the issues of law involved
40 Leave to appeal under s104(3) will be granted only on a ground that involves a question of law alone. I have set out above the grounds upon which it is said, on behalf of the applicant, that the magistrate made errors of law in her decision to commit the applicant. The principal issue of law involved concerns whether, and if so, the extent to which, it will be necessary for the Crown to establish the invalidity or incorrectness of the rulings.
41 The Crown at all times set its face against attempting to demonstrate that the rulings were wrong in law and that the Commonwealth was, therefore, actually deprived of amounts of tax properly due and payable. It seems that the questions involved in the assessment of the efficacy of the schemes may have been finely balanced, and were questions on which reasonable and informed minds might have differed - and, indeed, upon which minds within the ATO did differ. A delegate of the Commissioner exercising the Part 1VAA function may reasonably have concluded that, on their implementation, fringe benefits or other taxes were not payable - that is, that the schemes successfully avoided taxation. If this view were correct, no tax would have been payable. Another delegate may equally reasonably have come to a contrary view. If that view were correct, the companies would have been liable to tax. Indeed, mention was made of some evidence (to which I was not taken in detail) to the effect that a commonly held view in the ATO was that schemes of the type the subject of the rulings were effective legitimately to avoid the imposition of taxation, but that later another officer prepared a position paper expounding the opposite conclusion.
42 It was, presumably, for this reason that the Crown adopted the position set out in particular H. That is, the Crown recognised that it would have difficulty in establishing that the rulings were incorrect and that as a result the Commonwealth was deprived of taxation to which it was entitled. At that time it sought only to prove that the rulings facilitated by the applicant were contrary to "the view and policy" of the ATO. The consequence of this would be that once rulings were made, the Commonwealth had lost the opportunity to test the efficacy of the schemes. However, it seems that it subsequently resiled even from the position stated in particular H. The most it alleged, ultimately, was that the applicant published or acquiesced in rulings that were contrary to his own stated view of the law.
43 Both at committal, and in this court, the Crown adopted the position that Part IVAA rulings, favourable to the person seeking the ruling, "had an impact" upon the revenue, and conferred an advantage on the taxpayer and a corresponding disadvantage on the Commonwealth. This represents a fundamental misunderstanding of the purpose and (proper) operation of Part IVAA. It assumes that a favourable ruling does or might excuse the taxpayer from the payment of tax otherwise payable. As I have noted above, that is not, as I understand it, the purpose of Part IVAA. The purpose of the Part is to allow the taxpayer to know if the Commissioner considers that under the arrangements he/she/it has put in place, tax is or will become payable. The rulings are a declaration of the law as interpreted by (or on behalf of) the Commissioner as applied to the set of circumstances stated in the application. The mere fact that a ruling is to the effect that, in the particular circumstances outlined in the application for the ruling, tax is not payable, does not confer any benefit except certainty on the taxpayer - unless the ruling is, or is arguably, wrong. It cannot be said that a ruling which correctly acknowledges that, in a particular set of circumstances, a taxpayer is not liable for the imposition of a particular tax, confers any benefit upon that taxpayer, or any corresponding disadvantage upon the Commonwealth.
44 In the absence of any ruling of a binding character, the Commissioner would have had the opportunity of obtaining an adjudication by the courts on the question of whether tax was payable in the relevant circumstances. Once, however, a favourable ruling had been given, its binding character deprived the Commissioner of that opportunity. What he was "defrauded" of, on the Crown case, was the opportunity to have the scheme subjected to curial adjudication. Implicit in this analysis is the notion that the schemes were, at least arguably, ineffective; the corollary of which is that the rulings were, at least arguably, incorrect. If the last proposition were not correct - that is, if the rulings were incontrovertibly correct, or if the correctness was not, as the Crown would have it, in question - the Commissioner would have been deprived only of a right to litigate that was of no possible value. I see nothing in Peters or Kastratovic that envisages defrauding where the subject of the alleged fraud is of no value. This, it seems to me, is consistent with what was said by McHugh J in Peters at [74]. I do not mean to imply that it is necessary that the prosecution be able to ascribe a monetary value to what is lost: McHugh J envisaged injury to reputation or personal status as being possibly the subject of a fraud. But it is necessary that the thing of which the Commonwealth is defrauded have some value. I do not see that a right to litigate a hopeless case is a right that has any value. In order to make out a case of defrauding the Commonwealth under s29D, it was, therefore, essential to the prosecution case that tax was arguably payable under the circumstances detailed in the applications for ruling and that, by corollary, the rulings were arguably incorrect. That would necessarily mean that the right or opportunity to litigate the efficacy of the schemes was a right or opportunity having some value.
45 That raises one of the points made on behalf of the applicant in written submissions. That is that his counsel were, as a result of successful objection by counsel for the prosecution, prevented from cross examining officers of the ATO on the correctness of the rulings. The cross examination was rejected, after argument, on the basis that it was irrelevant. For the reasons I have given above I do not think it was. Rejection of the cross examination demonstrates error of law. (Rejection of the cross examination was not put on the applicant's behalf as a specific error of law, but, rather as illustrative of the fundamental error of law upon which reliance was placed.)
46 On behalf of the applicant it was also argued that it was incumbent on the prosecution to prove that there existed an obligation to pay tax and an avoidance of that obligation by a taxpayer. This was not because of the terminology of s29D, but because of the terminology of the charge levelled against the applicant. (Of course, in the context of this application, it is only necessary that the prosecution adduce evidence which, if accepted by a jury, would have such a result. But that is a detail.) The proof of the charge under s29D, having regard to Peters, does not necessarily require proof of an obligation to pay tax and an avoidance of that obligation. But that is not the basis on which the submission was put. The submission related to the formulation of the charge, firstly as it was put before the magistrate, and secondly as framed for the purpose of committing the applicant for trial. The charge as framed and on which the applicant was committed for trial does specify that the applicant assisted taxpayers to avoid the payment of tax. Cross examination of the ATO officers on the correctness of the rulings was directly relevant to this point.
47 Having regard to the concept of defrauding as explained in Peters, it would be open to the Crown, in a charge under s29D, to set out to prove (as it proposes to do) only that the Commonwealth had, by the applicant's dishonest actions, been deprived of the right or opportunity to litigate the efficacy in avoiding taxation of the schemes or plans. Providing it could establish, also, that it had some prospects of succeeding in such litigation, that would, in my view, be sufficient to establish fraud within the meaning of s29D.
48 But that ignores the manner in which the s29D charge is framed. The Crown has at all times formulated the charge as defrauding by "assisting taxpayers to avoid the payment of tax".
49 I am satisfied that, in order to make out that charge - as framed - it will be necessary that the Crown establish that tax was in fact payable, and was in fact avoided by the applicant's dishonest actions. The charge as framed is not apt to encompass, as the subject matter of the fraud - that is, the right or opportunity or valuable thing of which the Commonwealth was allegedly defrauded - the right or opportunity to litigate the liability to taxation of the person seeking the rulings.
50 During the course of argument, senior counsel for the Commonwealth specifically addressed this question. Referring to the formulation and particularisation of the charge, he put considerable store on the inclusion of the word "to" in the final phrase of the charge. It is as well to reproduce the submission that was made. It was:
"… in so far as the particulars in the charge alleged that the defendant … assisted taxpayers to avoid the payment of tax, the word 'to' is critical because we do not allege that the defendant assisted taxpayers avoid the payment of tax. So we have never alleged that there was an actual avoiding of tax as part of the particulars. It was always assisting them to avoid the payment of tax."
51 The distinction is not, in my opinion, well made. The word "to" adds nothing to the meaning of the charge. If, as I suspect, senior counsel intended to suggest that the allegation is that the applicant's dishonest actions assisted taxpayers in an (unfulfilled) intention or endeavour to avoid the incidence of taxation, the charge is not felicitously framed to reflect that allegation.
52 Further, while I have concluded above that rejection of the cross examination in relation to the validity of the rulings demonstrated an error of law where the allegation pursued was that the Commonwealth was deprived of the right or opportunity to test the efficacy of the scheme, the error is more significant where, as I have also concluded, the charge is framed in such a way as to require proof of actual loss.
53 In the absence of evidence that the rulings were incorrect, and that tax would have been payable in the circumstances outlined in the applications, it was not open to the magistrate to commit the applicant for trial on the s29D charge as formulated. To do so constituted error of law.
54 In the absence of evidence that the rulings were arguably incorrect and that tax may have been payable in the circumstances outlined in the applications, it would not have been open to the magistrate to commit the applicant for trial on a charge under s29D that asserted, not that the applicant assisted taxpayers to avoid the payment of tax, but that the applicant's dishonest conduct deprived the Commissioner of the opportunity to litigate the liability of the taxpayers to tax. If the Crown wishes to pursue its case on this basis, it will be necessary that it reframe the charge. The charge as presently framed, in my view, requires proof of actual loss to the revenue, by the avoidance of tax properly payable.
55 So far as the magistrate's reasons for her decision are concerned, senior counsel was only able to point to one explicit asserted error of law. This was contained in a passage which reads:
"The prosecution's position about the schemes is that tax deferred puts the revenue at risk."
56 The submission made in relation to this passage was that it was irrelevant, as there was no evidence of any deferral of taxation. This may be correct, but, so far as I am able to discern from the material before me, the submission was made by the prosecution, and accepted by the magistrate, in the context of an argument advanced on behalf of the applicant, to the effect that, while the rulings had the effect that fringe benefits tax was not payable, it may well also have been the case that, after a period of time, capital gains tax would be leviable and that this would have a balancing effect in relation to the fringe benefits tax not collected. It seems to me that the initial submission (made on behalf of the applicant) was quite irrelevant, and it was by this means that the notion of deferral of taxation was introduced. This was not a case concerning deferral or delay in the payment of taxation. However, if indeed it was an error of law on the part of the magistrate to make reference to the submission, it being irrelevant, it was not an error that had any operative effect upon her decision. It is not correct to assert, as is implied in the grounds of the application, that the magistrate found that the rulings resulted in a deferral of tax. That is not what she said, and she did not even go so far as to state that there was evidence which could satisfy a jury beyond reasonable doubt that payment of tax had been deferred.
57 There is one final matter to be addressed in relation to this charge. This was raised on behalf of the applicant only in oral submissions. It was asserted that there was no evidence before the magistrate that any of the schemes had in fact been implemented, or that any of the purchasers of the schemes had in fact taken any steps towards implementation. Senior counsel for the Crown did not point to any evidence in contradiction of this assertion.
58 This argument has caused me considerable difficulty. If it is correct that there is no evidence of implementation, the Crown case has to be seen in a different light again. The interest of the Commonwealth put at risk by the applicant's dishonest conduct would be the opportunity to litigate the schemes if and when they were implemented. There is a rather uncomfortable remoteness about this concept; however, I think it would be open to a jury to conclude that a favourable ruling did indeed imperil the interests of the Commonwealth in that it constitutes one early step in what might be the implementation of a scheme. Indeed, a favourable ruling would, one would expect, encourage a taxpayer to put into effect the arrangements proposed - and to set the taxpayer on the way to the possible avoidance of tax. The same remarks about the possible incorrectness of the rulings apply to this formulation of the case also.