Walking the line: when is tax advice a conspiracy to defraud the Commonwealth? An analysis of Pearce v the Queen.
journal contributionposted on 13.09.2016, 03:35 authored by Helen Hodgson
The Commonwealth has had a recent string of cases where a person has been successfully prosecuted for fraud, or conspiracy to defraud the Commonwealth. R v Pearce resulted in five people being imprisoned following the collapse of a mass marketed scheme, known as "Servcom". Of the five convicted of conspiracy, three were accountants that had been involved in arranging the tax effective financing that was the basis of the scheme. A charge of conspiracy to defraud the Commonwealth requires that the parties have acted dishonestly, and in a way that puts the revenue at risk. In the context of tax planning, tax advisers regularly give advice that is intended to reduce the tax liability of their client. This article examines the Pearce case to identify why the actions of the tax advisers were seen as dishonest, thereby crossing the line that separates tax advice from a conspiracy to defraud the Commonwealth. It also examines the relationship between a tax scheme that may be invalidated under income tax law and fraud, as understood in the criminal law.