If the government has deeper pockets than you, it has more to lose than it can hope to extort from you. That’s to your advantage.
Scenario 1: An employer, facing prosecution or bankruptcy for making a mistake with employees’ PAYE tax, tells the ATO that if the case goes to court, “we will argue that the obligation to collect income tax from our employees at our own expense
violates s.82 of the Constitution, which clearly implies that the cost of revenue collection is to be charged to the Commonwealth.” Will the ATO put the biggest Federal revenue stream at risk? Or will it settle its claim out of court on generous terms?
Scenario 2: As for Scenario 1, except that the employer has apparently made a mistake with GST, and threatens to claim that the obligation to collect GST from its customers violates s.82.
Scenario 3: An employer, facing prosecution or bankruptcy for making a mistake with payroll tax, tells the State revenue office that if the case goes to court, “we will argue that payroll tax, because it feeds into prices of goods, is a duty of excise and therefore violates s.90 of the Constitution.” It adds: “On our reading of the majority and minority judgments of the High Court in Ha v. NSW (1997), the contention that payroll tax is an excise would have found support among both factions of the Court.” Will the State run the risk of having payroll tax struck down, or settle its claim out of court?
Scenario 4: An employer being harassed over some other Federal tax (not GST or PAYE personal income tax) tells the ATO that if the case goes to court, “we will argue that you owe us more in reimbursement of compliance costs under s.82 than we allegedly owe you. If a win on s.82 does not lead to reimbursement of past costs, it will reduce future costs so that we can more easily pay what we allegedly owe.” Will the ATO run the risk of having its collection processes declared unconstitutional, or will it make whatever concessions are necessary to keep the case out of court?
Scenario 5: An employer being harassed over some other State tax (not payroll tax) promises that if the case goes to court, “we will argue that the State owes us more in refunds of unconstitutional payroll tax than we allegedly owe the State. Even if the striking down of payroll tax does not lead to refunds, it will improve our cash flow so that we can more easily pay what we allegedly owe.” Will the State continue its belligerence?
Scenario 6: An employer, being prosecuted by a State or Federal authority in circumstances that call for a discretion not to prosecute, tells the prosecution: “If we are fined, we will seek to have the fine and costs deducted from the refund owed to us under the Constitution. If the court rules that the two issues cannot be linked, we will retain the right to start a separate constitutional case. If our vindication on the constitutional issue does not lead to any refund, it will still make it easier for us to pay any fine.” Will the prosecuting authority gamble more than its entire budget in an attempt to collect one opportunistic fine?
Of course, if you’re an employer, I would never advise you to do anything that would put you in any of the above situations. (Besides, I’m not a lawyer and this article isn’t advice!) But if, in spite of your best efforts, you are already in such a situation, a constitutional counterattack (or the threat thereof) might well be the best defence.