This is the 19th extract from Evan Whitton’s Our Corrupt Legal System, available free at netk.net.au/whittonhome.asp.
The story so far.
Justice Russell Fox said: Justice means fairness, and that fairness and morality require a search for the truth, otherwise the wrong side may win.
The common law in England (and later its colonies) has never tried to find the truth. It began as an extortion racket in 1166. Extorting judges and their lawyer-bagmen formed a cartel to increase profits. Judges formally rejected a truth-seeking system in 1219
Lawyer-politicians in have been able to block change to a justice system since they became the “dominant interest” in Parliament about 1350. (Vote 1: Anyone but a lawyer.)
The civil version of the adversary system dates from 1460; the criminal version from 1695. In that system, trial lawyers – described as serial liars because they are adept at sophistry – gather and present evidence, question witnesses, and can spin the process out.
Judges have never been trained as judges; they are lawyers one day and judges the next. A US lawyer, Alan Dershowitz, said: ‘… lying, distortion, and other forms of intellectual dishonesty are endemic among judges.’
In the past two centuries, judges have created a number of truth-defeating devices which make it relatively easy for lawyers to get rich criminals off. The devices were also applied to the civil system, and made litigation even more of a lottery.
Legal academics joined the cartel after a serial liar, Billy Blackstone, began the first law school at Oxford in 1758.
Larceny by trick: tax evasion
Larceny by trick is the crime of theft by fraud or deceit. If systematic, it is organised crime.
Tax evasion is devised by lawyers, judges, accountants, and bankers. David Marr observed in Barwick (Allen & Unwin, 1980): ‘… the best minds of the Bar are engaged, as [Garfield] Barwick QC was engaged, in tax avoidance, and from the best minds at the Bar High Court judges are chosen. The High Court has an inbuilt tendency to be a tax avoider’s forum.’
London tax lawyers can make £2 million a year. H. L. Mencken (1880-1956) observed: “If all the lawyers were hanged tomorrow, and their bones sold to a mah-jongg factory, we’d be freer and safer, and our taxes would be reduced by almost half.”
Justice Russell Fox noted in Justice in the 21st Century that the British legal system was originally designed to benefit landowners, and was ‘later adjusted to the requirements of the wealthy and the powerful’.
Adam Smith, who knew about cartels and that greed is good, said that the man who evades tax is ‘in every respect, an excellent citizen’.
Hugh Richard Grosvenor, second Duke of Westminster, evaded tax, loved Hitler and hated Jews, but had the saving grace of owning much of Mayfair and Belgravia. In Inland Revenue Commissioners v Duke of Westminster (1936), Lord Atkin said:
… the deeds were … a device by which [the Duke] might avoid some of the burden of sur-tax. I do not use the word device in any sinister sense; for it has to be recognized that the subject, whether poor and humble, or wealthy and noble, has the legal right to so dispose of his capital and income as to attract upon himself the least amount of tax.
Atkin’s decision applied only to the rich. Poor and humble wage and salary earners cannot evade tax; it is deducted at source.
Australia was a vaguely ‘fair go all round’ sort of country. Section 260 of the Income Tax Assessment Act 1936 proclaimed:
Contracts to evade tax void. Every contract, agreement, or arrangement made or entered into, orally or in writing, whether before or after the commencement of this Act, shall so far as it has or purports to have the purpose or effect of in any way, directly or indirectly … relieving any person from liability to pay any income tax …defeating, evading, or avoiding any duty or liability imposed on any person by this Act; or preventing the operation of this Act in any respect; be absolutely void, as against the Commissioner, or in regard to any proceeding under this Act …
Absolutely does not mean absolutely
The operative word is ‘absolutely’. The task for tax lawyers and judges was thus to defeat the Parliament’s intention. A friend of Garfield Barwick (1903-97), Clyde Cameron, said of him: ‘I’d never known anyone who is able to so easily explain in a way that is so uncontroversial that a piece of white paper is jet black and a piece of black paper is snow white.’
In Keighery v Federal Commissioner of Taxation (High Court, 1957), Barwick argued that ‘absolutely’ does not mean absolutely; there could be exceptions. Five judges agreed: Chief Justice Sir Owen Dixon, who was capable of fraud (see above, The judge as Humpty Dumpty), and Justices Sir Dudley Williams, Sir Eddie McTiernan, Sir Frank Kitto, and Sir Alan Taylor. Only Sir William Webb dissented. The five judges’ lie opened the tax evasion floodgates in Australia.
Barwick went into politics in the conservative interest in 1958. It was said that Robert Menzies QC (1894-1978; Prime Minister 1939-41 and 1949-66), saw Barwick, ‘the undisputed lion of the Sydney Bar’, as his eventual successor. He made him Attorney-General.
A ‘truculent runt’
The security section of Barwick’s Crimes Act 1960 had a presumption of guilt for persons of ‘known character’. The leader of the Opposition, Gough Whitlam QC, referred to the section as ‘this odious provision’. Barwick, like most lawyers, had a useful capacity for self-deception. Professor Jenny Hocking, author of Gough Whitlam (Melbourne University Press, 2008), wrote:
Barwick was accustomed to unquestioned respect, to reverent acceptance of his legal opinion; this depiction of his proposals as dangerous, draconian and undemocratic besmirched his reputation and disturbed him.
Whitlam refused to withdraw his claim that Barwick was a liar; he told the House: ‘This truculent runt thinks he can get away with anything.’
Barwick got away with it at the Bar and on the Bench for 54 years. But not in Parliament. A colleague, Harold Holt (who, as Prime Minister in 1967, swam out to sea and got eaten by sea lice), kindly led Barwick, weeping, from the chamber. Professor Hocking said Barwick’s political career ‘was effectively over’.
Menzies tried Barwick as Foreign Minister but he failed there too. A job had to be found for him outside Parliament. Menzies could have sent him somewhere harmless, like Ambassador to Uttar Pradesh or the US, but in 1964, he made him Chief Justice, where his lies on tax matters were frankly criminal.
In Casuarina P/L v the Federal Commissioner of Taxation (1970), Barwick, Sir Victor Windeyer, Sir Harry Gibbs, and Sir William Owen finished off the 1936 Tax Act. David Marr said Casuarina concerned ‘a wholly artificial scheme … to avoid tax … The Casuarina case became the cornerstone of the tax avoidance industry’.
A profit is a loss
Barwick, Gibbs, and Sir Douglas Menzies committed another fraud on the revenue and pay-as-you-earn taxpayers in Curran v Federal Commissioner of Taxation (1974). The lie this time was that a profit of $2782 was a loss of $186,046. John Ahern, a Brisbane accountant, explained how Curran worked in A Taxing Time (1990, Copyright Publishing). This is a précis of Ahern’s explanation:
A company with shares worth $100 issues 100,000 bonus shares at $1 a share. The shares are now deemed to be worth $100,100 but are actually worth about $100. The shares are sold for, say, $200, a profit of $100, but Barwick et al would say it is a loss of $99,900.
Self-employed people, e.g. doctors, rushed into schemes based on Curran. John Ahern, who adopted the posture of Barwick & Co, went to prison, but the judges were not charged, let alone sent to prison.
The amount of tax money ‘liberated’ from the Treasury in the eight years after Casuarina: was $A800 million, some A$10.8 billion at 2009 rates. Treasurer John Howard resorted to retrospective legislation in 1978 to try to get back some of the money lost through Curran and similar schemes.
Economics Professor Russell Mathews said in 1980 that Australian wage and salary earners paid 81.2% of all income tax. In 1981, Howard’s Part IVA to the 1936 Act again purported to bar ‘blatant, artificial or contrived arrangements’, but judges and lawyers can always defeat the English language.
In 1985 Professor Mathews said: ‘Australian taxation policies have more in common with the protection rackets operated by the Mafia, where relatively poor and defenceless citizens are taxed for the benefit of the rich.’ Don Vito would understand.
An Australian tax office survey in the early 1990s found that ‘a significant segment of the BRW [Business Review Weekly] magazine’s Rich List claimed to have a taxable income below the minimum wage’.
Michael Carmody, the Australian Tax Commissioner, said in 1999 that tax schemes had caused ‘$3.5 billion in claims and rising’.
Brian Toohey reported in The Australian Financial Review of July 2-3, 2005: ‘When the Howard government was elected in 1996, the Income Tax Act was about 3000 pages. It is now estimated to be more than 10,000 pages, not counting the innumerable interpretative guidelines and rulings issued by the ATO [Australian Tax Office]…’
In The Cheating of America: How Tax Avoidance & Evasion by the Super Rich Are Costing the Country Billions (Morrow, 2001), Charles Lewis and Bill Allison, of the Center for Public Integrity, reported that in 1998 the Internal Revenue Service Commissioner, Charles Rosotti, said that avoidance and evasion were costing each taxpayer $1600 a year, some $480 billion, and that:
… thousands of the most affluent individuals and corporations routinely avoid and evade paying billions of dollars in taxes each year. And the level of unabashed greed seems to be increasing. Everyone from the principals of the largest accounting, law and brokerage firms to the sleaziest, fly-by-night Internet shysters are promoting offshore, cyberspace, and other avoidance schemes, and many of the most respected corporations and individuals are heeding their advice.
Secrecy is always the bottom line on corruption; Swiss banks sell secrecy. In February 2009, a leading Swiss bank, UBS, admitted to criminality in selling offshore banking services which facilitated tax evasion, and paid fines of US$780 million.
In August 2009, UBS agreed to turn over 4450 US accounts suspected by the Internal Revenue Service of tax evasion to Swiss authorities for onpassing to the IRS. Clients were expected to stonewall the disclosures in Swiss courts. The [London] Financial Times reported in April 2004:
An international task force to combat tax avoidance is to be set up by the US, Australia, the UK and Canada. The task force, which is expected to be based in New York, will focus on tax avoidance schemes employed by business and take joint action against such schemes.
The remedy is simpler:
• Legislation proclaiming that artificial schemes to evade tax are absolutely forbidden because they are unfair to pay-as-you-earners.
• Any judge who finds an exception will be instantly dismissed.
Next. Class actions
