La­bor promises to 'name and shame' di­rec­tors of phoenix com­pa­nies

The Guardian Australia - - News - Gareth Hutchens

Aus­tralia’s tax com­mis­sioner would have the power to “name and shame” no­to­ri­ous di­rec­tors of phoenix com­pa­nies un­der a fu­ture La­bor gov­ern­ment.

Il­le­gal phoenix ac­tiv­ity, where a new com­pany is cre­ated to con­tinue the busi­ness of a com­pany that has been de­lib­er­ately liq­ui­dated to avoid pay­ing its debts, in­clud­ing taxes and em­ployee en­ti­tle­ments, is es­ti­mated to cost Aus­tralia’s econ­omy bil­lions of dol­lars an­nu­ally.

Ac­cord­ing to a re­cent Phoenix Task­force re­port, it cost the econ­omy up to $5.1bn in 2015-16, with an es­ti­mated $300m in lost wages and en­ti­tle­ments for work­ers, $1.6bn in taxes never paid to the Aus­tralian Tax Of­fice (ATO) and a $3.2bn cost to small busi­nesses.

Un­der La­bor’s pro­posed changes, the ATO com­mis­sioner would have the power to name and shame in­di­vid­u­als and en­ti­ties en­gaged in il­le­gal phoenix ac­tiv­ity. The com­mis­sioner would also be given the power to ap­ply to the Aus­tralian Se­cu­ri­ties and In­vest­ments Com­mis­sion (Asic) for dis­qual­i­fi­ca­tion or­ders for di­rec­tors who en­gaged in phoenix ac­tiv­ity or other breaches of di­rec­tors’ du­ties.

La­bor said the mea­sure would add to its anti-phoenix­ing and tax in­tegrity mea­sures, in­clud­ing its plan to in­tro­duce a direc­tor iden­ti­fi­ca­tion num­ber (DIN) regime that would re­quire com­pany di­rec­tors to pro­vide more in­for­ma­tion about them­selves – in­clud­ing a 100-point iden­ti­fi­ca­tion check – to Asic at the time of regis­ter­ing a com­pany.

La­bor said the DIN mea­sure was the “most im­por­tant” re­form to de­tect phoenix ac­tiv­ity, and even though the Coali­tion gov­ern­ment had matched its com­mit­ment it was yet to in­tro­duce the

leg­is­la­tion to par­lia­ment to im­ple­ment it.

To ad­dress con­cerns about the com­mis­sioner of tax­a­tion over­reach­ing in ap­ply­ing a name and shame penalty, La­bor said the leg­isla­tive de­sign of its pol­icy would mir­ror the com­mis­sioner’s re­me­dial power.

That means the tax com­mis­sioner would have to no­tify the pub­lic that he had nom­i­nated “fraud­u­lent phoenix ac­tiv­ity” as an ac­tiv­ity for which peo­ple would be named and shamed, and that peo­ple put on the phoenix watch list would have a chance to change their be­hav­iour be­fore be­ing named and shamed.

The “name and shame” con­cept is elab­o­rated in a Tax and Trans­fer Pol­icy In­sti­tute pa­per, De­tect and de­ter or catch and re­lease: Are fi­nan­cial penal­ties an ef­fec­tive way to pe­nalise de­lib­er­ate tax evaders?, by the tax ex­pert Chris Leech.

La­bor said the tax com­mis­sioner ought to have the power to ap­ply to Asic for an or­der to dis­qual­ify a direc­tor fol­low­ing suc­cess­ful civil or crim­i­nal se­ri­ous non-com­pli­ance in phoenix ac­tiv­ity and other se­ri­ous tax-re­lated mat­ters.

“This is par­tic­u­larly im­por­tant for cases such as fraud­u­lent phoenix ac­tiv­ity, which in­vari­ably is a re­sult of breaches of direc­tor’s du­ties,” La­bor said. “In such cases, af­ter the tax of­fice suc­cess­fully deals with the tax-re­lated phoenix­ing mat­ters, the com­mis­sioner can ap­ply to Asic to en­sure the direc­tor’s du­ties el­e­ments of such fraud are pur­sued.”

Last year the em­ploy­ment de­part­ment re­fused to re­veal the iden­ti­ties of the di­rec­tors who con­trib­uted to a to­tal un­paid wage bill of $1.6bn over 10 years, which was left to tax­pay­ers to pick up.

Fig­ures, pro­duced un­der free­dom of in­for­ma­tion laws, showed that 1,322 peo­ple, who were each di­rec­tors of two or more com­pa­nies that failed, were re­spon­si­ble for a quar­ter of the un­paid wage bill, or $400m.

The shadow as­sis­tant trea­surer, An­drew Leigh, said the new mea­sures would “help pro­tect Aus­tralian jobs and the econ­omy”.

Pho­to­graph: Daniel Pock­ett/AAP

The deputy La­bor leader, Tanya Plib­sersek, the La­bor leader, Bill Shorten, and An­drew Leigh, who says the phoenix­ing crack­down will helppro­tect the econ­omy.

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