Judicial review of decision to remove tax agent from list of approved tax agents

Summary

The High Court dismissed the application for judicial review. The Court found the Commissioner of Inland Revenue ("the Commissioner") fully complied with her obligations under s 34B(9) of the Tax Administration Act 1994 ("TAA") to give the tax agent reasons for any proposed decision to remove the tax agent from the list of approved tax agents.

Impact of decision

A decision-maker does not need to conduct a consultation as required by s 34B(9)(b) of the TAA, provided:

1. the tax agent is fully and fairly aware of the basis on which the decision-maker is considering removing him or her from the list of tax agents; and
2. the decision maker fully and fairly takes into account any submissions made by the tax agent before deciding whether or not to remove the tax agent from the list of approved tax agents.

Facts

Accountants First Ltd ("Accountants First") was incorporated on 3 October 2005. Its sole director is Mr Kamal. He, his wife and the Imran Kamal Trustee Company Ltd are the shareholders of Accountants First. Soon after it was incorporated, Accountants First was granted approved tax agent status by the Commissioner under s 34B(4) and (5) of the TAA.

In February 2001, the Commissioner commenced an investigation into the tax affairs of Accountants First and Mr Kamal. The investigation revealed that between March and July 2006, Accountants First claimed input tax credits in respect of fictitious tax invoices for three goods and services tax periods, resulting in Accountants First evading tax amounting to $55,735.50.

On 18 December 2012, Mr Kamal pleaded guilty to six charges of tax evasion under the TAA. On 15 February 2013, Mr Kamal was sentenced to three months' home detention and 150 hours of community work. On the same day, Accountants First was convicted and discharged in relation to charges laid under the same provisions of the TAA.

Mr Kamal sought name suppression in the District Court because of concerns about Mrs Kamal's health. While his original application was dismissed, Mr Kamal successfully appealed that decision to the High Court. However, the High Court later revoked name suppression because Mr Kamal's evidence "proved to be very questionable".

Following the conclusion of the prosecution against Accountants First and Mr Kamal, officers of the Commissioner commenced a process to determine if Accountants First's tax agent status should be revoked. This process involved two decisions.

First decision

In May 2013, the Commissioner sent the shareholders of Accountants First letters advising that their company's tax agent status was being reviewed. The letters explained this was because of Mr Kamal's convictions and the duty of the Commissioner to protect the integrity of the tax system. The Commissioner sought a response within 30 days.

In June, the Commissioner received a submission from Accountants First's barrister at the time, Mr Coleman, explaining why the company's tax status should not be revoked (June submission).

After a meeting between officers of the Commissioner, Mr Kamal and Mr Coleman in August 2013, the Department sent letters to Accountants First's shareholders advising that a decision had been made to remove the company from the list of approved tax agents.

In October 2013, Accountants First filed judicial review proceedings and an application for interim relief. The application claimed that in making her decision, the Commissioner was unreasonable and/or failed to take into account relevant considerations and/or took into account irrelevant considerations.

Second decision

In December 2013, an officer of the Commissioner realised that the officer who had made the decision to revoke Accountants First's tax agency status did not have delegated authority from the Commissioner to make that decision.

In a letter to Accountants First's new barrister, Mr Weaver, Crown Law outlined the situation and explained that the decision made in September was not valid. It was also explained that a new decision-maker, with appropriate delegation, would consider whether Accountants First should be removed from the list of approved tax agents because of Mr Kamal's criminal convictions.

The matter was then given to a senior officer of the Commissioner who had the appropriate delegated authority. In an affidavit to the court, the senior officer swore that she carefully considered all matters on the file, including the June submission from Accountants First and the minutes of the meeting in August 2013.

In February 2014, the senior officer made the decision to remove Accountants First from the list of approved tax agents. In March 2014, the Department sent a letter to the shareholders of Accountants First notifying them of the decision and the reasons for the decision. Accountants First filed an application for judicial review on 20 March 2014 pleading two breaches of s 34B(9) of the TAA.

Decision

Reasons for proposing to remove tax agent status

The Court identified the Commissioner's clear and unequivocal duty imposed by s 34B(9) of the TAA to give a tax agent reasons for any proposed decision to remove the tax agent from the list of approved tax agents.

Collins J was satisfied that the Commissioner complied with her obligations under s 34B(9) of the TAA when she explained in May 2013 the reasons why she was considering removing Accountants First from the list of approved tax agents and when Accountants First was given the opportunity to make submissions, which it did in June and August 2013.

Mr Weaver argued that the Commissioner was obliged to again state her reasons for proposing to remove Accountants First when the second decision to consider removal was made.

His Honour stated that even if there was a further obligation on the Commissioner, this was complied with when Crown Law sent its letter restating those reasons in December 2013.

Consultation

The Court explained that s 34B(9) of the TAA also places a clear and unequivocal duty upon the Commissioner to consider arguments against the proposed decision that were advanced by the tax agent. Collins J considered whether the Commissioner had a duty to again consult with Accountants First when Ms Young made the second decision to remove it as an approved tax agent.

After considering relevant decisions, Collins J concluded that a duty to consult further only arises if the information relied upon by the decision-maker has materially changed.

His Honour found that the senior officer's decision to remove Accountants First from the list of approved taxpayers was based on the same key factors that Accountants First addressed in its original June submissions. The other matters that were referred to by the senior officer when reaching her decision were ancillary matters of no consequence. Furthermore, the Court pointed out that the fact the first decision-maker lacked authorisation did not invalidate the steps taken under s34B(9) of the TAA before the first decision was made.

The Court concluded that this reflects the realities of how administrative decisions have to be made in large organisations such as Inland Revenue. Everyday issues are consulted upon at one level and then escalated up the organisation to senior officers who are delegated with the responsibility to make decisions in the name of the Commissioner.

The court found that the Commissioner fully complied with her obligations under s 34B(9) of the TAA and therefore dismissed the application for judicial review.