Articles
Prof. Ann O’Connell
Australia
Combating Large-Scale Tax Evasion –
Australia’s Experience
Since 2005, Australia has combated
international tax avoidance and evasion
schemes through a multi-agency arrangement
called “Project Wickenby”, which combines the
resources of the Serious Non-Compliance Unit of
the Australian Tax Office with the resources of
several other government agencies. After
considering some preliminary matters, this
article examines the experience of Project
Wickenby and the issues arising from it.
The article also discusses some recently
introduced legislation designed to identify and
deal with promoters of tax avoidance and
evasion schemes.
1. Introduction
Australia’s self-assessment system relies heavily on vol-
untary compliance. Where non-compliance occurs, it is,
of course, necessary to have mechanisms in place to deal
with it. The Australian Tax Office (ATO) has special pro-
cedures to deal with non-compliance, and one area that
recently received much attention is the treatment of the
more extreme forms of tax evasion and fraud.
Since 2005, the ATO has combined the resources of its
Serious Non-Compliance Unit with those of several
other government agencies to combat international tax
avoidance and evasion schemes. The multi-agency
arrangement is called “Project Wickenby” and, although
there has only been one (albeit high-profile) conviction,
it is viewed by the ATO as a very successful operation
and the way of the future.
Before turning to Project Wickenby, this article consid-
ers some preliminary matters – first, what sort of behav-
iour is being targeted by the ATO and the difference
between tax avoidance and tax evasion; and second, the
range of penalties available to deal with the targeted
behaviour. The article then examines the experience of
Project Wickenby and the issues arising from it. Finally,
the article discusses some recently introduced legisla-
tion that aims to identify and deal with promoters of
schemes whose purpose is to avoid or evade tax.
2. Serious Tax Evasion and Tax Fraud
Non-compliance can take various forms. The 1988
Report and Recommendations on Taxpayer Compliance of
the American Bar Association noted that non-compli-
ance generally falls into four broad categories: failure to
file a return, underreporting income, overstating deduc-
tions, and overstating credits and adjustments.1 The
Report also noted that underreporting income was by
© IBFD
and Kerry Brewster*
far the most significant, accounting for roughly 70% of
the total tax gap in the United States.2 In addition, the
Report stated that non-compliance involves both a large
number of individual taxpayers who omit small
amounts of income and a relatively small number of
individuals who underreport large amounts of income.
The activities being targeted by Project Wickenby are
obviously at the larger end of the scale. Another distin-
guishing feature is the international aspect, which arises
as a result of the globalization of activities generally and
the possibility of accessing investments and/or banking
facilities in countries with less stringent tax and report-
ing obligations.
In addition to focusing on fraud and tax evasion, the
ATO is strongly pursuing tax avoidance activities.
Unlike the United Kingdom, Australia has a general anti-
avoidance provision, namely, Part IVA of the Income Tax
Assessment Act 1936. In distinguishing between evasion
and avoidance, it is commonly said that tax avoidance is
an arrangement which satisfies the technical require-
ments of the tax legislation, but reduces tax in a way that
is against the spirit or policy of the law. In contrast, tax
evasion is the wilful non-compliance with the tax law in
order to reduce or avoid tax – for example, fraudulently
misstating taxable income by e.g. not declaring income
or overstating deductible expenses. It is more difficult to
distinguish between tax avoidance and legitimate tax
planning because presumably the reduction of tax liabil-
ity by utilizing the tax provisions will always be part of
tax planning. According to Australia’s general anti-
avoidance provision, Part IVA applies if the sole or dom-
inant purpose of entering into a transaction is to obtain
a tax benefit. Tax planning may, therefore, have an inci-
dental purpose of obtaining a tax benefit, but that pur-
pose is not a dominant one. Tax advisers will frequently
advise their clients that it is important to identify a clear
commercial objective for the transaction. But even that
may not prevent a finding that Part IVA applies as the
High Court has held that the distinction between a
* © Ann O’Connell and Kerry Brewster, 2008.
Ann O’Connell, Associate Professor, Law School, University of Mel-
bourne; and Senior Research Fellow, Taxation Law and Policy Research
Institute, Monash University.
Kerry Brewster, Tax Group, Law School, University of Melbourne;
and Research Fellow, Taxation Law and Policy Research Institute, Monash
University.
1. See American Bar Association, Report and Recommendations on Tax-
payer Compliance, 41 Tax Lawyer 329 (1988).
2. More recent figures suggest that this is now about 80%; see Mazur, Mark
J. and Alan J. Plumley, “A Primer on the Tax Gap”, National Tax Association Net-
work 4 (February 2007).
BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008 145
Articles
“rational commercial decision” and a “dominant purpose
of obtaining a tax benefit” was a “false dichotomy”.3 The
High Court also said:
A person may enter into or carry out a scheme, within the mean-
ing of Part IVA, for the dominant purpose of enabling the rele-
vant taxpayer to obtain a tax benefit where the dominant pur-
pose is consistent with the pursuit of commercial gain in the
course of carrying on a business.4
The distinction between tax evasion and tax avoidance
may be less clear-cut than this discussion suggests, and
there are certainly elements of schemes in some of the
activities which are eventually found to involve more
sinister activities.
3. Penalties for Tax Evasion
The ATO has a large armoury of legislation available to
deal with tax evasion. The general offence and penalty
provisions are of two distinct types:
(1) administrative penalties, primarily in Divisions 284
to 288 of Schedule 1 of the Tax Administration Act 1953,
which impose additional (penalty) tax in specified cir-
cumstances. In 2006, new legislation was enacted to
enable civil penalties to be imposed on promoters of tax
avoidance and tax evasion schemes (see Division 290 of
Schedule 1 of the Tax Administration Act 1953); and
(2) judicial penalties in Secs. 8A to 13C of the Tax
Administration Act 1953, which create offences that may
be prosecuted in court. In addition, the Crimes Act 1914
and Criminal Code 1995 may apply, and they have regu-
larly been used in relation to tax offences. The offences
include fraud and conspiracy to defraud the Common-
wealth (Secs. 135.1, 135.2 and 135.4 of the Criminal
Code), aiding and abetting (Sec. 11.2), attempting to
commit an offence (Sec. 11.1) and conspiracy to commit
an offence (Sec. 11.5). In many cases, this secondary lia-
bility carries the same penalty as the primary offence.
Other special legislation may also be available. For
example, the Crimes Taxation Offences Act 1980,
enacted in response to the “bottom of the harbour” divi-
dend-stripping schemes, is directed at attempts to evade
tax by making a company or trust unable to pay tax. The
legislation on the proceeds of crime (e.g. Proceeds of
Crime Act 2002) has also been used to confiscate and
realize assets where it can be shown, on the civil stan-
dard of the balance of probabilities, that the assets are
the proceeds of crime. Automatic forfeiture follows a
conviction, but an acquittal does not prevent a court
from making a forfeiture order. The legislation also con-
tains measures to assist in the investigation of matters
relating to the proceeds of crime, e.g. allowing examina-
tion orders, production orders, notices to financial insti-
tutions, monitoring orders and search warrants.
State legislation may also be relevant. For example, the
Crimes Document Destruction Act 2006 created a new
criminal offence of destroying evidence, which was
made part of the Victorian Crimes Act. Sec. 254 pro-
vides:
146 BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008
A person who knows that a document or thing is or is reason-
ably likely to be required in evidence in a legal proceeding and
either:
– destroys or conceals the document or thing, or
– expressly, tacitly or impliedly authorises or permits another
person to destroy or conceal it,
with the intention of preventing the document or thing from
being used in evidence in a legal proceeding is guilty of an
indictable offence.
4. Project Wickenby
Project Wickenby, also known as Operation Wickenby, is
a project of a multi-agency task force consisting of the
ATO, the Australian Crime Commission (ACC), the
Australian Securities and Investments Commission
(ASIC), the Commonwealth Director of Public Prosecu-
tions (CDPP) and the Australian Federal Police (AFP);
in supporting roles are the Australian Transactions
Reporting and Analysis Centre (AUSTRAC), the Attor-
ney-General’s Department and the Australian Govern-
ment Solicitor. The aim of the project is to investigate
offshore tax avoidance or tax evasion arrangements and
large-scale money laundering. Project Wickenby is one
of the operations conducted under MIDAS, an ACC-
approved operational determination to target serious
tax fraud and money laundering.5 The lead agency for
the project, however, is not the ACC, but the ATO
(ostensibly). The project was established in 20056 and
has an end date of 2012.7 It has funding of AUD 305 mil-
lion.8 The estimated amount of revenue that is lost
through the schemes targeted by Project Wickenby is
AUD 300 million.9 In response to suggestions that, for
such a great expense, the revenue stands to gain little in
terms of recouped tax dollars, the Commissioner of Tax-
ation and the Justice Minister both pointed to “the mes-
sage” sent by Project Wickenby as its main advantage.10
Operation Wickenby resulted from the information
obtained during Operation Duxford, an ACC operation
begun after a referral from the ATO, which concerned
the activities of a high-profile Australian entertainment
lawyer. The investigation commenced in 2002,11 and as
part of Operation Duxford, investigators learned of a
meeting in Sydney between Philip Egglishaw (of Stra-
chans SA, a Swiss accounting firm) and the Australian
lawyer. Raids on Mr Egglishaw’s hotel room resulted in
the seizure of his laptop, which apparently held the
3. FCT v. Spotless Services Ltd (1996) 96 ATC 5201, 5204.
4. Id., per Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ.
5. As stated by the CEO of ACC, Alastair Milroy, on 6 February 2006.
6. The answer to a question asked at a hearing of the Senate Legal and Con-
stitutional Legislation Committee suggested that the project was commenced
in June 2005.
7. This is indicated by the recent amendments to the Tax Administration
Act 1953 – Sec. 3G(1)(b) states that any disclosures under that section must
occur before 1 July 2012 or a later prescribed date.
8. See the Treasurer’s statement at the press conference on 20 July 2006 and
Press Release No. 072 of the same date.
9. Attorney-General’s Department media release of 19 May 2006.
10. See Sexton, Jennifer, “Celebrity tax hunt delivers small returns”, The Bul-
letin, 30 January 2007.
11. See the comments of Justice Minister Senator Chris Ellison in id., and
the comments of Michael D’Ascenzo in a Lateline interview on 26 September
2006.
© IBFD

details of many Australian taxpayers involved in
schemes promoted by Strachans SA (it has been
reported that as many as 500 Australians were the sub-
ject of Project Wickenby investigations12). Shortly after-
wards, raids on the Australian lawyer’s offices and home
resulted in the seizure of more material (which the Aus-
tralian lawyer has challenged based on claims of the
legal professional privilege). Operation Wickenby was
established to investigate the activities revealed by the
information on Mr Egglishaw’s laptop. The arrange-
ments in question are said to entail the use of false
invoices, back-to-back loans, overseas credit and debit
cards, and falsified bequests to move income offshore,
which was then channelled back to Australia in such a
way as to avoid tax.
The first arrests were of three directors on the Gold
Coast in July 2006 who were charged with conspiracy to
defraud the Commonwealth. The alleged tax benefit was
AUD 6.6 million, obtained from 1999 to 2005. Assets of
the trio worth about AUD 11 million (sometimes
reported as AUD 10 million) were frozen under the pro-
ceeds of crime legislation. There have been no convic-
tions as yet. A person has also been charged with failing
to submit to a compulsory ACC investigation (the
authors think this is the Australian lawyer referred to
above, based on a reference in Money Laundering Intelli-
gence, August 2006).
Otherwise, only Glenn Wheatley, a musical entrepre-
neur, has been arrested, charged and convicted. He was
convicted of the offences of defrauding the Common-
wealth (Crimes Act 1914), failing to advise the trustee of
income (Bankruptcy Act 1966) and dishonestly obtain-
ing a gain (Criminal Code). He had avoided a tax liabil-
ity of approximately AUD 300,000 and was sentenced to
30 months in jail (with 15 months suspended) in July
2007.13 The CDPP had originally agreed to seek a non-
custodial sentence on the basis that Mr Wheatley had
cooperated with the authorities and provided valuable
evidence regarding the involvement of Mr Egglishaw
and another promoter. Prior to the court hearing, Mr
Wheatley was informed that this was no longer the case.
The judge did, however, note that Mr Wheatley had
cooperated with the authorities and took this into
account in sentencing.
On 14 March 2007, the Commissioner stated that ten
criminal investigations were being conducted by the
ACC or AFP and that more than 100 civil or criminal
investigations were being conducted by the ATO or
ASIC. He also stated that the ACC had successfully
defended 20 challenges in the Federal Court and High
Court and that 100 audits had been commenced. Fur-
thermore, assessments totalling AUD 26.95 million had
been issued, with AUD 24.9 million collected or under
payment arrangements. As of 20 July 2006, the investiga-
tions had involved Australia, Switzerland, the United
Kingdom and China.14
Project Wickenby has attracted criticism for moving
slowly and achieving little.15 On 23 July 2007, a barrister
acting for the Commonwealth stated in court proceed-
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Articles
ings on the Australian lawyer’s claim of the legal profes-
sional privilege (see 5.4.) that Operation Wickenby’s
progress was stalled because of the Australian lawyer’s
actions. Delays in the release by the Swiss authorities of
thousands of files were also given as a reason for the slow
progress of Project Wickenby.16
5. Issues Arising from Project Wickenby
5.1. Issue regarding the multi-agency approach
As noted above, Project Wickenby involves several Aus-
tralian agencies that are pursuing large-scale offshore
tax evasion. Various issues arise from the involvement of
several agencies. The main issues appear to relate to the
roles of the different agencies and to information shar-
ing. The issue of the differing roles and the processes for
coordinating a multi-agency approach were discussed
by Deputy Commissioner Michael Monaghan in March
2007.17 Agreements have been reached to ensure that the
agencies can work together.18
Another problem relates to information sharing. New
legislation on information sharing was prompted by
Project Wickenby to better help agencies share informa-
tion “to aid concerted law enforcement”; the Tax Laws
Amendment (2007 Measures No. 1) Act 2007, which
received Royal Assent on 12 April 2007, amended the
Tax Administration Act 1953 by inserting Secs. 3G and
3H. The underlying purpose was to broaden the infor-
mation-gathering powers of the ATO. In the second
reading speech, the Justice Minister stated that the
amendments were to enable the ATO to disclose tax-
payer information to officers in the Project Wickenby
task force (i.e. to officers of the ACC, AFP, ASIC and
CDPP) as well as to enable information sharing between
the agencies of similar task forces in the future. In the
second reading speech, the Justice Minister also said that
the amendments “will enable agencies to better share
information to aid concerted law enforcement, without
compromising the general protection of taxpayer pri-
vacy”.
The targets of Project Wickenby have queried how their
names and affairs became widely known despite the sup-
posed existence of secrecy measures.19 In response, the
Treasury launched a project to improve the laws to pro-
tect taxpayer information – Review of Taxation Secrecy
and Disclosure Provisions. The Commissioner has also
claimed that the reason that those targeted by Project
12. See Wood, Leonie, “The lawyer, his clients and one huge tax probe”, The
Age, 10 June 2006.
13. [2007] Victorian County Court 718 (19 July 2007).
14. Id.
15. See McKenzie, Nick, “First success fails to quell doubts on probe”, The
Age, 20 July 2007.
16. Id.
17. “The enforcement decision and coping with multi-jurisdictional
enforcement – ASIC and ATO’s approach”, speech by Deputy Commissioner
Michael Monaghan to the ASIC Summer School, 9 March 2007.
18. See e.g. the Memorandum of Understanding between the ATO and
ASIC in May 2007.
19. See Sexton, supra note 10, referring to Paul Hogan and John Cornell.
BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008 147
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Wickenby became known to the public is that they are
inclined to challenge the ACC’s and ATO’s investigative
powers in court, bringing them into a public forum.20
5.2. Cost of investigation
From time to time, comments have been made that the
amount of revenue allocated to the various agencies to
deal with tax evasion is almost the same as the revenue
said to be under threat as a result of tax evasion. The
ATO’s response has always been that what is important is
the message that tax fraud and evasion will not be toler-
ated and that promotion of such schemes will result in
severe penalties.
5.3. Issues regarding multi-jurisdictional involvement
The ATO has said that, with the growth of globalization,
compliance issues are increasingly associated with inter-
national markets.21 In a speech in June 2007, the Com-
missioner described the benefits of information-sharing
arrangements as follows:
Australia has developed strong global tax information sharing
through international tax forums and bilateral agreements. This
has resulted in productive and positive discussions that have
helped resolve corporation-specific bilateral and multilateral
tax issues. For example, through the mutual assistance provi-
sions of our tax treaties, we have been able to avoid double taxa-
tion for some Australian enterprises.22
In the same speech, the Commissioner also noted that
forums such as the Joint International Tax Shelter Infor-
mation Centre (JITSIC) had strengthened international
cooperation which was critical to counter abusive
attempts to obfuscate tax obligations.
In relation to tax treaties, the Justice Minister has been
reported as saying that Project Wickenby had “required
the execution of mutual assistance treaties with Switzer-
land, the UK and China”.23 Furthermore, efforts have
been made to engage with the authorities in jurisdictions
traditionally known as tax havens. For example, tax
information exchange agreements have been executed
with the Netherlands Antilles (March 2007), Antigua
and Barbuda (January/February 2007) and Bermuda
(2005). These agreements have been described by the
Minister for Revenue and Assistant Treasurer as rein-
forcing Project Wickenby.24
5.4. Access to information – legal professional privilege
and other challenges
The involvement of crime-fighting agencies has pro-
vided valuable support to the ATO in relation to tax eva-
sion. One of the factors mentioned by the ATO regard-
ing the success of Project Wickenby is that, despite
numerous court challenges to the actions of the various
agencies, most have not succeeded.
For example, in Stoten v. Sage (Examiner, ACC) & Anor,25
the court rejected the argument that the wife of Mr
Stoten (one of the Gold Coast directors mentioned in 4.
who was charged with conspiracy to defraud the Com-
monwealth) could refuse to answer questions pursuant
to the doctrine of spousal privilege. The constitutional
148 BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008
validity of Sec. 4A of the Australian Crime Commission
Act 2002 (which gives the ACC power to investigate
state offences with a federal aspect) was challenged in
B v. ACC26 and in S & Ors v. Australian Crime Commis-
sion.27 Neither challenge was successful. In May 2006, the
High Court refused to grant special leave to the parties
in S & Ors.28 As a result, the seven people involved could
be “coercively” examined by the ACC.29
In Hogan v. ACC,30 the applicant argued unsuccessfully
that the privilege against self-incrimination was not
abrogated by the ACC Act. The applicant was, however,
successful in arguing that he had a right to legal repre-
sentation by a chosen adviser (which had been denied by
the examiner in the ACC investigation). The ACC took
the position that the case turned on its own facts and, as
of 14 February 2006, was not seeking legislative amend-
ment. Rather, the ACC was drafting its Practice and Pro-
cedures Manual to reflect the decision.
In AA Pty Ltd v. ACC,31 which involved an investigation
into people trafficking, the applicant argued successfully
that the ATO was not a “law enforcement agency” within
the meaning of the term in the ACC Act 2002 to which
the ACC could disseminate information under Sec.
59(7) of that Act. The ACC appealed the decision to the
Full Federal Court, and it was reversed.32 In the mean-
time, the regulations under the ACC Act were amended
prescribing the ATO (and other agencies) as bodies to
which the ACC could disseminate information under
the ACC Act.
In A2 v. ACC,33 the applicant sought access to the affi-
davits used to support a search warrant application and,
in another case, A2 v. ACC,34 the same applicant chal-
lenged the ACC’s power to apply for search warrants
under Sec. 3E of the Crimes Act 1914 in support of a
special investigation. The applicant was unsuccessful on
both counts.
Swiss-based tax adviser Mr Egglishaw (of Strachans SA)
applied for orders to prohibit the ACC from using the
contents of the seized laptop. The Federal Court did not
grant the orders and upheld the validity of the search
warrant and the ACC’s coercive powers.35 Mr Egglishaw
20. Lateline interview of Michael D’Ascenzo, supra note 11.
21. See ATO Compliance Program 2007-2008, at 69.
22. “Creating the right environment: transparency, cooperation and
certainty in tax”, speech by the Commissioner of Taxation, Michael
D’Ascenzo, 19 June 2007.
23. See Sexton, supra note 10.
24. See Press Release No. 006, 1 February 2007.
25. [2005] FCA 935.
26. [2005] FCA 1314; (2005) 225 ALR 117.
27. [2006] FCAFC 5; (2006) 226 ALR 619. Also cited as B2, C, R, D, A and M
v. ACC [2006] FCFCA 5.
28. [2006] HCATrans 240.
29. McClymont, Kate and John Garnaut, “Wickenby seven fail to evade tax
probe”, Sydney Morning Herald, 20 May 2006.
30. [2005] FCA 913.
31. [2005] FCA 1178.
32. ACC v. AA Pty Ltd [2006] FCAFC 30.
33. [2006] FCA 27.
34. [2006] FCA 106 and, on appeal, A2 v. ACC [2006] FCAFC 147.
35. Egglishaw v. ACC [2006] FCA 819.
© IBFD

made an application on 27 October 2006 under the
Commonwealth Administrative Decisions Judicial
Review Act to review the ACC’s decision to refuse him a
copy of the “Egglishaw hard drive”. His application was
dismissed by Justice North following the Anshun princi-
ple36 (Mr Egglishaw was estopped because he had not
included his claim for a copy of the hard drive in the first
Federal Court proceeding).
In A3 v. ACC (No. 2),37 Emmet J of the Federal Court
gave an interim ruling that some of the documents
sought by the ACC were prima facie subject to the legal
professional privilege (the documents were held by a
Sydney law firm). At that time, however, the Court was
yet to consider whether the privilege did not apply
because the documents had been made in the further-
ance of a crime, fraud or impropriety.
The Australian lawyer referred to above has been
involved in a legal challenge to 20,000 documents seized
in February 2004 and sued the ACC in the Federal Court
claiming the legal professional privilege. On 23 July
2007, Justice North reprimanded the Australian lawyer
during a directions hearing in Melbourne for not pro-
ducing a list of the documents with regard to which he
claimed the privilege by the date set by the Court. It was
argued that the Australian lawyer’s clients could them-
selves claim the privilege, hence the reluctance to pro-
duce the list. This was rejected.38
Another court action involving the same Australian
lawyer was the ACC’s application for an injunction after
it accidentally included part of its brief of evidence
against the Australian lawyer in a letter sent to him,
which had been intended for the Australian Govern-
ment Solicitor. The injunction was granted by Justice
Bernard Bongiorno of the Victorian Supreme Court on
21 December 2006, and the Australian lawyer was com-
pelled to return the documents to the ACC.
In addition to the above cases, several applications were
heard regarding whether names should be suppressed,
which were not contentious.
5.5. Access to information – voluntary disclosure
initiative
Another way in which Project Wickenby seeks to access
information is by encouraging cooperation and disclo-
sure by taxpayers. On 18 July 2007, the Commissioner
launched an initiative to encourage taxpayers to volun-
tarily disclose unreported income derived from overseas
activities, stating: “Helping people to do the right thing
and taking a firm approach with those who don’t builds
confidence in the tax system and helps create a level
playing field for everyone.”
The initiative has been interpreted as an “amnesty”.39 In
developing the initiative, the ATO consulted with the
Australian Bankers Association and the Australian
Financial Markets Association.
The policy is that if people come to the ATO before the
ATO goes to them, the CDPP will consider granting an
© IBFD
Articles
indemnity from criminal prosecution in the same cir-
cumstances as where this policy applies in Project Wick-
enby, e.g. where:
(a) the case does not involve a significant degree of
criminal conduct;
(b) the taxpayer divulges information about how the
arrangements worked, including the role and iden-
tity of the promoter; and
(c) the taxpayer cooperates with the investigation and
in the consequential proceedings.40
Overall, the ATO has a policy of encouraging voluntary
compliance, hence its publication of its compliance pro-
gram – see the Commissioner’s address to release the
Compliance Program 2007-2008 on 16 August 2007. It
has been suggested in the media that the ATO would not
have been pleased with the outcome in the Wheatley
case because Mr Wheatley’s sentence may deter taxpay-
ers considering voluntary disclosure.41 In Wheatley,
however, the judge made the point that there is a differ-
ence between voluntarily disclosing wrongdoing and
cooperating once the authorities have raided the person’s
premises. As noted above, the judge took into account
that Wheatley had cooperated, but said that this only
occurred after the federal police had carried out a search
of his home.
5.6. Use of criminal law
One interesting aspect of the conduct of Project Wick-
enby has been the increased reliance on general criminal
law provisions rather than on any of the provisions of
the Taxation Administration Act. One explanation may
be that the agencies involved are more familiar with the
criminal law provisions than with the tax legislation.
Another explanation may be that the penalties are much
harsher under the criminal law and the authorities are
keen to bring the full force of the law to bear. Although
some of the provisions of the Taxation Administration
Act provide for a custodial sentence, the period of
imprisonment under the Crimes Act is significantly
longer.
Another development has been the reliance on conspir-
acy as the basis for a prosecution. For example, some
individuals have been charged with conspiracy to
defraud the Commonwealth. Presumably, if the charge is
conspiracy, there is no need to show that the Common-
wealth was actually defrauded. Case law also suggests
that it may be easier to prove the offence of conspiracy.42
36. [2007] FCA 939.
37. [2006] FCA 929, 21 July 2006.
38. See Robinson, Natasha, “Tax lawyer’s clients may be outed”, The Aus-
tralian, 24 July 2007.
39. See Shand, Adam, “I was robbed: Wheatley”, The Bulletin, 19 July 2007;
and Seage, Chris, “Wheatley dudded by bureaucratic leaks and zealots”,
Crikey, 25 July 2007 (Internet-based news service: www.crikey.com.au).
40. This was outlined in a speech by the Deputy Commissioner of the ATO’s
Serious Non-Compliance Unit on 9 March 2007.
41. See the comments of Mark Leibler made to ABC radio on 20 July 2007,
publicized in “Tax evaders will run after Wheatley jailing”, The Australian, 20
July 2007.
42. See e.g. Pearce, Tielman & Wharton v. R (2005) WASCA 74.
BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008 149
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5.7. Participants and promoters In relation to promoters, Project Wickenby has identi-
fied two individuals – a lawyer based in Australia and
Finally, it should be noted that the type of large-scale
Mr Egglishaw based in Switzerland. It remains to be seen
fraud being targeted by Project Wickenby has something
whether the court challenges that are presently delaying
in common with mass-marketed tax avoidance schemes.
the bringing of charges will come to an end. The provi-
In both cases, the role of a promoter is crucial, and the
sions introduced into the Taxation Administration Act
individual taxpayers are usually approached by a person
in 2006, referred to as the “promoter penalty provisions”,
associated with a promoter or they hear about a “scheme”
have yet to be tested in court. It will be interesting to see
through word of mouth. Regarding mass-marketed tax
if these provisions are used or whether the authorities
avoidance schemes, the arrangements usually involve
will pursue more draconian criminal charges.
real money and real schemes, e.g. agricultural-type
schemes, and the issues are whether there is a legitimate
business and whether the taxpayer is at risk in relation to
6. Conclusion
the transaction. The tax evasion schemes being investi-
gated by Project Wickenby involve simply the failure to The first successful prosecution resulting from an
declare income and the transfer of money overseas, fol- investigation by Project Wickenby occurred on 19
lowed by an arrangement to get the money back into July 2007 (the Wheatley case). The high-profile
Australia or to make it available to the individuals off- nature of the defendant and the promise of many
shore often through the use of numerous credit cards. more high-profile individuals have raised the public
interest in the overall investigation. The ATO also
Project Wickenby targets both the participants in the tax
claims significant success in that most of the court
evasion schemes and the promoters. In Wheatley, it was
challenges to the powers of the various agencies
argued to the trial judge that Mr Wheatley’s role as mere
involved have been unsuccessful. Some doubts,
participant did not deserve a custodial sentence. It was
however, have been raised about the claims of
also argued that a more lenient view should be taken of
success, especially given that the costs of the
his actions since he had acted “out of need, not greed”.
investigations are high and the amounts of money
This was a reference to the fact that, at the time Mr
likely to be recovered are relatively small.
Wheatley entered into the scheme, he was bankrupt,
having lost a substantial amount of money in connec- What is undoubtedly true is that the establishment
tion with a failed nightclub venture. The judge was not of Project Wickenby, with a multi-agency approach
persuaded by either argument. He referred to the impor- and multi-jurisdictional focus, has changed the
tance of deterring others who may be tempted to engage landscape for large-scale tax evasion and fraud in
in similar schemes. He commented that “serious frauds Australia. Project Wickenby may thus provide a
on the revenue will result in an immediate custodial sen- useful example for other countries.
tence in the absence of substantial mitigating circum-
stances”.43 Judge Wood did note the effect of the difficult
financial circumstances in which Mr Wheatley found
himself, but did not comment further. 43. [2007] VCC 718, Para. 59.

150 BULLETIN FOR INTERNATIONAL TAXATION APRIL 2008 © IBFD