The way
is open for Inland Revenue to bankrupt John George Russell on a $367 million
tax debt after the High Court struck out his demand that payment by instalments
be accepted.
Mr Russell who claims to have no assets offered
to pay $1,000 per week in reduction of the debt and then later offered $150,000
in full settlement of his tax debt, a figure amounting to 0.04 per cent of what
is owed.
Mr Russell and Inland Revenue have a long
history. Decades of litigation has seen
Mr Russell held liable for tax avoidance through use of an intricate scheme of
companies, partnerships and trusts described as being of labyrinthine
complexity. He was assessed to owe tax
of $5.69 million for the period 1985-2000.
Shortfall penalties for taking an “abusive tax position” together with
interest for non-payment has pushed the tax bill up to $367.2 million.
In 2006, Mr Russell offered to pay off the debt
at $1000 per week. That figure is less than the amount of interest accruing on
the tax debt per week. In 2013, Mr
Russell offered $150,000 in full settlement of the amount owed. Inland Revenue declined both offers. With a court judgment against Mr Russell for
$367 million owed, Inland Revenue was taking steps to bankrupt him when the
High Court was asked to intervene. Mr
Russell said there were no valid reasons for declining his offers.
Inland Revenue alleged this was just a stalling
tactic to delay bankruptcy, with the delay compromising Revenue’s ability to go
back and unwind Mr Russell’s prior business transactions. Bankruptcy law imposes time limits on how far
back in time a bankruptcy investigation can go.
Inland Revenue produced an inter-office memo to
explain why Mr Russell’s offers were rejected.
Revenue says Mr Russell’s use of circular corporate shareholdings and
trust arrangements has allowed him to accumulate wealth in his trusts for the
benefit of his family while at the same time declaring little personal
income. Companies he is personally
asssociated with do not have a good history of filing tax returns. And there are question marks over his wife’s
tax affairs as well, Inland Revenue says.
Inland Revenue dismissed the proposed offers as
unrealistic, particularly given Mr Russell’s age (he his now 78) and concerns
about his true financial position.
Justice Asher struck out Mr Russell’s
application for a judicial review of Inland Revenue’s decision not to accept
his offers. His Honour said the
application was an abuse of process.
Russell
v. Inland Revenue – High Court (17.4.15)
15.030