ATO stuns gold refiners with victory in $250m GST case

Discussion in 'Gold' started by harry_mr, Dec 21, 2019.

  1. harry_mr

    harry_mr Active Member

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    Not sure if this was posted somewhere but everytime I read things that Australia is the soft target for Tax cheats whether its big companies, crime gangs, dating scams, insurance fraud etc i I cant help but think we must be seen are the worlds suckers. If it wont work elsewhere it probably will work in Australia. Our systems and advisers needs to grow balls.

    https://www.smh.com.au/money/tax/at...victory-in-250m-gst-case-20191220-p53lzc.html

    ATO stuns gold refiners with victory in $250m GST case

    The gold refining industry was left reeling on Friday after the country’s biggest refiner lost a landmark case against the Australian Taxation Office, which has in recent years targeted a $1 billion tax fraud in the sector involving Middle Eastern criminal gangs.

    Following a 15-month wait, the Administrative Appeals Tribunal found in the ATO’s favour on Friday morning.

    According to the ATO, the tribunal found that the country’s biggest refiner, EBS, claimed input tax credits with reckless indifference to the GST consequences.

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    Australian Taxation Office Commissioner Chris Jordan.Credit:Dominic Lorrimer

    “The Tribunal found that these artificial arrangements dealing in gold were a tax-driven scheme,” the ATO said in a statement.

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    But that isn’t the end of the matter. A spokesman for EBS’ liquidator Schon Condon, which instigated the case, said lawyers and counsel had reviewed the judgment and found serious errors and it would be subject to an appeal.

    The case, which is estimated to involve $250 million in GST payments, is one of many similar proceedings before the AAT.

    The refining industry has been in the ATO’s crosshairs for at least six years as it attempted to crack down on large scale tax fraud, in a scam made possible by loopholes in the GST Act.

    Gold bullion was exempt from GST as it was considered a form of currency. However, if the bullion was defaced, melted or turned into jewellery and sold as scrap it was subject to GST.

    This enabled criminals to fiddle the system by buying GST-free bullion then on-selling it to refiners as scrap to collect the GST. Instead of remitting the tax payments to the ATO, they pocketed it. The refiners who bought the scrap later claimed the GST back from the ATO, which is legal.

    However, the tax office believed some refiners were in cahoots with the traders in what they referred to as a gold tax carousel “aimed at manipulating the GST treatment of gold.” To this end they targeted refiners.

    In a statement, the ATO said the tribunal found that processing the gold in the way EBS had was not “refining” for GST purposes.

    [​IMG]
    Gold bullion was exempt from GST as it was considered a form of currency.Credit:Bloomberg

    While the ATO is crowing over this huge victory, it is worth noting that much of the fraud could have been avoided if the flawed tax policy had been addressed.

    Instead, the ATO set up Operation Nosean and went after a number of gold refiners, including EBS, by refusing to refund the GST and then issuing them with retrospective tax assessments. Some went broke while others struggled to survive.

    EBS, a gold refining business currently operated by ABC Refinery, which is owned by the multibillion-dollar privately owned Pallion Group, went into liquidation and the liquidator decided to challenge the ATO in the AAT.

    It was an expensive and high stakes case. A leaked briefing paper obtained by The Sydney Morning Herald and The Age that was prepared by the ATO for the incoming government ahead of this year's federal election described the case as a “strategic litigation matter” that could have “significant” revenue or administration risk.

    It warned that an adverse decision would impact other cases: “The ATO is seeking recovery of GST that has been avoided in schemes related to the adulteration of gold bullion (there are in excess of $1.15 billion in assessments for primary tax and penalties in relation to these schemes).”

    It said the case specifically concerned the meaning of precious metal in the GST Act and the operation of GST anti-avoidance provisions. It warned the new government an adverse decision would likely attract “significant media attention”.

    It was right. If the ATO lost it would have left a huge hole in the ATO’s budget and opened the floodgates to a multitude of damages claims by various refiners in the industry.

    But the win opens up a different can of worms. It throws into question the survival of some of the smaller players that continue to face retrospective tax assessments and have been hanging on by a thread awaiting their own AAT judgment.

    It also raises the hoary question of who is ultimately responsible when GST is defrauded. The fraudsters? Or those who bought products that attracted GST that should have been remitted to the tax office, but wasn’t?

    Put simply, should the refiners have known or be expected to have known that they were buying scrap gold from sellers who abscond with the GST? Even if they didn’t know, should they be on the hook?

    The big shame is much of this could have been avoided if Australia had followed the lead of Britain, which operates a similar value-added tax system, and addressed the gold tax fraud in 2003 by introducing a “reverse charge”.

    A number of players in the refining industry had warned the ATO five years ago they suspected fraud. AUSTRAC was also tipped off. They also suggested the ATO fix the problem by following Britain.

    It would take the ATO until 2017 for the ATO to change the system. By then some operators had gone belly up and some of the fraudsters and stolen money was long gone.

    Nobody likes a tax cheat. They undermine the system and put untold pressures on the economy. In the case of gold fraud it resulted in more than $1 billion being ripped out of the system and some criminal gangs managing to abscond with money while some refiners, who argue they were innocent parties, became collateral damage.

    The appeal will be the next twist in an ongoing saga.

     
    Chad Valiant likes this.
  2. GoldenEye

    GoldenEye Well-Known Member Silver Stacker

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    We need to remember that the Administrative Appeals Tribunal is not really a court, so either party can just ignore this and take the case to another court.
     
    66rounds likes this.
  3. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    " If the ATO lost it would have left a huge hole in the ATO’s budget"

    So this was more about the ATO budget?
     
    silverhair and 66rounds like this.
  4. spannermonkey

    spannermonkey Well-Known Member Silver Stacker

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    2nd post on this subject
     
  5. harry_mr

    harry_mr Active Member

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    The gold refining industry was left reeling on Friday after the country’s biggest refiner lost a landmark case against the Australian Taxation Office, which has in recent years targeted a $1 billion tax fraud in the sector involving Middle Eastern criminal gangs.
    Ok maybe I should have highlighted this line as a point of difference it was was not about the ATO, Au or GST but that Australia is continuously the sucker to the rest of the world for scams. We seems to be a soft target for companies not paying their share of company tax, Tax scams as this article is about, Phone scams, ATM scams, Dating scams, Insurance scams, Investment scams, from what I see its rife https://www.scamwatch.gov.au/news/record-losses-expected-as-scammers-target-australians
     

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