Sussan Ley (Farrer, Liberal Party, Shadow Minister for Justice and Customs) Share this | Link to this | Hansard source

I rise to speak on the Foreign Evidence Amendment Bill 2008. This bill seeks to amend part 3 of the Foreign Evidence Act 1994. Part 3 of the act provides for foreign material obtained as a result of a mutual assistance request to be adduced in evidence in criminal and related civil proceedings in Australian courts. This material is most important in fraud and money-laundering cases. The act applies to proceedings in states and territories as well as Commonwealth courts. However, these amendments are initially intended only to apply to Commonwealth proceedings. Provision exists for the application of the amendments to state and territory courts by regulation.

Some problems have been experienced adducing foreign business records in evidence in state and territory courts. The problems arise because business records must comply with the rules of evidence of the states and territories, some of the requirements of which are technical. The amendments provide that business records obtained through mutual assistance will be presumed to be admissible unless the court is satisfied that the records are not reliable or probative or that they are privileged. In addition, there are measures to provide for testimony to be admitted where the law in the country of its origin does not require such evidence to be given on oath or affirmation or under caution, provided that there is an obligation to tell the truth. These amendments preserve the court’s discretion to refuse to admit evidence where it is in the interests of justice to do so.

The use of foreign business records and other evidence is often a vital component of transnational money-laundering and fraud cases. Those cases should not be jeopardised by inconsistencies between Australian jurisdictions as to how or whether that evidence is received by a court. This bill has the support of the opposition.

Mike Kelly (Eden-Monaro, Australian Labor Party, Parliamentary Secretary for Defence Support) Share this | Link to this | Hansard source

I rise to support the Foreign Evidence Amendment Bill 2008, which was introduced by the Attorney-General, the Hon. Robert McClelland, in the last session. This bill appears at first glance to be rather technical but it is in fact a very important piece of legislation. It is important because it will enable the Taxation Office and the government to see that our taxation laws are fairly and efficiently executed and that all Australians pay their fair share of the tax burden—increasingly important in these circumstances that we face at the present time. At a time when many Australians are facing the possibility of hardship as a result of the global economic downturn, it is important that everyone has confidence in the fairness and integrity of our taxation system. Nobody likes paying taxes, but the Australian community understand why we need a taxation system and they have confidence in the way our tax system is administered. That is why Australians are among the world’s most conscientious taxpayers. Support for the taxation system will, however, rapidly erode if taxpayers become convinced that some individuals are able to dodge their responsibilities. Ordinary Australians will soon ask why they should pay their taxes when a handful of wealthy individuals are able to avoid paying theirs.

This bill will make the task of ensuring fairness in our taxation system easier. It will do so by enabling the Commonwealth Director of Public Prosecutions to gain access more easily to business records and other forms of evidence from foreign countries, thus making easier and quicker the prosecution of those who have sought to avoid paying their fair share of taxation. Although this bill applies only to the Commonwealth, the Attorney expects to have discussions with his state and territory counterparts to examine the extension of its terms by way of regulation to state and territory proceedings as well.

The use of evidence gained from foreign countries in Australian courts is governed by two pieces of legislation, the Mutual Assistance in Criminal Matters Act 1987 and the Foreign Evidence Act 1994. These acts enable the Commonwealth Attorney-General to request certain types of information from foreign countries for use as evidence in Australian court proceedings. But, in the years since these acts were passed, certain limitations in their scope and application have become apparent, particularly in relation to taxation cases, which can be very complex and which frequently require extensive documentation. This bill seeks to remedy these deficiencies.

It is particularly important that these deficiencies be remedied now, because the Taxation Office and the Australian Federal Police are currently engaged in Australia’s largest ever campaign to crack down on tax evasion, known as Operation Wickenby. This campaign began in 2004 and is still ongoing. It is targeting the minority of wealthy individuals who have sought to avoid or evade their tax responsibilities. By the end of 2008, Operation Wickenby had resulted in the launching of 23 criminal investigations involving 249 completed tax audits. As a result of these investigations, 28 people have been charged on indictable offences and more than $200 million in tax liabilities has been discovered. Nearly $150 million in unpaid tax has been collected.

Operation Wickenby is part of the international campaign to stamp out tax evasion and money-laundering through the use of various bogus offshore investment schemes. One of the largest of these is based in the Channel Islands, a well-known tax haven. Recently we saw the arrest in Jersey of Mr Philip de Figueiredo, head of the Swiss tax haven firm Strachans and one of the alleged principals in the offshore tax schemes used by a number of prominent and wealthy Australians. Australian authorities want to extradite Mr de Figueiredo to face charges of tax fraud. It is important to note in passing that Operation Wickenby was begun under the previous government, presumably with the support of all the members of the Howard cabinet. It is not an ideologically motivated attack on the wealthy; it is an effort to enforce the existing tax law and to ensure that all Australians, wealthy or otherwise, pay their fair share of tax.

The Commonwealth DPP has advised the government that the current provisions of the Foreign Evidence Act are inadequate for the purpose of gathering the evidence from overseas which is necessary for the successful prosecution of a number of cases arising from Operation Wickenby. Most importantly, the current act makes it difficult to gain access to foreign business records, which are frequently the central pieces of evidence in cases where tax has been evaded through the transfer of money to other countries or where money has been earned through business activity in another country. If this bill is not passed in a timely manner, there is a risk that some of these cases will be put at risk. I am sure that it is an outcome that no-one in this House would desire.

To make it clear that the terms of the Foreign Evidence Act apply to foreign business records, this bill amends part 3 of the act to ensure that foreign business records may be made available to Australian authorities unless they are found by a court to be unreliable or privileged. The bill also creates a presumption that such records meet the requirements for admission as evidence to Australian courts unless evidence to the contrary is produced. In other words, where a judge, magistrate or other officer in a foreign country has certified that testimony was given in accordance with the law of that country, the responsibility for proving otherwise will rest with those wishing to challenge this rather than with the Australian authorities. This will make it much easier for Australian authorities to obtain such records and to use the evidence contained in them to prosecute individuals who have evaded their tax responsibilities.

This does not mean that business records obtained from overseas will be automatically admitted as evidence in Australian courts. The courts will retain their current discretion to refuse to admit such evidence at the application of a party to the case. In fact, this bill gives the courts greater flexibility in determining the use to which such material may be put. This bill expands the scope for retaining such material, not the scope for its use as evidence in Australian courts.

To reinforce this point, the bill before us removes the obligation on the Attorney-General to certify that material received from a foreign country in response to a request under the Foreign Evidence Act satisfies the requirements for testimony. This question will now be left entirely to the discretion of the courts. The court will have the power to reject such material completely or to limit the use which may be made of any given piece of evidence in the case before it. The bill says:

The court may limit the use to be made of foreign material if there is a danger that a particular use of the foreign material might be unfairly prejudicial to a party to the proceeding concerned.

So this bill actually increases the safeguards for defendants in such cases.

The bill also addresses some other areas in which the current law has been found to be inadequate for the purposes for which it was intended. The bill makes it easier to admit as evidence testimony taken overseas by clarifying the question of whether such testimony must have been given under oath. Some countries do not require evidence to be given under oath or affirmation but instead impose an obligation to tell the truth by some other means. In some cases testimony given in a foreign country in this manner has been challenged on the grounds that it does not comply with Australian procedures for the giving of evidence, even though the testimony was given in conformity with the law of the country in which it was given. This bill provides that testimony will be admissible if it was given under an obligation to tell the truth that complied with the law of the country in which it was given. The admissibility of such evidence will still be at the discretion of the court but it will no longer be deemed to be inadmissible merely because it was not taken under oath.

The bill also amends the Foreign Evidence Act to broaden the definition of ‘testimony’ so as to take into account the rapid changes in technology which have occurred since the act was passed in 1994. Where the act says ‘audio or video tape’ it will now say ‘a tape, disk or other device from which sounds or images are capable of being reproduced’. This is a sensible provision which reduces the possibility of relevant evidence being ruled inadmissible on the grounds that it was recorded on a medium which did not exist in 1994, such as a mobile phone text message or a posting on a website.

Tax evasion is a serious criminal offence. Not only does it deprive the Commonwealth of revenue needed for the many vital functions carried out by the federal and state governments, such as national defence, the payment of pensions and benefits, and support to our health and education systems; it also undermines confidence in the integrity of our taxation system thus encouraging other people to also evade their tax responsibilities. We all know of countries where there is no social consensus about the payment of tax, where most people feel that it is legitimate to avoid and evade paying tax or where corruption enables people, particularly wealthy and powerful people, to avoid taxation altogether. This is the path to lawlessness and social breakdown.

Everybody dislikes paying tax and that is why it is all the more remarkable that most Australians are conscientious about meeting their tax obligations. They obey the law because they know their taxes are being spent on important and necessary programs and because they have confidence that the tax system is being administered fairly and honestly. That is why cracking down on the small minority of tax evaders is so important. Campaigns like Operation Wickenby are not vendettas against the wealthy. They are a necessary part of maintaining public confidence in the integrity and fairness of the tax system.

If ordinary Australians—people like the wage earners, farmers and small business operators of Eden-Monaro—whose hard work has built the prosperity we now enjoy, see wealthy lawyers, celebrities and company executives avoiding tax with impunity, they will quite reasonably ask: ‘why should I pay my tax or obey the law in other areas if the law is not being enforced against these people?’ This is all the more important as we face the current difficult economic circumstances in which many people face the possibility of losing their jobs, their investments and even their homes. At such times people are quite rightly angry when they see a handful of wealthy individuals enriching themselves by evading their tax responsibilities. That is why it is the responsibility of this parliament to see that the conscientious and diligent officers of the ATO, the AFP and the Office of the DPP do not have unnecessary obstacles put in their way as they investigate and prosecute such individuals. Where legislation is inadequate or out of date, it is our job to see that it is strengthened and brought up to date in a way which makes it easier for these agencies to do their job while, of course, safeguarding the right of defendants to argue their innocence before the courts. That is what this bill does, and I congratulate the Attorney for bringing it forward. It will also complete another vital aspect of the sound regulatory regime that exists in this country which has put us in a much better position in terms of the global financial situation. Therefore, I urge both this House and the Senate to pass this bill without delay.

Luke Simpkins (Cowan, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Foreign Evidence Amendment Bill 2008. This bill intends to amend part 3 of the Foreign Evidence Act 1994, which is the part that relates to foreign material obtained by a request for mutual assistance to be put forward as evidence in legal proceedings in our courts here in Australia—whether in criminal or civil proceedings. It is understood that there have been problems in using such overseas information because of the need for foreign business records to comply with the rules of evidence in the states and territories. Further, this material has been even more important in money laundering and fraud cases. I will take that point up a little later. This bill will apply to Commonwealth proceedings not only in Commonwealth courts but also in the courts of the states and territories. This bill will establish the presumption of admissibility of information obtained through that mutual assistance, unless the court determines that the records are unreliable or privileged. These are the main aspects of this bill and the amendments that I wish to cover.

It is true that in this globalised world this country will continue to face the threats of white-collar crime, fraud and money laundering. It is therefore important that measures such as these are progressed, and they have my full support. It is, however, appropriate to also make mention of the previous important legislation that has helped address these specific problems in recent years. These acts form the framework of legislation to fight money laundering and the financing of terrorism. Firstly, I would like to mention the very important Financial Transactions Reports Act 1988, the FTR Act, which was designed to ensure the reporting of specific transactions of $10,000 or more, the retention of specific documents and the identification and knowledge of customers. That act is, of course, administered by the Australian Transaction Reports and Analysis Centre, AUSTRAC, which was established under the FTR Act as Australia’s anti-money-laundering regulator and specialist financial intelligence unit.

The FTR Act covered the cash dealers, including the banks, down to securities dealers and even TABs and cash carriers. The FTR Act has been supplemented by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, which was another significant regulatory reform by the previous government. That act was initiated to help enable Australia’s financial sector to maintain international business relationships, to prevent and detect money laundering and terrorism financing by meeting the needs of law enforcement agencies for targeted information about possible criminal activity and to bring Australia into line with international standards. Moving beyond the FTR Act, the AML/CTF Act now covers the financial sector, gambling sector, bullion dealers and other professionals or businesses, now known as reporting entities.

Given the increased requirements, including costs, and regulations, the act was designed to be implemented in stages, with up to 24 months being provided to achieve full implementation of the act, which has now occurred. The obligations that came with the AML/CTF Act included customer identification and verification of identity, record-keeping and establishing and maintaining the whole program. It also included ongoing customer due diligence and reporting, particularly of suspicious matters, threshold transactions and international funds transfer instructions. The AML/CTF Act imposed a risk based approach to regulation. Reporting entities are now determining the way in which they meet their obligations based on their assessment of the risk of whether providing a designated service to a customer may facilitate money laundering or terrorism financing. AUSTRAC has continued to operate under that act in its role as the nation’s financial intelligence unit. One of the great regulatory improvements imposed in the AML/CTF Act was to expand AUSTRAC’s role as the national AML/CTF regulator with supervisory, monitoring and enforcement functions over a diverse range of business sectors.

With these previous acts and with this bill, the question is: what are they designed to deal with? I would now like to speak about one aspect of that—that is, combating money laundering. It is generally considered that there are three stages of money laundering. The first stage is called placement. This is where funds that are derived from illegal activities are actually moved to a more convenient place or into a different form that will arouse less suspicion from regulators. The funds can be moved into a retail economy or into a financial institution, whether it is a traditional or untraditional kind. The second stage is layering, and this is where the funds are moved in via complex financial transactions. This is done to remove clarity and obscure and hide the money and its trail. The third stage is where the money is converted into what appears to be legitimate business earnings or proceeds through normal financial transactions.

The final issue I will raise is the difference between organised crime money laundering and terrorism money laundering. Some commentators have described how organised crime money laundering is circular in its operation because ultimately organised crime is about greed and using the illegal proceeds for the sole benefit of those responsible. The funds have to come back clean, for the use of those who planned the whole process. Terrorism money laundering is linear in its nature because it is designed to move funds from an origin to a destination to be utilised for terrorist activities. Working off estimated figures from 2001-02, the financial flow of funds into terrorist organisations at that time were significant and therefore capable of financing great harm to innocent people. They demonstrate the need for vigilance in the future. I will quote some of the estimated figures. It is estimated that Al-Qaeda had a cash flow of between $20 and $50 million in that financial year, Hamas had around $10 million and Hezbollah had about $50 million. These huge funds give terrorists great capacity to organise their evil and cowardly campaigns, and we should be and are committed to engage them on this level, as we should on all levels.

In both the organised crime and terrorism forms of money laundering, the characteristics of these operations are clearly complex. To combat them we need careful regulation and ongoing reviews of our legislation. It is therefore right and appropriate that this bill be passed, and I support its passage.

Richard Marles (Corio, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Foreign Evidence Amendment Bill 2008, which will make it easier to conduct criminal prosecutions in this country which involve the taking and obtaining of evidence in relation to overseas activities. In particular, it will allow for a far easier prosecution of white-collar crime in Australia where that criminal activity has involved overseas activities. The bill will do this by streamlining the process by which we adduce foreign business records into evidence in a domestic proceeding. Business records are a key part of any white-collar criminal prosecution. They provide a rich source of information in a criminal prosecution and that information is often highly reliable and highly relevant.

Currently, the Foreign Evidence Act is inadequate in allowing all relevant foreign business records which exist to be considered as evidence in a prosecution in an Australian court. So this bill will make it easier, principally, for that evidence to be brought before an Australian court to therefore allow for prosecution. Some very significant prosecutions and activities are currently underway, which I will come to in a moment, and this legislation will help provide the basis for all the necessary information being considered in those prosecutions.

Clause 24(4) of the proposed bill provides a presumption that foreign business records can be adduced into a proceeding in Australia, unless it is found that those business records are not probative, not reliable or, for some reason, are privileged documents. That is a much wider ambit in terms of considering foreign business records in a domestic criminal prosecution than that which currently exists under the Foreign Evidence Act.

The proposed bill will also make it easier to admit testimony obtained overseas, again, in a domestic proceeding. Paragraph 22(1)(aa) of the proposed bill will make it possible to admit into evidence, in a domestic proceeding, testimony which is obtained overseas, provided that it is obtained and received in circumstances where the person giving the testimony is doing so under a legal obligation to tell the truth. That may be in cases even where no formal oath is given to that person before the testimony is provided. Indeed, clause 22(3) of the proposed bill provides for a presumption that testimony obtained overseas will be able to be used in a domestic proceeding, unless there is evidence to the contrary—that is, that the testimony was provided under a legal obligation to tell the truth.

These two provisions are a significant extension of the ability for a domestic court to consider evidence originating from overseas. So, concurrently with that—in a sense, as a check in relation to that—clause 24A of the proposed bill also provides a much greater discretion to the court in not accepting that evidence. It is, if you like, a check on this new, wider ability to review that evidence. It puts that discretion, obviously, in the hands of the court. So, in a sense, it creates a much greater ability to consider information deriving from overseas but puts the court in the driver’s seat as to whether or not to use its discretion to accept it. Of course, that discretion is based on whether or not the acceptance of the evidence originating from overseas would unfairly prejudice a party.

A number of other minor amendments are contained in this bill which are also important in terms of allowing greater evidence originating from overseas to be considered in an Australian court. There is, for example, in the proposed bill a provision which provides that references to evidence which is a recording by audio or video means be extended to include recordings which are made by more modern means of recording. There is a clarification that the Attorney-General’s certification of foreign material is limited to what was originally intended—that is, a certification that the foreign material was obtained in response to a mutual assistance request made under the Foreign Evidence Act. That, of course, is what the act originally intended to provide in terms of the Attorney-General’s certification.

The Foreign Evidence Act currently applies to Commonwealth courts, to state and territory courts, to criminal prosecutions and to related civil proceedings. That said, this amending legislation will only apply, at least initially, to Commonwealth criminal proceedings and related civil proceedings, with a view to it covering state and territory courts in the future, where those state and territories agree to or want this additional ability to obtain overseas evidence and to apply it to proceedings within their jurisdictions.

Tax evasion by taking money overseas is a very big deal for this country. Indeed, in terms of its tax receipts, Australia loses billions of dollars as a result of this activity. Operation Wickenby, an operation conducted by the Australian Taxation Office, is indeed the largest tax investigation operation ever undertaken by them. It began four years ago and it is directed exactly at overseas tax evasion by Australians. It is estimated, in the next four years, to recover $5.7 billion of Australian government revenue. Indeed, in just the last few weeks there have been extradition proceedings undertaken, pursuant to Operation Wickenby.

I mention Operation Wickenby in the context of this bill because Operation Wickenby needs this bill. The provisions which are currently in the Foreign Evidence Act do not provide enough of a basis for having all the information that can possibly be obtained and which is relevant to prosecutions under Operation Wickenby, so it is essential that we pass this bill so as to put the proper legislative basis in place to allow all the relevant information to be obtained so that prosecutions under Operation Wickenby, and indeed all criminal prosecutions and related civil proceedings, can consider all the relevant information available.

Labor has always been concerned with white-collar crime. We have always been concerned to make sure that there is the proper legislative basis to ensure that white-collar criminals can be prosecuted. Indeed, the Foreign Evidence Act itself was initially an initiative of the Keating government back in 1994, implemented at the time by the Attorney-General, Michael Lavarch, and by the honourable member for Denison, the Minister for Justice at the time, Duncan Kerr. The principles then were as they are now. The Foreign Evidence Act then was put in place to facilitate and streamline the admissibility of evidence originating from overseas in domestic proceedings. Indeed, if one looks at the second reading speech for the original act, which was at that point the Foreign Evidence Bill 1993, it reads as follows:

Part 4 of the bill sets out a similar scheme, adapted to meet the specific needs of the Australian Securities Commission in civil proceedings arising from the Corporations Law and the ASC law where the ASC is a litigant. The part will facilitate the admissibility of foreign evidence in such proceedings. The globalisation of capital markets in the past few years has required business regulatory agencies such as the ASC to liaise and offer assistance to each other in carrying out their regulatory functions. This will often result in requests by the ASC to foreign agencies for information, testimony and documents where the ASC is involved in civil proceedings.

Sixteen years down the track, that process of globalisation has gone forward in leaps and bounds. The world that we now live in and the financial transactions which occur are far more complex now than they were then, and it would also be right to say that the activities of white-collar criminals have become increasingly canny and increasingly complex. It is essential, then, that we have a legislative regime which keeps up with this changing world. The Foreign Evidence Amendment Bill 2008 is a bill which will do just that: make sure that the Foreign Evidence Act keeps up with the world around it.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

The amendments in the Foreign Evidence Amendment Bill 2008 facilitate the process of adducing business records held overseas as evidence in Australian courts. By changing the Foreign Evidence Act, they will assist in the prosecution of persons who, by hiding money in the world’s shadowy places, seek to defraud the Commonwealth. They will add to the federal government’s arsenal against tax evasion, money laundering and organised crime. The amendments, by changing or making more simple the receipt of foreign business records by Australian courts, will ensure that Australia’s financial intelligence network—which includes the Australian Crime Commission, the Australian Taxation Office, the Australian Federal Police and the Commonwealth Director of Public Prosecutions—can continue to vigorously pursue investigations into tax fraud both here and overseas. Under the amendments, as long as the requirements of division 3 are met, foreign material relating to business records will be admissible in Australian courts. The court would not be required to consider any other rules of evidence under Commonwealth, state or territory law in relation to that material.

It is instructive to consider the nature of business records and why it is that, for many years, there have been continuing attempts to make the receipt of business records in evidence in court proceedings a more simple procedure. The explanatory memorandum for this legislation notes:

Business records are generally considered an accurate and reliable form of evidence.

That has certainly been the view of Australian lawyers and judges for many years, and since the middle of last century there have been reforms made to Australian rules of evidence dealing with the receipt of Australian business records in courts, all of which have been designed to get over the problem that business records might otherwise have been thought to be hearsay, to have been excluded from evidence and not to be admissible in evidence. There are often problems with using business records to establish the identity of the particular record keeper who made the record. There are often problems in establishing the precise provenance of the business records, and thus there might quite often be either a difficulty or an impossibility in having someone directly connected with the making of the business record come before the court to say that the record in question is authentic, proving the document in the way in which other documents are required to be proved in court. Recognising the usefulness of business records, there have been continual amendments to state evidence acts. Indeed, the Australian Law Reform Commission, in its very large recent review of the Commonwealth Evidence Act—which has also been adopted as a model law in New South Wales—has made some suggestions as to how the business records provisions as they appear in the Commonwealth Evidence Act should be improved.

These amendments look at foreign business records, which are records of most direct relevance in pursuing the kinds of tax evasion that are occurring through the use of overseas structures, overseas banks and overseas companies and improving the offences that are being prosecuted under Australian law in Australian courts. Very often, it is seen as greatly useful to be able to bring into evidence records that are obtained from overseas sources. Perhaps most particularly, these amendments will allay any risk that the current unamended provisions of the Foreign Evidence Act will obstruct a number of current prosecutions that arise from Operation Wickenby—an operation that other speakers in this debate have mentioned—which is Australia’s largest tax fraud investigation to date. The purpose of Operation Wickenby has been to detect and dismantle the intricate evasion mechanisms used by a small number of Australian citizens to avoid tax. It has been estimated that these illicit enterprises put in excess of $300 million of Commonwealth revenue at risk. Operation Wickenby has demonstrated a commendable whole-of-government approach to the problem of tax avoidance. It has brought together the expertise of the Australian Taxation Office, Centrelink and the regulators at the Australian Securities and Investments Commission with the enforcement powers of the Australian Crime Commission and the Federal Police.

Since 2004, Operation Wickenby has had considerable success in combating tax evaders who blatantly falsify deductions, conceal their taxable income, use offshore transactions and establish companies for the benefit of other tax evaders. There has been quite a deal of publicity given to some of those prosecutions, some of which involve high-profile people and which have been well reported on. Up to June 2008, the Australian Taxation Office had issued tax assessments in the order of $71 million in tax revenue as a direct result of the Australian Crime Commission’s Wickenby investigations. Similarly, the Wickenby examination process has provided invaluable evidence from difficult witnesses for still pending prosecutions. In the year to 30 June 2008, the Australian Crime Commission conducted 203 coercive examinations and issued 182 notices to obtain intelligence and information. In December 2007, three people were charged with conspiracy to defraud the Commonwealth of $6.6 million and were committed to stand trial.

Nothing raises the ire of the Australian taxpayer more than the kinds of people that these amendments to the Foreign Evidence Act are aimed at. An excellent example is the very first enforcement action brought as a result of Operation Wickenby, which was against Adam Hargraves, a Gold Coast entrepreneur whose business, Phone Directories Co., had declared four years without profit. Investigations into Mr Hargraves’s financial arrangements uncovered a sophisticated evasion scheme concealing three Porsches, 10 properties and over $3 million in a Commonwealth securities account. To the hardworking taxpayers in my electorate of Isaacs, this kind of contempt for tax obligations is infuriating. Tax evaders hold the rules of our society in complete disregard. They take the benefits of our public hospitals, our schools, our roads and all the other services that our taxes make possible, but they contribute nothing. I think of tax evaders as thieves, people who steal the benefits of our community without paying for them. This parliament should do everything possible to ensure that the full armoury of powers is available to Commonwealth investigative and prosecuting agencies to ensure that tax evasion is brought to account.

The focus of these amendments on the procurement of foreign business records and their use in evidence will be invaluable in combating schemes like those of Mr Hargraves, the Gold Coast entrepreneur. The businesses complicit in these frauds will generally have documentary evidence, often overseas, that is the key to successful prosecution. By way of illustration, one could look at a classic international scam loan arrangement that is outlined in the 2008 Australian Taxation Office publication Tax Havens and Tax Administration. This involves an Australian company establishing a fraudulent tax scheme offering, for example, an $80,000 tax deduction for a $20,000 cash contribution. It runs like this. First, the Australian promoter instructs an international promoter to ‘provide’ finance to the taxpayer. Second, the international promoter sets up a finance company outside Australia. Third, the offshore finance company makes a book entry purporting to finance the Australian taxpayer with a non-recourse book entry loan of $60,000, which is paid on paper, but which is not actually paid, directly to the promoter. Fourth, the Australian taxpayer pays $20,000 in cash to the promoter. Fifth, the Australian taxpayer claims a deduction from the Commonwealth of $80,000, being the book-entry $60,000 loan plus their $20,000 contribution. The last two steps outlined in the Australian Taxation Office’s publication are that the so-called loan is never paid back, and the result is that, at a 40 per cent tax rate, a tax refund of $32,000 is obtained, so that each taxpayer recoups their $20,000 investment and retains a net benefit of $12,000—at, of course, the cost of Commonwealth revenue.

These arrangements are difficult to identify. With these amendments, the business records from the offshore finance company—to use the illustration given by the Australian Taxation Office—would be more readily able to be used in evidence in court proceedings, as would the records of the international promoter. It will be harder to set up sham loans like this, because the evidence of whether or not they have been paid back—the evidence that shows that they are in fact sham transactions—will be more readily available to Australian courts. This foreign evidence will be able to be collated with information from tax returns, from credit and debit cards and from international information exchanges under our relevant tax treaties so as to be able to pinpoint abusive schemes created by tax avoiders and evaders.

When monitoring patterns of incoming and outgoing transactions, AUSTRAC will identify an inconsistency between a tax evader’s foreign dealings and reported tax outcomes. That is the reason we ask all persons leaving the country to indicate on their departure card if they are carrying more than $10,000 in currency. Evidence is already difficult to obtain from overseas. Companies such as the Geneva firm Strachans SA—the dealings of which were a catalyst for Operation Wickenby—are notoriously secretive. It is no coincidence that Adam Hargraves had a Visa card from the Corner Bank, a private banking institution in Lugano Banca, Switzerland. Of course, access to evidence is dependent on bilateral agreements between the Australian government and governments overseas. Operation Wickenby involves what are known as ‘mutual assistance requests’, whereby Australian law enforcement authorities seek cooperation from international counterparts to secure evidence located offshore. For example, in 2005 the Federal Supreme Court of Switzerland ordered that the Australian Crime Commission be given access to Swiss documents detailing a fraudulent $90 million scheme being run out of Sydney to allegedly manufacture Scotch whiskey. It was through this mutual assistance request process that Australian authorities were able to use their international counterparts, the Swiss Magistrates Office, to procure the information necessary to recover the money defrauded from the Commonwealth. The Swiss authorities were also able to assist in the release of the documents identifying several Australian promoters of these fraudulent schemes.

These amendments build on the Labor tradition of protecting the Australian taxpayer. Since Australia’s first specialist financial intelligence unit, AUSTRAC, was established under the Hawke government in 1989, Labor has built on this legacy and now introduces these amendments to guarantee the security of Australia’s revenue. I commend the bill to the House.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

Anyone who practises as a lawyer or as a litigant involving business records knows the challenges of dealing with business records. Business records are in a category all their own in terms of evidence. Often opinion is expressed in those records and often you cannot identify who has drafted the business records, who has put pen to paper, who has typed on the keys to collate those business records. So there is often hearsay involved. Getting evidence adduced in terms of business records is difficult. It is difficult to know who to cross-examine. Courts are notoriously loath to allow business records to be admitted into evidence, and it frustrates litigants and lawyers incredibly. As someone who practised in civil and criminal law for many years before coming to this place, I had many cases involving foreign evidence from Asia, Africa and the United States, and getting evidence was difficult. Making sure it complied with all the technicalities of Queensland jurisdiction and Commonwealth jurisdiction was also a challenge.

The main purpose of the Foreign Evidence Amendment Bill 2008 is to streamline procedures so that we can adduce business records as evidence in Australian court proceedings. Initially, it is to do with criminal and civil matters involving the Commonwealth, but I would hope that the state and territory proceedings will also come within the province of this type of legislation and that agreement can be reached with the states and territories so that we have a uniform system in this country with respect to evidence.

Rules and regulations under the Family Court, the Federal Court, the Federal Magistrates Service and the civil courts in Queensland—where I come from—all deal with business records, so it is important that we get this right, and the reason for that can be summed up in this way: nothing causes constituents in my area more aggravation than people not paying their way. I subscribe to the view of the father for the Minister for Trade, the former Treasurer of this country, Frank Crean, who once said words to the effect of, ‘Paying tax is the way we civilise society.’ By paying tax we pay for hospitals and care for the sick. We educate our children. We care for our aged. So the purpose of this legislation is to ensure that Australians who are trying to evade taxation are compelled to pay their way. That means the Australian taxpayers can be confident in the integrity of our taxation system.

Whilst the legislation is known as the Foreign Evidence Amendment Bill 2008, it is all about taxation. It is all about government revenue, and it is all about making people pay their fair share to support the Australian community. Part 3 of the Foreign Evidence Act provides a means of adducing foreign material, such as business records, in response to a mutual assistance request to a foreign country, as evidenced in Australian criminal and related civil proceedings.

Currently the act requires that the business records must comply with the rules of evidence in the foreign jurisdiction and also with the very technical, evidentiary rules which vary between the states and territories of Australia. The bill before the House today ensures that those technical problems can be overcome and that the evidence can be adduced and is presumed to be admissible unless the courts are satisfied the records are not reliable and have probity or are privileged. That is a very good, flexible amendment. It will improve the transparency and efficiency of our court system and ensure that evidence can be adduced. Overcoming the requirement that the taking of foreign evidence had to be on oath or affirmation is also a good provision and means that, if someone is under a legal obligation to tell the truth, the evidence can be adduced here in Australia. So there are a number of great initiatives. Also in part 3 there is some clarification that really brings the legislation into the 21st century by changing definitions of audio and video tape to ‘a tape, disk or other device from which sounds or images are capable of being reproduced’ to recognise that we now live in a computer age with all the advances of technology, about which I am sure our children know better than we who sit in this House.

The purpose of this particular legislation can be summed up by two words: Operation Wickenby. It is interesting that the Commissioner of Taxation, when he appeared before the Joint Committee of Public Accounts and Audit on 3 October 2008, said that he expected an extra $5.7 billion over the next four years in relation to that particular operation. That is what this legislation is all about: improving the prospect of the ATO obtaining further moneys to improve the integrity of our taxation system. The Howard government and this government are to be commended for the way in which they have supported the Australian Taxation Office, the Australian Crime Commission, ASIC and other regulatory bodies with respect to Operation Wickenby, which commenced in 2004. As I said, its aim is to minimise tax evasion. In a submission put to the US Senate Homeland Security and Governmental Affairs Committee for a hearing into tax haven banks and US tax compliance conducted by their permanent Subcommittee on Investigations on 17 July 2008, the Australian Taxation Office made some very pertinent comments and points which I will refer to. It noted that the OECD estimates that between US$5 trillion and US$7 trillion is held in tax havens or banking secrecy jurisdictions.

The Australian Transaction Reports and Analysis Centre, AUSTRAC, and Australia’s Financial Intelligence Unit, FIU, have sophisticated capabilities to track international monetary flows. In the financial year ending 30 June 2007 it is estimated that $16 billion was sent directly to tax havens from Australia and approximately $18 billion was sent directly from tax havens to Australia. Those are extraordinary sums of money. It is probably also the case that, with nearly a million Australians living overseas and with 45 per cent of people living in this country either having one parent born overseas or having been born overseas themselves, funds and assets are held offshore, often legitimately. But it is quite sad that at times people have to resort to these types of tactics to avoid their obligations to their fellow citizens.

Offshore evasion is a concern internationally. There are a number of factors which mitigate the risk here in Australia: our geographical isolation, the existence of AUSTRAC, vigilance of governments of both persuasions, our lack of an inheritance tax or gift duty, the relative size of flow of funds from Australia to tax havens compared to other countries, the generally law-abiding aspects of the Australian people and the ethics and morality that we have in this country, and the message that the Australian Taxation Office has sent from Operation Wickenby and other activities. But we must always be concerned about concealment.

Operation Wickenby is really a multiagency taskforce and it has engaged in a huge investigation—a $300 million tax fraud inquiry into offshore accounts. There have been dozens of people charged. A message must be sent to those people who are abusing tax havens and engaging in dodgy tax schemes and to those individuals and businesses using the cash economy in a way to avoid meeting their obligations to their fellow citizens and companies to not engage in these activities, to refrain from these types of activities, and that they will be punished severely when they engage in these types of activities. The Commissioner of Taxation has written over 3,500 letters to people in the last year asking them to disclose overseas interest. In excess of 820 disclosures have been made and $35 million or more of previously undisclosed income has been disclosed. This is a huge operation which we must support. The Foreign Evidence Act 1994 and the amendments to it in this bill are about supporting the Australian Taxation Office in its endeavours.

I believe that constituents in my electorate strongly support these types of measures. They strongly expect that other Australians will pay their way and contribute to building roads, hospitals, schools, community centres and a fair and just Australia. This legislation will go a long way to ensuring that our regulatory bodies undertake the kind of investigation and prosecution which must be undertaken to maintain, in a very difficult time, the kind of lifestyle that we enjoy in this country. I am very pleased to speak on this bill and I commend it to everyone.

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

This is one of those items of legislation which enjoy the support of both sides of the chamber. The Foreign Evidence Amendment Bill 2008 obviously enjoys the support of the Rudd government, and it also builds on the work of the Howard-Costello government. This is an issue which is important to all Australians, and it comes to the matter of fairness in the tax system. Technology gallops along—who would have known 10 years ago that we would have the technology and various electronic methods of avoiding obligations that we have in 2009? That is why it is always important that governments look very carefully at the law and make sure that it is updated so that they are able to deliver on their obligations to the Australian people.

This bill amends the Foreign Evidence Act. It seeks to make sure that Australia’s courts are given the weapons they need to guarantee that Australian taxpayers are not defrauded and, more generally, that business records from overseas are able to be used as evidence, unless the court is satisfied that the records are not reliable, probative or privileged. The Bill Digest emphasises:

• Testimony provisions will operate more flexibly to allow for evidence to be received where an individual is under a legal obligation to tell the truth, even though no formal oath or admonition has occurred—unless of course, there is sufficient evidence to raise doubt as to the contrary.
• Courts will be given greater discretion to limit the use of foreign material where there is a danger that it may be unfairly prejudicial to a party to the proceedings.

Also, as in so many other items of legislation, there are additional amendments which update provisions and make consequential changes, many of which are important from the point of view of dotting the i’s and crossing the t’s but do not to any great extent change aspects of the law.

There is no doubt that right across the world there are criminals and people who seek to take advantage of loopholes or deficiencies in the law. That is why the Foreign Evidence Amendment Bill 2008 is an important tool in updating the law to make sure that the interests of litigants and taxpayers are carefully observed. Honourable members opposite have pointed out some aspects of the genesis of this legislation. It is one of those items of legislation which ought to become law sooner rather than later.

Money laundering is an issue which confronts governments and nations across the world. Because of the fact that the world is now a global village, increasingly we find that governments in one part of the world seek evidence and assistance from other governments to help bring about satisfactory legal outcomes. The concept of a mutual assistance request once might have been quite rare but it is now routine and Australian authorities and authorities overseas cooperate as much as possible, particularly in fraud and money-laundering cases.

The act applies to proceedings in state and territory courts as well as to those in Commonwealth courts; however, the amendments in this bill are initially intended to only apply to Commonwealth proceedings. As is often the case, the application of the law may well be broadened by appropriate regulations tabled by the executive. The Foreign Evidence Amendment Bill 2008 is an important bill and is supported by the opposition. I commend the bill to the House.

Bob Debus (Macquarie, Australian Labor Party, Minister for Home Affairs) Share this | Link to this | Hansard source

I would like to thank members for their contributions to the debate on the Foreign Evidence Amendment Bill 2008. I particularly acknowledge the members for Farrer, Eden-Monaro, Cowan, Corio, Isaacs, Blair and Fisher. I thank the opposition for its support for the bill. The collection of foreign evidence relies on the willingness of foreign counterparts to provide assistance to Australia. The increasing globalisation of business and advances in technology mean that Australia’s efforts to fight crime depend ever increasingly on this form of foreign assistance, but our laws governing the admissibility of foreign evidence are not always flexible enough to deal with international differences in procedure. Barriers remain that can prevent the use of reliable evidence obtained from foreign countries with systems of criminal investigation and procedural law which differ from ours.

That brings us to the amendments before the House. Requests for business records are one of the most common types of requests for foreign evidence made by Australia. Business record evidence is used in financial fraud and proceeds-of-crime matters—a high-profile example referred to by members being the prosecutions arising out of what we call Operation Wickenby. But business record evidence is also used in prosecutions for crimes like money laundering, drug importation and child pornography and, while business records are generally considered a reliable and accurate form of evidence, compliance with Australia’s admissibility requirements is onerous from the point of view of many other countries. These requirements are now adversely impacting on Australia’s ability to obtain reliable evidence in a timely manner, and it is therefore appropriate, and indeed necessary, that more flexible rules are introduced to apply to the admission of foreign business records in domestic proceedings. It is also vital for the administration of justice that the law retains appropriate safeguards and that judicial discretion is maintained in this area.

In order to protect against the inappropriate admission of unreliable evidence, the bill provides that foreign business records may not be adduced if the court considers the records are not reliable or probative or if the records are privileged. The court also retains a broad discretion to prevent the foreign business records being adduced if justice would be better served if the foreign material were not adduced—that is to say, the discretion of the judge in any particular case is of great significance.

The bill strikes an appropriate balance in retaining safeguards while ensuring that there is sufficient flexibility in the law as it will stand. I ask that the relatively technical and minor appearance of this bill not detract from an understanding of its fundamental importance as a much-needed legal reform. Indeed, the provisions of this bill are vital to the more effective operation of Australian criminal and associated civil proceedings, and I commend it to the House.

Question agreed to.