The recent Federal Court case Commissioner of Taxation v Rawson Finances Pty Ltd (No 2)  FCA 402 highlights the lengths to which the Australian Taxation Office (ATO) is prepared to go in seeking to recover alleged unpaid tax liabilities when it has suspicions of fraud or evasion.
The case concerned an application of the Commissioner to the Federal Court, to obtain foreign evidence, in circumstances where the taxpayer's appeal under Part IVC had been decided in favour of the taxpayer by the Full Federal Court in 2013. The basis of the Commissioner's application to obtain foreign evidence was that evidence given in subsequent Part IVC proceedings, in relation to a related taxpayer, suggested that the evidence underpinning the 2013 judgement was “false or materially misleading”.
In Rawson Finances, the Court considered the scope of s7 of Foreign Evidence Act 1994 (Cth), and whether there were any limitations to its application. In considering the breadth of the power, the Court found that the Commissioner's application which sought evidence and documentation from the chairperson of a foreign bank, was valid, as the request stated its purpose. Further the request sought to establish the provenance of the documents which may be used by a later Court to determine weight and admissibility.
In allowing the application, the Court noted that the power under s7 was limited by the privilege against self-incrimination, so that the persons whose information was the subject of the request were not compelled to consent to the bank disclosing its confidential information.
The case shows that the ATO is prepared to go to considerable lengths, and invest significant resources, where it would like to send a strong message to the public regarding certain behavior. Rawson Finances also demonstrates the importance of thoroughly understanding and testing evidence as early as possible.