Institute of Taxation Research

30 KEY QUESTIONS ABOUT THE AUSTRALIAN TAXATION SYSTEM
©1998 ITR

1. Why does the Institute of Taxation Research exist?
Most of the members of the Institute are old enough to remember when Australia's taxation system maintained some degree of fairness and ordinary Australian's could retain a significan proportion of the results of hard work.  Over the 15 years from 1983 to 1998 there has been a significant shift in taxation.  Even lowly paid workers are being taxed at rates which used to be reserved for managers and professionals, managers and professionals are being taxed at rates formerly reserved for the rich and most significantly the rich are hardly being taxed at all.

The official figures tell it all.  Companies which do 70% of Australia's business pay 10% of Australia's tax.  The small companies and individuals who do 30% of Australia's business pay 90% of the tax and the Australian Taxation Office is concentrating on making this 30% pay an even bigger percentage.

ITR's sole reason for existence is to bring this state of affairs to an end.  On the day Australia gets a fair taxation system the Institute will gladly close it's doors.

2. Will the Howard government's proposed changes with a GST and income tax adjustments create a fair taxation system?
Not even a slightly fairer system.  In fact ITR research suggests the major multinational companies will be able to reduce their tax payments even below today's meagre rates.

3. What are the major losses caused by the current taxation system?
There are three categories of losses created for the community by the current system.  Firstly, individual saving, either for normal family needs or for retirement, is penalised at every turn.  The result is that Australia has one of the lowest savings rates in the civilised world guaranteeing there is a shortage of capital for development of ideas, businesses and infrastructure.

Secondly, businesses are penalised for having employees.  High taxation means much higher total wages are needed to provide even basic living standards for the average worker.  The result is that many Australian companies now import their products rather than employing Australian workers either directly or indirectly to make them.  At ITR we have also seen many businesses forced to close by the ATO, putting the staff out of work.

Thirdly, large capital imports are needed to pay for capital works and the imported goods from countries which don't have punative taxation systems.  This forces the value of the Australian dollar down, diverts the returns from Australian exports to overseas financiers in the form of interest and the interest charges plus devaluation forces the costs of imported goods up in relation to Australian incomes.

After 15 years of the current system Australians are measurably poorer than they were.  Most discretionary incomes have shrunk, large numbers are out of work, and our living standards have slipped tremendously in relation to the rest of the OECD nations.

4. Why haven't we previously heard about the Institute of Taxation Research?
The Institute itself is new and is focussed totally on taxation.  It was only formed in July 1998 after members witnessed a series of small businesses being closed and their workers sacked as the result of ATO activity rather than tough business conditions.  However, the members have been working at the research parts of the project for up to 25 years and key members of the legal profession have been applying the principles to battles with the ATO and other authorities for at least five years.  The Institute itself does not act as the lawyer for clients though there are legally qualified people on staff.

The support group for the Institute, which consists of over 400 highly qualified and successful Australians including some 20 senior counsel and 5 professors of constitutional law.  In addition, it has the support of the professionals of International Law at two prestigious overseas universities.

Despite being new, the Institute is recognised by the Government and the ATO as a major threat.  As a result, at government request, the media imposed a blackout on the constitutional issues.  Occasionally, the blackout leaks and the public gets a brief glimpse.  But no follow-up stories are ever allowed to see the light of day.  The self-interest of the major news proprietors and the government coincide.  Truth is the casualty - as usual in these matters.

5. Why is ITR a threat to the ATO and the Government?
Most Australian's believe the ATO is all-powerful and invulnerable.  They believe that it is backed by legislation and powers which can defeat all except the few super-rich members of the community who also can afford unlimited legal advice of the highest quality.  In its press releases the ATO is consistently threatening and intimidatory - not the least towards journalists.  ITR's research has shown this aggression and intimidation is based on bluff - and that the Commissioner of Taxation and those closest to him are very well aware of how shaky the legal ground is on which they stand but their response has been to increase the aggression.  But for the first time in Australia's history individual ATO officers are being cited before the courts, stripped of their legislative protection, and for the first time personally answerable for their actions.  Legally the ATO and the government are servants of the United Kingdom...and Australian sovereignty means they can't be.

6. What is Australian Sovereignty?
Sovereignty occurs when the other nations of the world recognise a country as an independent nation.  It means that as a people we are entitled to completely control our own affairs both nationally and internationally.  At federation in 1901 we were still a colony, legally under the control of the United Kingdom.  Today we are recognised by evey country in the world as an independent sovereign nation.  We are even recognised as such by the United Kingdom.

7. What does it really mean and when did this change from colony to sovereign nation take place?
In strict legal terms Australia became an independent nation at the moment Sir Joseph Cooke lifted his pen from signing the Treaty of Versailles as the second signatory on Australia's behalf at about 11:30am on 28 June 1919.  From that moment on the Australian people had the right to decide their own future.  But more importantly it meant only the Australian people could decide what legal and political systems we should live under.

8. But haven't we done that since 1901?
No, we haven't.  We have never had either an Australian system of law or an Australian system of government.  We have remained firmly under British law but without the protections British citizens have.  Australian courts have ruled that we are bound by British laws in the form of the Commonwealth and State constitutions but we are denied the legally enforceable civil rights which exist under other British laws.  Simply put, the lawyers and the politicians have decided we will keep the British laws which limits their power but which existed as part of the legal environment when the constitutions were written.  This is why none of the Australian constitutions contain any form of civil rights other than the right to vote.

9. If the Constitution isn't broken why fix it?
Who says the constitution isn't broken?  The "splendid constitution" myth is perpetuated by the politicians and lawyers who are the only ones to benefit under it!

Effectively, the Commonwealth of Australia Constitution is a document for a dictatorship.  For instance, it allows an appointed Governor General to govern with out a parliament and with ministers solely appointed by him/her for as long as the Governor General may wish.  The only restriction is that the ministers can only serve for 90 days without being a Member of Parliament but a nominal change of the portfolio - even a simple change of name for the ministry - can easily overcome this.  You don't believe this - then read the Constitution from Section 61 onwards.

The proponents of the 1901 Constitution try to escape this problem by saying that the "conventions" prevent this occuring.  But in fact the "conventions" have no legal force, they are simply the way things have been done in the past and recent experience shows today's politicians simply regard the past as a disposable nuisance.

Most importantly the International Law Commission of the U.N. has ruled that "the laws of one Member State cannot apply within the territory of another Member State except via a reciprocal treaty.  Such treaty may not infringe the sovereignty of either Member State."

The Commonwealth of Australia Constitution is a British law, passed by the Westminster Parliament on 25 October 1900 and there is no reciprocal treaty between Australia and the UK to allow the continued use of the colonial Constitution.  Therefore under two aspects of international law the continued use of the Constitution is illegal, both under the normal powers of sovereignty and under the requirements of major treaties, to which both Australian and United Kingdom are signatories.

10. What difference does this make?
Every building depends on its foundations.  If the foundations collapse so does the building.  In legal terms the Constitution is the foundation of Australian government and the Australian legal system.  Its collapse under international law means the "building" of the Australian government and legal systems also collapses.  The only legal response under international law is a new constitution and new legal and political systems as chosen by the Australian people.  No one else has the power to create the new system.

11. We elected the government.  Doesn't that give it power and authority?
In law there is a concept called "informed consent".  It means that if you are to make an important decision, for instance on whether to allow a surgeon to undertake a very risky operation, then you must be provided with all the information about the risks which may take your life or the surgeon has gained permission to carry out the operation by fraud.

In political terms this means that the first government after independence (or indeed any later government) had to inform the Australian people that British power, including that of the Queen, no longer applied in Australia and that a vote at the election handled all of the power, including the royal power, to the politicians.

The politicians have carefully avoided informing the Australian public since they know the public would demand safeguards against abuse of political power to be built into the system.  Today there are no safeguards.  Without informed consent the politicians and the governments have no legal authority but they do still possess power since public servants will obey them and attempt to enforce laws no matter how unjust these may be.

Professor I.W. Cumpston, Emeritus Reader in Commonwealth History at London University has described this as the "greatest political confidence trick in history."

12. What about the Taxation Laws?
Laws passed before 1919 were valid laws under the colonial system since the Constitution was still valid.  However the first Commonwealth Income Tax Act was passed in 1936 and amended in 1942 to take over all income tax from the States.  By the time these tax laws were passed the Constitution had been null and void for 17 year and any domestic law dependent on it is "ultra vires" i.e. without legal force.

13. But didn't the Australia Acts of 1986 fix all this?
The politicians and lawyers would love you to believe they did.  In fact the concept on which the Australia Acts were based is legally absurd.  The Australian Parliament was legislating to stop a foreign parliament, the Westminster Parliament, from making laws and the Westminster Parliament was making laws in respect to a foreign country, Australia.  Both parliaments were acting in contravention of Articles 2 and 4 of the Charter of the United Nations which they sworn to uphold.  Under international law the Australia Acts are an exercise in illegality which fixed nothing.

14. What about the Statute of Westminster 1931?
Most Australian lawyers believe the Statute of Westminster 1931 is what gave Australia sovereignty. The same lawyers also believe the earth is flat.

Careful reading of the Statute shows it is one side of an "international arrangement" which requires legislation by the affected Dominions.  Unfortunately for the lawyers Article XVIII of the League of Nations Covenant, by which both Australia and the UK were bound, requires "international arrangements" to be registered and published the League of Nations otherwise they are null and void and deemed not to exist.  The Statute of Westminster and the Statute of Westminster Adoption Act 1942 were not registered and therefore are not valid in international law since they fall directly under the terms of assigned and ratified treaty.  In any case, Australia was independent long before the Statute was produced in an attempt to hide the political chicanery of 1919-1920.

15. Then who does hold sovereignty over Australia?
In a word, the people, the people of Australia!  And the High Court of Australia was ruled so in the Australian Capital Television Case 1992.

Despite the historical links, legal sovereignty passed from King George V to the Australian people on 28 June 1919.  The legal and constitutional changes needed to accompany this transfer have never been made.  Because of this, Elizabeth II has never been sovereign Queen over Australia.  The UN certifies that Australia was a sovereign nation at least by 1945 when we joined the UN (sovereignty being a condition of joining) and when Elizabeth did not assume the throne of the United Kingdom until 1952.  Since two sovereignties can't co-exist and the Australian people have never surrendered theirs, then Elizabeth has never been sovereign Queen over Australia.  The title Queen of Australia given to Elizabeth by the Royal Styles and Titles Acts of 1953 and 1973 is purely honorary and carries no constitutional power.

16. What is the current status of the legal system?
Technically the entire legal system does not exist.  The states themselves cease to exist as legal entities on the day the Constitution died.  They were created from colonies by Section 6 of the Act and without it return to being colonies.  However, colonies of the UK can't exist in independent Australia today and the states therefore legally disappear as do their courts and legal authority.

Likewise, the Commonwealth legal system does not exist de jure, ie. at law.  But both Commonwealth and State legal systems exist de facto and have to be dealt with in a practical sense.  Dealing with these de facto systems is the area in which ITR's expertise becomes most useful.  Because the legal systems are riddled with contradictions because of the way in which they have been perpetuated we pit the contradictions against each other to the benefit of our clients.

17. What about the Governor General and the State government?
The State governors claim to draw their power from the Australia Act 1986 (Cth) which places them in a remarkable position given that its mere existence contradicts international law and the UN Charter.

The Governor General gains his authority from the Queen of Australia an honorary position, which carries no authority under the Constitution.  Section 2 of the Commonwealth of Australia Constitution Act says all references to the Queen in the Constitution refer to "Her Majesty's heirs and successors in the sovereignty of the United Kingdom".

Australia is not mentioned and because no referrendum was ever held under Section 128 to alter the Constitution to include the Queen of Australia, the Constitution has not been altered and the Governor General appointed by the Queen of Australia has no power under Section 58 to give "Royal Assent in the name of the Queen" to laws made by the parliament.  It means all the laws made by Parliament since 1984 have not received Royal Assent and are therefore NOT LAWS even without the invalidity of the Constitution.

18. But can't they just backdate everything?

Under International Law there is no such thing as retrospectivity.  No matter how much the ATO wish it were different there is no way new tax laws can be made retrospective to justify the many obnoxious decisions being made today by the ATO.

DEALING WITH THE A.T.O.

19. Will I go onto an ATO hit list if I use this historical and legal knowledge?

*Anyone who has received an amended ATO notice is ALREADY on an ATO hit list.

In fact anyone in any reasonably well paid occupation is already on an ATO hit list. As the time of writing this document, the ATO had publicly attacked footballers, blitzed builders, wiped out a group of publishers, and was attacking people who invested in superannuation schemes., investments in film and television, investors in agriculture research projects, backers of stage shows etc, to name a few targets. About the only people the ATO doesn't have on a hit list are the major multinational companies who pay little or no tax in Australia.

20. But I do my taxation return carefully and absolutely honestly - aren't I safe?

* We wish you were. But the record shows, and every tax accountant knows, that if the ATO decides to audit your affairs they will not accept that you got everything right. In any case the tax laws are so complex and contradictory that if you get something right by one measure it can be made wrong by another tax measure if the ATO decides you have to be punished even if for no reason other than they don't like the way you look. hooror stories abound of the various ways in which ATO officers invented faults in order to justify the audit taking place. The sad truth is that even the most honest citizens are not safe when dealing with the ATO.

21. But don't the ATO have incredible powers to investigate and punish?

* In a nutshell, NO! And what's more they never really had these powers. It didn't matter so much when the old Taxation Department was simply an arm of the government, strict but operating very carefully and correctly. However the transition from Taxation Department to Australian Tax Office introduced a new culture where bonuses are paid on the basis of the amount of tax collected. Not all ATO officers are on a bonus but enough are to make putting a return in no better than a lottery - but a lottery you can't win, you can only lose. AND THEY PUT PART OF YOUR LOSS IN THEIR OWN POCKET.

22. But don't they always win in court?

*Not any more. The court system may not be about truth, that disappeared long time ago from the British/Australian system. It isabout procedure and precedent and the rules of court and these can be turned against the TO. It is a question of saying to the ATO "forget your rules and play according to ours where the dice aren't loaded your way."

23. Is it that simple as just writing a letter to the ATO and setting out the facts?

* We wish it was but the truth is the lower ranks of the 11,000 tax office employees are deliberately kept in the dark by their superiors otherwise the honest lower rankers would refuse to collect illegal taxes. So the ATO has produced a number of computer generated letters which are used to answer letters from taxpayers on constitutional matters. They are full of legl and historical errors but the bluff often works and if someone fights back they are referred to special sections who know a bit more.

A monster like the ATO doesn't just roll over and die but like all dragons it can be killed and its fire put out. It does take persistence and knowledge about how the dragon lives.

24. But don't people get sent to gaol for tax evasion?

*Tax evasion presumes two conditions

A. Legal taxes
B. Illegal manouvres used to escape the legal taxes

A. The taxes are totally illegal
B. The best manouvres to prevent their collection are 110% legal

25 Then why can't we go to our normal legal advisers for protection?

*If you have honest legal advisers you can. The difficulty is that the average solicitor is part of the legal system and their entire income and staus depend on them continuuing to support the status quo.
But there is another problem. When most of these lawyeres were studying law, they simply accepted the validity of the Constitution without question and now they find it impossible to question the basic law on which their entire career depends. There are a few with intellectual honesty needed to examine the facts regardless of where that leads. If you have one of these lawyers value them highly.

26. What if my legal adviser wants a Q.C's opinion on this?