Guest Post: An open letter to the ATO from Gavin Putland

Draft letter to the ATO

To: The Commissioner of Taxation

Cc: The Treasurer
    The Attorney-General
    The Minister for Financial Services & Superannuation

Dear Sir,

Letter of Demand re Unconstitutional Taxes

Section 82 of the Australian Constitution says that the cost of collecting Federal taxes is chargeable to Consolidated Revenue. We (name of company) therefore claim that it is unconstitutional to require us, at our expense, to collect personal income tax payable by our employees or contractors, or to collect GST payable by our customers. While we expect you to deny that s.82 means what it says, we will be surprised if you are willing to gamble most of the Federal Budget on that denial! We therefore expect you to accept our very reasonable offer to settle our claim out of court. The offer is as follows:

(1) We will keep the PAYG income tax that we withhold from employees and contractors; but the employees and contractors will still receive credit for the withheld tax as if it had been paid to the ATO on their grossed-up wages/salaries/fees.

(2) We will keep the GST that we collect from customers; but the customers will still receive input credits on tax invoices issued by us.

(3) We will no longer pay company tax, except capital gains tax (CGT).

(4) We will no longer make compulsory superannuation contributions or pay the Superannuation Guarantee Charge (SGC).

(5) In lieu of PAYG income tax, GST, company tax and the SGC, we will pay a VAT at a rate of x% on our gross value added, with border-adjustment. The quoted rate will apply to the VAT-inclusive, GST-exclusive base (this being the base that gives the simplest accounting). In other words, we will subtract our domestic purchases (ex-GST) from our domestic sales (ex-GST) and send x% of the difference to the ATO.

(6) This settlement will remain in force until Federal tax legislation is amended so that private entities are no longer required to collect tax in their own time or at their own expense.

Explanatory notes:

  • Terms (1) and (2) avoid any disruption to the affairs of other taxpayers. They relieve us of the obligation to collect tax for the Commonwealth, but do not entirely relieve us of the compliance costs that give rise to our claim. We therefore demand terms (3) and (4) as compensation for the remaining compliance costs.
  • Term (3) makes an exception for CGT in order to assure you that we will not avoid tax by realizing capital gains during, rather than before or after, the period of operation of this settlement.
  • Term (5) prescribes a VAT rather than a retail tax in order to assure you that we will not avoid tax by concentrating on non-retail activities.
  • The rate quoted in term (5) is the rate that would have left our total bill for compulsory superannuation and Federal taxes (other than CGT) unchanged during the last accounting period. The rate is therefore sufficient to enable the Commonwealth to make superannuation contributions on behalf of our employees as if we had paid the SGC.
  • The VAT, unlike PAYG tax, superannuation and company tax, would not enter into prices of our exports. And unlike PAYG tax and superannuation, it would not enter into our marginal labour costs. Hence we would be able to expand our business. Hence the Commonwealth would receive more revenue from us (through the VAT on our domestic sales) and from other taxpayers (through the flow-on effects).
  • Will the VAT force us to raise prices for domestic customers? No, because our VAT remittances will be covered by the avoided remittances of PAYG tax, GST, company tax and superannuation. There will be no need to rake in extra income by raising prices (as there would be if the avoided PAYG tax were paid out in gross wages and salaries rather than retained by us).

We have taken pains to ensure that your acceptance of our offer would not cause any difficulties if other taxpayers were to demand the same treatment. (Indeed, our offer is inspired by G.R. Putland’s “Draft Federal Budget Speech, 2014-15“, which is obviously designed to apply to all taxpayers.)

As users of Federally-funded services, we have no desire to starve the Government of revenue. By offering to pay the old CGT and the new VAT, we have demonstrated our willingness to make a fair contribution to that revenue. But we will not tolerate compliance costs that violate our constitutional rights. Neither will we tolerate other unnecessary compliance costs and deadweight costs as long as we have a legal means of resisting them.

Accordingly, if you do not accept our generous terms, we reserve the right to sue the Commonwealth for injunctive relief and compensation for past violations of s.82. And in view of the rate at which productive enterprises are failing under the deadweight of the current tax system, we regard suing the Commonwealth as one of the better investment opportunities around!

Yours faithfully,

. . .

CEO, . . .

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16 Responses to Guest Post: An open letter to the ATO from Gavin Putland

  1. coz

    Is this based on the presumption that the constitution is binding? Cause I got serious doubts that it is, legally, I mean I wasn’t consulted on it, nor have I consented to be bound by it, have you? Gillard ignored it when she made up her own oath.

    Nice try though, good start.

  2. John A

    Excuse me Mr Putland, since it is not April 1st, I am taking you seriously.

    What the hell is the difference between your VAT and the present GST, apart from zero-rated, exempt and input-taxed items?

    And why are you putting this forward as an alternative to collecting taxes on behalf of the government/Treasury, when you say that your company will remit the net VAT?

  3. eb

    Total waste of time. Read Sec82. It’s clear that it’s the costs incurred by the Commonwealth that are the first charge on revenue acquired through taxation. Costs of taxpayers are not contemplated.

  4. coz

    I think possibly ‘constitutions’ are feelgood documents designed to draw voters into the illusion that politicians must act in our best interests, but lawfully they’re not worth the paper they’re written on. Americans seem to be making some ground in the ‘anti-constitutional’ cases but maybe theirs is different. Ours is pretty lame legally.

  5. Entropy

    Quite so. Nice tax system proposal,but I have serious doubts about the packaging. There is something bordering on the emmersonesq about it.

  6. Mindfree

    Careful Gavin

    A group by the name of Institute of Taxation Research few years ago tried something similar with a flat tax and at the same time declared the ATO an invalid organisation due to no formal gazette pronouncement when they were transitioned from the Tax Dept. The group got royally rat-fucked by the Howard govt. with one of the heads Ian Henke, former top Vic bureaucrat under Kennett being sent to gaol (in Qld??) for tax schemes.

  7. When NSW and Vic refund the illegally collected fuel excise let me know and I will consider further action. It was also found to be illegal in an Australian court of law.

  8. Jarrah

    “Is this based on the presumption that the constitution is binding? Cause I got serious doubts that it is, legally, I mean I wasn’t consulted on it, nor have I consented to be bound by it, have you?”

    LOL

  9. JC

    Trolling for most of the day I see, Jazzabelle.

  10. Jarrah

    Do you agree with coz, Jeremy, that the constitution isn’t binding, and requires personal consultation and consent? Please say yes.

  11. ad

    If you’ve ever voted federally, you’ve consented to the constitution.

  12. Amortiser

    KK: When the High Court found against the states for the imposition of state fuel taxes and alcohol taxes, writs were issues against the Queensland Government by a number of hoteliers for refund of the taxes that had been illegally collected from them,

    The only thing that differentiates the government from a common brigand is the fact that it was lawful power to collect taxes. The hoteliers would have won their actions comfortably. What followed was a massive abuse of power which would have landed the perpetrator before in court for contempt in any other circumstances.

    Peter Costello rode in on his black horse and proclaimed that any court awards of refunds would be met by retrospective legislation against the cliamants to recover all awards for the states. The illegal actions of the state governments were retrospectively rendered legal. Any private citizen interfering in a court case by threatening parties to an action would have been jailed for contempt. Costello reverted to the personna of the brigand very quickly. The constitution is regarded as an administrative inconvenience rather than the law that constrains then by both politicians and bureaucrats.

    Very sad.

  13. coz

    It’s just a tax farm and we’re the battery animals. Tax is what we produce, same as hens do eggs and cows milk. If they couldn’t milk us for tax, there wouldn’t be any point in it, from the Battery Farmer POV.

  14. Gav P

    John A: My main reasons for proposing the VAT are not its advantages over the present GST, but rather its advantages over PAYG tax, company tax and the SGC. But, to answer your question, the proposed VAT has a broader base than the existing GST and does not involve tax invoices. And it’s the tax invoices that make the present GST vulnerable to challenge under s.82.

    eb: The issue is costs incurred by taxpayers as collectors, not as payers. The “costs, charges, and expenses” mentioned in the first half of s.82 are thereby declared to be liabilities of the Commonwealth; and if the drafters of the Constitution did not intend “costs, charges, and expenses” to include those initially incurred by private entities, that must be because they never imagined that the legislators would be so depraved as to require private entities to collect tax. Now that the legislators have indeed stooped to that level, the literal application of s.82 would compensate the victims and give the legislators an incentive to minimize the damage.

    Mindfree: I’m not questioning the legality of the ATO. Neither am I questioning the validity of the Constitution after the Treaty of Versailles (another favourite argument of debit-tax/turnover-tax crackpots). And although our politicians are doing their damnedest to dismantle the rule of law, things have not yet degenerated to the point where you can be locked up for stating a claim against the government and offering to settle it out of court on mutually beneficial terms.

    kelly liddle and Amortiser: Costello’s legislation took the form of a 100% Federal “tax” on any refunds of unconstitutional State taxes. That legislation is open to challenge on the ground that it is an attempt to circumvent the Constitution – especially as it purports to grant the revenue from the “tax” to the offending State! But that would raise another problem: to whom are the refunds owed? — the businesses that remitted the unconstitutional taxes, or the (mostly unknown) customers to whom they passed on the cost? However, from the Commonwealth’s viewpoint, the prospect of losing the collection mechanisms for GST and PAYG income tax should be scary enough, even if there were no risk of having to refund past compliance costs.

    If a claim under s.82 is to influence policy, it doesn’t need to be sure of succeeding in the High Court (although I maintain that it should succeed). It only needs to pose a credible threat of succeeding. And when you’re asking the government to pick the lowest-hanging fruit on the tax-reform tree, how much encouragement should it need?

  15. Gav P

    P.S.: I suspect that the WordPress upgrade (thank you, Jacques) incidentally solved my problem with the comment filter. Time will tell.

  16. Amortiser

    Gavin, the tax is applied to the producer and is passed onto the customer as part of the producers’ costs. It’s not the producer’s fault that the government finds it more convenient to charge the tax at the point of production. The entire tranche of illegal taxes are refundable to those it was actually levied on whether it be hoteliers or petrol companies.

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