Jock Anderson

Self-styled tax martyr and bankrupt Brent John Gilchrist, who had a key role in the doomed Actonz tax evasion scheme, had no show of convincing the Supreme Court that leaving a gst assessment in his desk did not amount to tax evasion.

In what the court, comprising Chief Justice Dame Sian Elias, Justices Peter Blanchard, Andrew Tipping, John McGrath and Noel Anderson, regarded basically as an exercise in futility, it dismissed Mr Gilchrist’s appeal against his district court conviction for knowingly failing to provide information requested by Inland Revenue.

The district court also found Mr Gilchrist carried out an underhand scheme to ensure payment of client debts to himself rather than to Inland Revenue.

Mr Gilchrist ran a tax consultancy business by means of an arrangement called E-Tax Trust – the sole trustee of which was a company of which Mr Gilchrist was a major shareholder and the sole director.

It was a taxable activity under the Goods and Services Tax Act 1985, but between June 2001 and August 2003 gst was not paid.

That was because Mr Gilchrist, as Justice Anderson politely put it, preferred to apply the cash flow of the business to other commitments.

Inland Revenue tried several times to get Mr Gilchrist’s debtors to pay what Mr Gilchrist owed and to extract from Mr Gilchrist information about the tax he owed.

But Mr Gilchrist entered into a deed of assignment purporting to assign the debts valued at more than $43,000 owed to E-Tax Trust to a company called E-Tax Trust Ltd, of which he was the sole director.

The same day he emailed Inland Revenue alleging that their formal request for a list of his debtors was unlawful.

He also wrote to client debtors advising them of the assignment and requiring them to pay the debts to the assignee company, a move he did not tell Inland Review about.

When one of Mr Gilchrist’s clients threw a spanner in the works by querying the deal with Inland Revenue the taxman moved quickly and charged Mr Gilchrist.

As Justice Anderson said: “It is plain that if Mr Gilchrist had provided the information in the notice as and when required, the [Inland Revenue] Department would have required payment of the client debts to it pursuant to the s157 [Tax Administration Act] procedure, and that his deliberate non-compliance with the s17 [Tax Administration Act] notice was to pre-empt payment of due tax by way of that procedure.”

Having failed in an appeal to the Court of Appeal Mr Gilchrist tried to convince the Supreme Court that his conduct did not constitute the offence of which he was convicted.

His novel argument was that the provision under which he was convicted was not intended to criminalise the non-payment of tax where there had been no evasion of the assessment of tax.

He claimed his assessments were in order and there was no issue of evading assessment.

With his tongue perhaps firmly in both cheeks Mr Gilchrist submitted that gst liabilities involved self-assessment and therefore if a taxpayer correctly calculated gst and left the assessment in his desk that would not amount to tax evasion, even if the gst was not paid.

Their Honours seized on the futility of this proposition, saying it was “plainly wrong.”

“Mr Gilchrist’s argument seems to envisage the evading of the payment of tax by a gambit of evading assessment,” Justice Anderson said.

Having rejected much of Mr Gilchrist’s out of date arguments the court found that evading assessment must have the consequence of evading payment.

“If a taxpayer had no obligation to pay assessed tax the assessment would be an exercise in futility,” Justice Anderson said.

Mr Gilchrist represented himself; KBF Hastie and RJ Ellis appeared for the Crown and CT Gudsell as amicus curiae.

Note: Actonz – a Wellington technology company that was part of a software venture involving hundreds of high net worth individuals, was New Zealand’s second biggest tax avoidance arrangement. Its history has been well-documented elsewhere and its $226 million tax wrangle was resolved in a secret deal in 2005.

Insolvency and Trustee Services records show Mr Gilchrist, a former Spicer&Oppenheim national director of taxation and former senior inspector at Inland Revenue’s head office policy division, was adjudicated bankrupt in April 2005 following an application by Inland Revenue, which sought $53,500.

As recently as June this year Mr Gilchrist, described as a Wellington-based tax specialist, was writing in the National Business Review about leasing company cars.

Feedback on this story to jockanderson@xtra.co.nz