Treasury Laws Amendment (Black Economy Taskforce Measures No 1) Bill 2018 [2018] AUSStaCSBSD 41 (14 February 2018)

• Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018
• Strict liability offences 130
• Reversal of the evidential burden of proof144

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Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018

Purpose	This bill seeks to amend the Income Tax Administration Act 1993 and the Taxation Administration Act 1953 to address identified issues associated with the black economy Schedule 1 creates new offences related to the manufacture, distribution, possession, sale and use of electronic sales suppression tools Schedule 2 introduces compulsory reporting to the Australian Taxation Office by businesses operating in the courier and cleaning industries
Portfolio/Sponsor	Treasury
Introduced	House of Representatives on 7 February 2018

Strict liability offences ^[130]

1.168 Item 2 of Schedule 1 to the bill seeks to introduce a new Subdivision BAA into the Taxation Administration Act 1953 (Administration Act). The Subdivision contains a number of offences relating to the production, use, possession and distribution of electronic sales suppression tools^[131] (ESS tools). The offences (in proposed sections 8WAC, 8WAD and 8WAE) seek to make it unlawful for a person to:

• manufacture, develop or publish an ESS tool;^[132]

• supply or make available for use an ESS tool or a right to use such a tool; or provide a service involving the use of an ESS tool;^[133]

• acquire or possess an ESS tool, in circumstances where the person is required under a taxation law to make or keep a tax record;^[134] and

• make, alter, keep or prevent from being kept a tax record with the use of an ESS tool, in circumstances where the person is required under a taxation law to make or keep such a record.^[135]

1.169 The offences in proposed section 8WAC are punishable by a pecuniary penalty of 5,000 penalty units, while the offences in proposed sections 8WAD and 8WAE attract penalties of 500 and 1,000 penalty units respectively. Each of the offences is an offence of strict liability.

1.170 Under general principles of criminal law, fault is required to be provided before a person can be found guilty of a criminal offence (ensuring that criminal liability is imposed only on persons who are sufficiently aware of what they are doing and the consequences it may have). When a bill states that an offence is one of strict liability, this removes the requirement for the prosecution to prove the defendant's fault. In such cases, an offence will be made out if it can be proven that the defendant engaged in certain conduct, without the prosecution having to prove that the defendant intended this, or was reckless or negligent. As the imposition of strict liability undermines fundamental criminal law principles, the committee expects the explanatory memorandum to provide a clear justification for any imposition of strict liability, including outlining whether the approach is consistent with the Guide to Framing Commonwealth Offences.^[136]

1.171 With respect to the offences in proposed section 8WAC (which carry more significant penalties), a comprehensive explanation for the application of strict liability is provided in the explanatory memorandum:

Applying strict liability to these offences is appropriate because it substantially improves the effectiveness of the prohibition on electronic sales suppression tools. The provision will act as a significant and real deterrent to those entities who seek to profit by facilitating tax evasion and fraud through the tools' production and supply. Because an electronic sales suppression tool's principal function is, by definition, to facilitate tax evasion, there are no reasons for an entity to produce or supply such a tool beyond those covered by the applicable defences...The ability to prosecute at the fraud's facilitation level will significantly reduce the instances of fraud at the user level.^[137]

1.172 The explanatory memorandum also provides similar (though less extensive) explanations for the application of strict liability to the offences in proposed sections 8WAD^[138] and 8WAE.^[139]

1.173 The committee notes that the Guide to Framing Commonwealth Offences states that the application of strict liability is only considered appropriate where the relevant offence is not punishable by imprisonment and is only punishable by up to 60 penalty units for an individual.^[140] In this instance, the bill proposes applying strict liability to offences punishable by between 500 and 5,000 penalty units. The explanatory memorandum states that the magnitude of the relevant penalties is justified as the offences relate to systematic fraud and tax evasion. With regard to the offences in proposed section 8WAC, the explanatory memorandum also notes that the Taxation Administration Act 1953 imposes a civil penalty of a similar amount on persons who promote tax exploitation.^[141] While noting this explanation, the committee remains concerned about the application of strict liability in circumstances where a very significant financial penalty may be imposed.

1.174 Further, the committee notes that proposed section 8WAD seeks to apply strict criminal liability to the mere possession of an ESS tool, and to impose a substantial penalty (500 penalty units) where possession is established. The committee is concerned that proposed section 8WAD could criminalise a broad range of conduct, up to and including mere inadvertence. For example, a person could acquire an ESS tool from a third party, never use the tool, and forget that the tool was in their possession. Owing to the application of strict liability in proposed subsection 8WAD, the person could be convicted of an offence despite not engaging or intending to engage in the type of conduct (that is, certain kinds of tax evasion) that the bill seeks to prevent. The committee's concerns are heightened by the fact that the offence would apply the day after the bill commences, meaning that there may be a number of people currently lawfully in possession of an ESS tool that would immediately commit an offence the day after the bill receives royal assent.

1.175 The committee acknowledges that the offence in proposed section 8WAD would not apply if an entity gives a notice to the Commissioner of Taxation, as soon as practicable after the commencement of Schedule 1 to the bill, that the entity acquired or assumed possession or control of the ESS tool or the right to use it before 9 May 2017.^[142] However, the committee remains concerned that persons who are in possession of an ESS tool, but have never used that tool, may not be aware of the proposal to criminalise possession of ESS tools, or the proposed notification provisions, and may be immediately subject to a criminal offence on the basis of mere inadvertence.

1.176 Finally, in relation to proposed section 8WAC, the committee notes that explanatory memorandum states that the significant pecuniary penalty (5,000 penalty units) that may be imposed in relation to that provision is justified because the offences in that section relate to intentional and systemic fraud and tax evasion.^[143] In this regard, the committee notes the difficulty in reconciling an offence which seeks to punish intentional conduct with a proposal to remove the requirement to prove fault in relation to that conduct.

1.177 The committee seeks the minister's more detailed justification for the application of strict liability to offences attracting significant penalties of between 500 and 5,000 penalty units.

Reversal of the evidential burden of proof^[144]

1.178 As outlined above, proposed sections 8WAC and 8WAD seek to create offences relating to the use and possession of electronic sales suppression tools. Proposed subsections 8WAC(3) and 8WAD(2) seek to create exemptions (offence-specific defences) for those offences. The defences provide that the offences in sections 8WAC and 8WAD do not apply where the relevant conduct is undertaken for the purposes of preventing or deterring tax evasion or enforcing a taxation law.

1.179 Subsection 13.3(3) of the Criminal Code Act 1995 provides that a defendant who wishes to rely on any exception, exemption, excuse, qualification or justification bears an evidential burden in relation to that matter.

1.180 At common law, it is ordinarily the duty of the prosecution to prove all elements of an offence. This is an important aspect of the right to be presumed innocent until proven guilty. Provisions that reverse the burden of proof and require a defendant to disprove, or to raise evidence to disprove, one or more elements of an offence, interferes with this important common law right.

1.181 While in this instance the defendant would bear an evidential burden (requiring the defendant to raise evidence about the matter) rather than a legal burden (requiring the defendant to positively prove the matter), the committee expects any such reversal of the evidential burden of proof to be justified. In this regard, the explanatory memorandum states:

Framing the circumstances in which an entity does not commit an offence as an offence-specific defence is appropriate because the person who undertakes the conduct is best placed to lead evidence about why their conduct was for the purposes of preventing or deterring tax evasion or enforcing a law.^[145]

1.182 The committee notes that the Guide to Framing Commonwealth Offences^[146] provides that a matter should only be included in an offence-specific defence (as opposed to being specified as an element of the offence) where:

• it is peculiarly within the knowledge of the defendant; and

• it would be significantly more difficult and costly for the prosecution to disprove than for the defendant to establish the matter.^[147]

1.183 It is not apparent to the committee that the matters in proposed subsections 8WAC(3) and 8WAD(2) would be peculiarly within the knowledge of the defendant, and are matters that would be difficult and costly for the prosecution to establish. In particular, the question of whether a person was undertaking particular conduct for the purposes of enforcing a law does not appear to be a matter peculiarly in the defendant's knowledge. In this regard, the committee also emphasises that a defendant being 'best placed' to point to evidence in relation to a matter does not equate to the matter being 'peculiarly' within the defendant's knowledge.

1.184 The committee seeks the minister's more detailed justification for making the question of whether a person is acting to prevent or deter tax evasion, or to enforce a taxation law, an offence-specific defence, by reference to the principles set out in the Guide to Framing Commonwealth Offences.

1.185 The committee also seeks the minister's advice as to the appropriateness of amending the bill to provide that whether a person is acting to prevent or deter tax evasion, or to enforce a taxation law, to be an element of the offences in proposed sections 8WAC and 8WAD (rather than an offence-specific defence).

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[130] Schedule 1, item 2, proposed sections 8WAC, 8WAD and 8WAE. The committee draws Senators' attention to these provisions pursuant to Senate Standing Order 23(1)(a)(i).

[131] Proposed section 8WAB defines 'electronic sales suppression tool' as a device, software program or other thing, a part of any such thing, or a combination of any such things or parts, that is capable of, and a reasonable person would conclude has the purpose of, falsifying, manipulating, hiding, obfuscating, destroying or preventing the creation of certain tax records.

[132] See proposed subsection 8WAC(1).

[133] See proposed subsection 8WAC(2).

[134] See proposed subsection 8WAD.

[135] See proposed subsection 8WAE(1).

[136] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 22-25.

[137] Explanatory memorandum, pp.12-13.

[138] Explanatory memorandum, p. 15.

[139] Explanatory memorandum, p. 17.

[140] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 23.

[141] Explanatory memorandum, p. 13.

[142] See Schedule 1, item 4.

[143] Explanatory memorandum, p. 13.

[144] Schedule 1, item 2, proposed subsections 8WAC(3) and 8WAD(2). The committee draws Senators' attention to these provisions pursuant to Senate Standing Order 23(1)(a)(i).).

[145] Explanatory memorandum, p. 18.

[146] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, pp. 50-52.

[147] Attorney-General's Department, A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, September 2011, p. 50.