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The ATO should halt its attack on gold refiners

With the future of the gold refiners at stake, the ATO should hold its fire until the courts have weighed its actions.

The Melbourne Cup in the process of being made at the ABC Bullion refinery in Sydney. (Picture: Jason Edwards)
The Melbourne Cup in the process of being made at the ABC Bullion refinery in Sydney. (Picture: Jason Edwards)

The great gold tax fraud is gradually moving closer to where it needs to go — the Federal Court and the Administrative Appeals Tribunal.

But I am afraid by the time the courts get the chance to make a ruling on the Australian Taxation Office’s actions it will have used its draconian small business powers to stop or delay refunding GST that has been paid by refiners to suppliers in order to shut down most of the industry. Up to a thousand people could lose their jobs, with Sydney the hardest hit city.

The only major gold refiner left standing will be the Australian Government’s Perth mint.

I don’t think he will listen but I make an appeal to Tax Commissioner Chris Jordan to stop bankrupting our gold refining industry until the courts decide on whether the way he is using his incredible GST powers to destroy an industry is legal and whether the gold refining industry was a participant in the great gold fraud which may have cost Australia around $500m. I set out some of the issues last week (The bungles that forged Australia’s biggest tax fraud, December 5).

The ATO is using its powers to act as investigator, prosecutor, judge, jury and appeal court to destroy the industry. The ATO may be right (but there is a strong case that they are wrong) and the refiners may be guilty of participating in a massive fraud but, by the time the Australian court system gets the chance to decide their guilt or innocence, the ATO hangmen would have strung up most of the industry.

It goes against Australia’s justice system and underlines why fundamental changes are required in the tax act before the Turnbull government promotes innovation and small business.

Gold refining in Australia is undertaken by a large number of small enterprises but it pivots on two groups — the government-owned Perth Mint and Sydney’s ABC Refinery.

The tax commissioner has not taken any action to shut down the Perth Mint. But it has taken action against ABC Refinery, which is one of Australia’s largest private companies and is a world-accredited gold refiner. ABC gold is used to make the Melbourne Cup and supply the Royal Mint.

Both the Perth Mint and ABC Refinery are substantial refiners of gold mined in Australia and ABC Refinery has been taking considerable market share from the Perth Mint because ABC made substantial investment in new equipment.

When refiners buy gold from miners for refining, they do not pay GST but when they buy scrap gold for further treatment, they are forced to pay GST to the sellers.

Some of these sellers turned out to be crooks and disappeared without remitting the GST they collected to the Government. The UK and other large gold centres modernised their GST style regulations to stop such fraud but Australia did not follow and, not surprisingly, got caught out by the crooks.

Even if the ATO closes down the non-government refiners, Australia will continue to be defrauded until the regulations are brought into line with the UK.

The commissioner is wielding an axe on the industry by deliberately stopping or delaying refunding of the GST that refiners are forced to pay when they purchase scrap gold. Sometimes the ATO also lands the industry with massive back claims but the ATO noose is applied with most devastation when payments are delayed by the issuance of a large number of questions, which can go on for months and thereby deprive the industry of working capital.

As soon as the commissioner used this technique to stop refunding GST paid to suppliers, ABC Refinery stopped buying scrap and runs its refinery on its substantial mining business where no GST is involved.

Some of the scrap that was once treated by ABC Refinery is now being treated by the Perth Mint but increasingly jubilant refiners in Singapore reckon Chris Jordan is their hero for closing Australian rivals.

We now have a much better idea of what the commissioner believes is happening because one of his tax counsel executives, Jonathon Woodger issued an opinion to the GAAR tax review body.

That opinion stated that the gold refiners “must have known or at least ought to have known, that the gold in question was merely going around in circles and that the transactions with ‘the suppliers’ were unlikely to have been real.”

Given that the gold purchased was so pure, the ATO executive then questions whether the refiners could be said to be refining gold under the meaning of the act.

“It seems more difficult to describe any activity as refining when the purported refiner knows, or ought to know, that the metal is sufficiently free of impurities”.

And if Woodger is right that the Australia’s gold refining industry is a fraud, then all sorts of catch-all clauses of the act apply.

Clearly such an opinion is a highly controversial view of the world gold industry, which needs to be tested in the courts with the advantage of evidence from global gold experts.

But, Down Under, Woodger actually chaired on the GAAR board (which includes non ATO executives) that reviewed the ABC Refining case, that’s the way tax justice works in 2016 Australia.

ABC Refining lost.

Australia’s internal tax appeal system leaves a lot to be desired and much more of it should take place with independent bodies.

To get the Douglass case to the courts, the nation had to rely on a constitutional issue (Chris Jordan’s last shot at righting a wayward ATO, November 29).

In the case of the refiners and GST, there are provisions that allow issues to go to court but those provisions are totally useless if the ATO destroys the industry before the courts have had a chance to do their job.

And if Chris Jordan does decide to destroy the industry before the courts have a chance to decide the issue, then it will lead to the biggest tax court case in Australia’s history with the ATO being sued for billions.

Robert Gottliebsen
Robert GottliebsenBusiness Columnist

Robert Gottliebsen has spent more than 50 years writing and commentating about business and investment in Australia. He has won the Walkley award and Australian Journalist of the Year award. He has a place in the Australian Media Hall of Fame and in 2018 was awarded a Lifetime achievement award by the Melbourne Press Club. He received an Order of Australia Medal in 2018 for services to journalism and educational governance. He is a regular commentator for The Australian.

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Original URL: https://www.theaustralian.com.au/business/opinion/robert-gottliebsen/the-ato-should-halt-its-attack-on-gold-refiners/news-story/57faa48675cf808fa941cedd8ba413fb