ANGER is mounting over the lack of transparency and the powers of WA’s tax collector, the Office of State Revenue, and the lack of cost-effective recourse to adverse tax assessments.
ANGER is mounting over the lack of transparency and the powers of WA’s tax collector, the Office of State Revenue, and the lack of cost-effective recourse to adverse tax assessments.
State Revenue auditors can effectively enter a business’s premises, order everyone out and seize documents there if it feels there is a sufficient reason to do so.
Building companies, engineer-ing firms and some of WA’s largest corporations have felt the sting of State Revenue’s powers in the past year, with the most obvious example being Westralia Airports Corporation.
There has been talk that Alcoa could face a large stamp duty bill but one of its spokesmen said it was still awaiting a State Revenue assessment.
State Revenue also targeted the contractors that operated display homes for building companies – in some cases handing out five-year retrospective tax bills.
It was a similar story for at least 10 engineering firms that faced tax bills of up to $1 million – some backdated as far as 1995.
And if State Revenue hands down a tax bill, the taxpayer has to prove the agency is wrong.
That means objecting to State Revenue first and then taking the matter to the Supreme Court if that fails – an option likely to cost at least $50,000.
However, before the case goes to court the tax bill must be paid and the complainant risks having to pay the Government’s costs as well if he or she loses.
Halsey and Associates partner Fiona Halsey said it was usually not worth challenging a tax assessment below $100,000 in court.
She said another problem facing business was the dearth of barristers skilled in tax areas, especially with Wayne Martin QC tied up with the HIH Royal Commission.
Besides Mr Martin there are a further five barristers taking State tax briefs.
Fallon Group partner Tony Ince said State Revenue also made it hard for tax practitioners to learn the facts behind any case involving their clients.
Mr Ince said he asked to sit in on interviews State Revenue was conducting with contractors his client had hired to ensure he was working from the same facts if his client decided to lodge an objection to any tax assessment.
“State Revenue refused, saying my presence would intimidate the contractors,” Mr Ince said.
“Sure, there would have been instances where my interpretation of the facts would differ with State Revenue’s, but at least we could get the facts straight.
“Otherwise, it’s not easy to gain the facts from State Revenue that they have used to make an assessment. It’s an issue we have with State Revenue because it demonstrates an us and them attitude.”
In the case of Westralia Airports Corporation, its adverse tax assessment of $67.5 million came two months after a State Revenue auditor had visited its premises.
WAC chief executive Graham Muir said the auditor never told them what he was looking at.
“He only said if there were problems he would get back to us. He never did and the next thing we knew the tax bill arrived in the mail,” Mr Muir said.
The tax bill was for $37.5 million plus an automatic penalty of $30 million. That penalty was later reduced, so the WAC is now only facing a bill of $40.4 million.
Mr Muir said he was confident the WAC’s objection would be allowed, although it would still be left with a legal bill.
“There were several factual errors in the assessment, such as dates and the companies involved,” he said.
“If the objection fails we’ll have to pay the tax bill within two weeks, although State Revenue has said we can have a three-month extension.”
Mr Muir said the whole audit and objection process was flawed.
“What annoys us with this is that they didn’t do the assessment properly in the first place, especially given the magnitude of the figures. You would think this would have gone to the tax commissioner but it appears it has been done by a middle-ranking officer,” he said.
Commissioner of State Revenue Bill Sullivan refused to comment on individual tax cases but admitted the Government had placed a greater emphasis on revenue collection.
The Office of State Revenue has had its compliance arm beefed up by successive governments. In this year’s budget it received funding for an extra eight auditors.
“We’re now better equipped to get out there and ensure State tax is complied with,” Mr Sullivan said.
“It’s better for those paying the taxes because they know their competitors will also be meeting their obligations. Plus we’re ensuring State laws are being met and that reduces the pressure on tax base widening and rate increases.
“The vast majority of people in WA are honest. Part of the compliance problems we face come from ignorance and we have to work on that. But there are also people out there who seek to gain a competitive advantage by avoiding tax.”
Despite the criticisms, most tax practitioners rate State Revenue as one of the most efficient revenue collectors in Australia.
Besides having to collect a vast array of State taxes and administer a number of subsidy programs, such as the First Homeowners Scheme and pensioner rebates for water and council rates, it also collects Federal taxes on Christmas and Cocos islands.
Ms Halsey said she liked State Revenue’s staff retention.
“The people I’ve been dealing with at State Revenue have all been there for about 10 years and that’s a good thing,” she said.
Mr Sullivan said State Revenue, as part of the Department of Treasury and Finance, had a goal of becoming an employer of choice.
