rate of 75% of the shortfall amounts for the quarterly tax periods ending 30 September 2000, 31 December 2000 and for the shortfall amount on the GST return for the period 1 January 2001 to 30 June 2001.
14.The respondent considered that the Applicant had intentionally disregarded the tax law by understating the total of supplies and acquisitions on the BAS for the relevant periods. The total penalty imposed was $1019.25.
15.The Applicant objected to the imposition of the administrative penalty in a letter received by the respondent on 4 July 2003.
16.On 12 August 2003 the respondent issued the Applicant with a Notice of Assessment of penalty for having a tax shortfall amount.
17. On 14 October 2003 the Applicant objected to the penalty amount.
18.On 16 October 2003 the respondent advised the Applicant in writing of the decision on the objection, disallowing the Applicant’s objection as to penalties.”
4. This matter first came before me for a directions hearing on 11 February 2004. The Respondent called for that hearing, having regard to an indication at a prior and preliminary hearing by the Applicant, that notwithstanding the fact that he had objected against penalty only, he might seek to put in issue not only the penalty but also the tax itself. At the directions hearing I understood the Applicant to have complained firstly that the Australian Government had deprived him of his first wife and secondly that the same Government was seeking against him, a pensioner, to take the food out of his children’s mouths. I gained the impression at the time, wrongly as it turned out, that the Applicant had emigrated from Israel only three years previously. The Applicant became very upset and heated; I in turn became concerned that I did not fully understand what he was saying and thought it prudent to ask that an interpreter be made available at the hearing. When asked to choose the language involved the Applicant chose his first language and being Arabic. In fact there was little need for an interpreter, although she did assist on a few occasions.
5. The Applicant has been in Australia since 1974; he receives a disability pension (because of eyesight problems) from the Australian Government. He remarried and at 62 has four young children aged between 11 and six who are being educated in an Australian Government school. He said at the beginning of the hearing; “I am a disability pensioner and not a taxi-driver”.. However, this case revolves entirely and only around his activities as a taxi-driver, albeit apparently not on a full-time basis. As to how a man can drive a taxi when he has problems of eyesight was never fully explained, although at a later stage the Applicant said that when driving a taxi he takes a rest every two hours.
6. At the time of the directions hearing I had not considered the documents (and which are substantial) in this matter. The Applicant said that an underpayment of GST had been made because of his accountant’s negligence. While noting that a taxpayer is responsible for the acts of his own tax agent against whom he might have a right of recourse in suitable circumstances, (and I was not then aware of the circumstances in which the understatement occurred), I wondered, whether having regard to the small amount involved, a settlement could not be reached. Negotiations to this end did apparently take place but were not successful.
7. T4-60 is the Applicant’s objection, which does not bear a date, but according to the index to the T documents should be treated as dated on 4 July 2003. It reads as follows:
“I wish to object to determination made by you on 23 May 2003. Any underpayment of the GST was the result of an accounting error. I have agreed to pay any tax owing by instalments, but I object to the payment of any penalties”
It will be noted that the Applicant objected only against the penalty, although he did not specify any grounds other than the alleged accounting error.
8. T6-65 is another relevant letter (to the same effect except that no grounds are specified) by the Applicant, dated 14 October 2003, addressed to Paula Gunnig; it reads as follows:
“I am writing to you with full of hope helping me getting out of this trouble. It is regarding to the penalties notice at 12.8.03 and late lodgement of GST statement activities which is not my fult (sic) its actually my previous accountant that he done a very bad job and I got the blame and the penalty.
I am willing to pay the short fall of the GST but not the penalty and the interest if possible.
I am fully confident that you will help me in this matter.
Dear Madam I am a disabelity (sic) pensioner with four kids under the age of ten which will be very difficult for me to pay the amount because there are no other income that I can relay (sic) on exept (sic) the pension payment.
I wish you to consider my view. Thank you.”
9. At the directions hearing, the Applicant agreed that the case turned only on penalty, and not on the tax assessed, and a direction to this effect was issued.
10. I have noted that the Applicant became very cross and upset at the directions hearing. When I read the documents in order to prepare for this matter I did not find it altogether surprising that this was by no means the first such outburst. T3-13 includes a note headed “Second Visit – 28/08/02” reading as follows:
“Visited Tony Saba again to explain about the findings and give him an opportunity talk about the operators for whom he has been driving, but refused to give any information in the last visit. Mr. Saba was informed about the findings that he has under reported his shifts and income. Mr. Saba was visibly upset and started banging the tea table ferociously shouting that he is a pensioner just trying to make some additional money. He calmed down after I quietly asked him to do so or else that I would terminate the interview.”
11. It is not easy to deal with the conduct of the hearing in a cohesive fashion simply because the Applicant was unable to refrain from making frequent emotive statements, often illogical, sometimes melodramatic and often irrelevant. He repeatedly interrupted and especially when Ms Gatland was making her closing submissions. He was at the outset invited to choose between giving evidence and making a statement on the basis that the former course (and which he chose) would result in cross-examination but on the other hand had substantially greater probative value.
12. Although the T-documents run to 132 pages, the issues in this matter fall within a narrow compass. The main issue is whether the Applicant, having understated his taxi income, produced information and in particular a cash book (after the audit had commenced), which was false. The T-Documents include evidence at considerable length as to how the Respondent in the course of the audit process went about checking the information supplied against information obtained from other sources and in particular the TCS Taxi Radio logs, and how it computed the Applicant’s actual earnings for the purpose of computing his additional GST liability. It is to be noted that those investigations, laborious as they were, would have elicited evidence only as to taxi fares derived by radio link and not fares derived in any other manner. The Applicant said vociferously on more than one occasion that if he had wanted to cheat the revenue he could have failed to use his PIN to sign in to the relevant radio link.
13. In effect the Applicant’s case was that all of the blame should be placed on he shoulders of Kamal Schokair, his accountant (and who is referred to henceforth in these reasons as “the Accountant”). His evidence was that he left everything to his Accountant who in turn concocted everything; on this basis the Accountant concocted false BAS periodical statements and he also after the audit commenced, concocted a false cash book. To do so, according to the Applicant, the Accountant required no assistance from the Applicant; the Accountant simply told the Applicant how much money was needed. The Applicant also (and this was the subject of complaint by him) took substantial fees from him. Moreover and when the investigations by the Respondent became pressing the Accountant abandoned him and refused to help him further.
14. Put in other words, the Applicant does not deny that there was an interview on 8 April 2002; he also does not deny that a cash book was produced and that it was false; he says that the entire exercise was orchestrated by the Accountant and that he played no part in it and was in no way responsible. There is one very obvious fallacy in all of this; the cash book when compared with the Respondent’s calculations indicates that there is consistency between them as to when the Applicant worked as a taxi driver and it is doubtful whether the Accountant could have known this information without input from the Applicant. This leaves aside the question of why the Accountant would have been involved in conduct of a fraudulent nature. The Accountant did not give evidence. The Applicant said that when asked to do so the Accountant put the phone down on him.
15. When the hearing first commenced I asked the Applicant whether the Respondent’ Statement of Facts, Issues and Contentions was correct and in particular as to the factual statements contained in it were correct. I understood him to say that they were, at least at first, although later allegations would suggest that insofar as the facts recited include allegations that the Applicant was involved in or party to them, those allegations were denied.
16. When the time came for Ms Gatland to cross-examine, she found it extraordinarily difficult to obtain coherent answers from the Applicant. On occasion she received answers of the emotive kind; there were suggestions that she should not be doing a job, which involved taking money from a pensioner and depriving his children of, inter alia, ice cream. On one occasion and in answer to a question he asked her whether she had children of her own.
17. There were answers, which were more-or-less coherent:
(a)The Applicant agreed that he was registered for GST from 1 July 2000 but then said, “You should know - why do you ask me?”
(b)The Applicant agreed that he lodged BAS statements. When asked about his annual return, he said “No I did not know - I had an accountant. I know nothing – he knew. I didn’t know my obligations”.
(c)The Applicant agreed that the cash book (T14) was incorrect but when asked whether he kept receipts and other vouchers, said that his Accountant didn’t want them. He denied that he was asked for vouchers at either meeting with the Respondent.
(d)When asked whether at an interview the cash book was produced and whether the cash book produced was correct, the Applicant at first answered “yes” but then said “I didn’t say it was correct”.
18. The Applicant said that he was willing to pay the shortfall but did not believe there was a shortfall. (Ms Gatland reminded me that I had issued a direction, with the Applicant’s consent, that the Applicant sought only to contest the penalty and not the tax itself).
19. The Applicant said as to his BAS statements that he did not know whether they were true. His answer was “I don’t know. I am a dumb. I am not a professional”. He then went on to refer to his Accountant as a bastard.
20. Ms. Gatland in her closing submissions went into the law starting from basic concepts of the nature of a taxable supply. She contended that this is a case of wilful deceit and in respect of which the penalty was correctly assessed at 75%. I propose to deal with the law in more detail later in these reasons.
21. The Applicant said that his earnings were minimal and never more than $20 in profit for himself personally on any given working day, and again attributed the problem to the Accountant who had been “in a hurry. The Accountant said - I want nothing - just give me the book and I ring you every quarter to pay”.
22. The Applicant who had again become very upset then complained that the Respondent was pursuing him when he was not a “big fish”.. He complained also that he should have had a warning. He then suggested bizarrely that they would sell a child and went on to say “we have had a bad life from this trouble. I put one child for sale. If they want it they must take if from my pension.”
23. To obtain the full flavour of what transpired requires a consideration of the transcript although accurate transcription may at times be difficult. The Applicant again complained about the Australian Government taking food from his children’s mouths. He complained also that his first wife received so many benefits from the Government that she left him.
24. The Applicant is an ill-educated and quick-tempered man. Throughout Ms Gatland’s submissions he interrupted her. When dealing with a self-represented Applicant of this kind one possible practical solution is to let him say what he pleases and when he pleases, although naturally within limits. My attempts to keep him within acceptable limits were marginally successful.
25. The extent of the Accountant’s involvement is unclear. It is highly unlikely that he could have done everything on his own and without any involvement on the part of the Applicant. It is possible that they acted together. This is a bad case; deliberate understating of income is bad enough but to produce a false cash book after the audit commenced, even where the work of actually writing the book was performed by the Accountant (if this was the case) is particularly reprehensible. The wording of the relevant legislation (referred to later in these reasons) has the effect that the Applicant is responsible if the deceit was by him or his agent. However and as I have indicated I do not accept that the Applicant was in no way involved in or party to the deceit.
26. Ms Gatland’s submissions as to the applicable law were comprehensive and I do not think that it is necessary for me to go into as much detail. The Applicant was plainly making taxable supplies in accordance with section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (“GST Act”). There was clearly a tax shortfall within section 284-80 of Schedule 1 of Taxation Administration Act 1953 (“TAA”). Section 284-75 (1) of Schedule 1 of TAA as to penalty provides as follows:
“You are liable to an administrative penalty if:
(a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation law; and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it; and
(c) you have a *shortfall amount as a result of the statement.”
The table in subsection 284-90(1) of Schedule 1 to TAA provides at item 3 that:
”1.Your *shortfall amount or part of it resulted from intentional disregard of a *taxation law by you or your tax agent,
The base penalty amount is 75% of your shortfall amount.”’
27. The bad temper often displayed by the Applicant made this matter quite difficult to handle. I accept of course that allowances must be made for a person of little education, who is in unfamiliar territory and who feels aggrieved even though his difficulties are of his own making. A consideration of the transcript will elicit the fact that he was given much latitude and towards the end of the hearing he seemed to become calmer but on the basis that the Government must take the money out of his pension. The reality appears to be that the Applicant having been caught out in deliberate evasion is prepared to pay the tax but is not prepared to pay the penalty. And in defence of his rights he plainly believes that offence is the best defence. This case indicated in stark terms the desirability of an applicant in circumstances such as these having representation. I accept that the Applicant may lack the means and note that in any event it is doubtful whether professional representation would have produced a different result. Representation would however have elicited proper advice and quite possibly leading to a settlement.
28. In this matter the Applicant is, as I have indicated, caught by the words of the legislation, which in its terms applies to intentional disregard of taxation law “by you or your agent” (Emphasis added)
29. In the circumstances the objection decision under review is affirmed.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: A. Krilis .......................................................................................
AssociateDate/s of Hearing 25 February 2004
Date of Decision 15 March 2004
Representative for the Applicant Self
Solicitor for the Respondent Ms Jill Gatland
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