Bottom of The Harbour Tax Avoidance - Deputy Crown Solicitor Debacle

Deputy Crown Solicitor Debacle

The first time the Australian Taxation Office (ATO) detected a bottom of the harbour scheme was in 1973. Rod Todman, a senior investigations officer in Perth, found a scheme involving about 50 companies and selected one for investigation. By 1974 he had assembled evidence which was referred to the Deputy Crown Solicitor (DCS) in Perth for possible prosecution as a test case.

The DCS was uncertain of the prospects for the case, but in late 1974 had a Queen's Counsel opinion strongly recommending charges of conspiracy to defraud the Commonwealth be brought against the promoter and two other individuals. But there then followed delay upon delay, duplicated investigations, ill-prepared reports by inexperienced officers, and even a DCS officer deliberately avoiding contact with the ATO.

After five full years, in April 1979, and based on miscommunication, the Crown Solicitor in Canberra advised the ATO that the evidence was insufficient and the case was dropped. It might well have been that it was not strong enough, but that decision wasn't arrived at in a well-considered way. The performance of the various DCS officers was later the subject of scathing criticism, with problems arising primarily from overworked and underskilled staff, and bad management.

The abandoned case only came to light in 1982 in the Costigan Royal Commission investigating activities of the Federated Ship Painters and Dockers Union. The Commission came upon bank account transactions for millions of dollars, and the "paper trail", as it was called, led eventually, and among other things, to the bottom drawers of the DCS Perth.

One of those other things the commission found was that the wife of one of the senior case officers at the DCS Perth was running an escort service, and that she was a company secretary at several companies which were involved in bottom of the harbour schemes. There was no suggestion her husband improperly used his position, but the connection was close enough to be extremely embarrassing for all concerned, and the officer was dismissed.