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Record fines for company tax evasion


PM - Friday, 27 June , 2003  18:10:07

Reporter: Ben Knight

PETER CAVE: First though, the largest fine for tax evasion in Australian legal history was handed down in the Victorian Supreme Court today.

Two Victorian companies and their owners have been fined more than $53 million for mixing diesel fuel with cheaper products to avoid paying excise duty.

From Melbourne, Ben Knight reports.

BEN KNIGHT: The company, Australian Petroleum Supplies, was set up in country Victoria by businessman, Ray Sidebottom, and claimed its objective was to buy and sell petrol products to customers at a cheaper price per litre than the major fuel companies, and pass on those savings to the rural community.

It bought its own petrol station on the Hume Highway, and even set up its own independent refinery in Moama, on the Murray River.

In 1997, the Australian Customs Service launched an investigation into the company and a year later, issued proceedings against it, alleging it had evaded more than $6 million in excise duty.

The allegations were directed at Australian Petroleum Supplies, but also at a company called GV Liquid Tankers, both were part of the Sidebottom group of companies.

The Customs Service alleged that they had blended diesel fuel with solvents, kerosene, and heating oil, to avoid paying excise.

The two men admitted the allegations, but today, they still received the largest fines for tax evasion ever see in Australia.

Each of the two companies was fined $26 million each.

Raymond Leslie Sidebottom was fined $1.1 million, while his 68-year-old father, Kelvin Earnest Sidebottom, was fined $100,000.

They'll also have to pay the Tax Office $9 million in unpaid excise, as well as the interest.

Outside the court, Assistant Tax Commissioner, John Mcnamara, welcomed the result.

JOHN MACNAMARA: We're ecstatic. It just goes to show that if you want to take on the tax system by trying to evade, as in this case, it was a systematic long-term evasion, you will get caught and the consequences, as with today's outcome, are quite heavy.

JOURNALIST: Justice Bongiorno said if you brought this as a criminal case, these people could have gone to jail.

Why didn't you do that?

JOHN MACNAMARA: There are different rules that we have and different offences that we can bring against people.

In this instance we thought it was most appropriate to go down the civil route, to get a significant penalty as far as a monetary penalty is concerned.

JOURNALIST: Does it amount to fraud?

JOHN MACNAMARA: It certainly is evading a money that should have been paid. So there are options there as to whether we would be able to prove fraud in a criminal sense.

But certainly we were able to prove evasion and that's the route we took down.

JOURNALIST: Are there any other cases before the courts that would approach this sort of scale?

JOHN MCNAMARA: We do have a number of cases, but this is by far the biggest case we've had on our books.

BEN KNIGHT: In a statement, the Sidebottoms say the decision to pay the penalties was a commercial one, to obtain finality and avoid potentially huge penalties, saying the total being sought by the Tax Office was approximately $500 million.

They say by coming to an out of court settlement, they'll be able to continue their business, which is one of the largest employers in northern Victoria.

While other companies in the Sidebottom Group will continue to operate, the cost of the fines, as well as legal fees, has resulted in Australian Petroleum Supplies going into voluntary administration, and it's possible the second company, GV Liquid Tankers, could do the same.

In Numurkah, where the businesses are based, it is going to have a huge effect.

Heather Kelly is the President of the Numurkah Chamber of Commerce.

HEATHER KELLY: My first reaction, because I know their family is, how will their family feel and because they've got a lot of friends in the community, and a lot of employees in the community, the shock waves that will go through our town and the surrounding areas.

BEN KNIGHT: What impact do you think it'll have?

HEATHER KELLY: Any business that has to close causes unemployment and unemployment in country towns in drought times is very difficult for everyone to wear and bear.

BEN KNIGHT: Ray Regan is the President of the National Tax and Accountants' Association.

He believes this is the tip of the iceburg and as more indirect taxes are targeted by the Tax Office, cases like this will become more common.

RAY REGAN: Well, it just shows that the Government realises that both indirect taxes and direct taxes are where tax evasion is occurring.

But we believe that the Tax Department will be putting on hundreds of extra staff to undertake dedicated GST audits.

Already the Federal Government has allocated $1.5 billion over four years to the Tax Department to undertake such audits. So basically millions and millions of dollars will be collected through GST tax evasion.

PETER CAVE: Ray Regan, President of the National Tax and Accountants' Association.