The Commissioner of Land Tax has forwarded the following memorandum for advice:

In the case set out hereunder the circumstances are, in my opinion, such as to warrant action under the provisions of section 48 of the Land Tax Assessment Act.

As this is the first case where penal action of this character is contemplated, I shall be glad to be fortified with your advice as to the proper procedure to be adopted in cases falling within the scope of this section.

A.B.C. furnished a return for 1910-11 in respect of certain lands, the total unimproved value of which he declared to be £21,803. The Department valued the lands at £ 56,624, and assessed the taxpayer on such valuation.

On such assessment being notified to the taxpayer, Messrs Blake & Riggall of Melbourne, Solicitors, as his agents, lodged a Notice of Objection thereto for the reasons that 'the values shown on the return lodged are correct; that the figures according to the Department's check valuation are excessive, and that the additional tax claimed is an overcharge'.

A conference between the Department and the Solicitors followed but no reduction in the higher values assessed was made by the Department nor were sufficient reasons adduced by the Solicitors in support of the Objection.

Subsequently, Messrs Blake & Riggall wrote, in explanation of the discrepancy between the values, that there had been duplication in the values of the improvements and they forwarded two draft valuations (from the latter of which the return had been prepared) in support of their explanation.

I enclose a statement showing-

1. The values asserted by the owner and the Department respectively for each of the two parcels of land contained in the return.

2. The values asserted by Messrs Blake & Riggall when submitting the draft valuation on which it is alleged the original assertion was founded.

3. Information as to the improved and unimproved values of neighbouring estates.

4. Evidence of sale values of lands in the neighbourhood.

5. Description of the land as prepared by the Staff Valuer.

On the facts of the case as set forth in the enclosed statement, the following observations may be made:

1. The unimproved value declared by the taxpayer is considerably less per acre than values declared by others in the neighbourhood.

2. The difference between the owner's declaration of value and the Department's valuation is considerably in excess of 25 per cent.

3. The draft valuation submitted by Messrs Blake & Riggall in explanation of an alleged mistake shows signs that the land-owner or someone on his behalf had written up the values of the improvements beyond the figures asserted by his valuer.

4. The property is one which is suitable for closer settlement and one which could probably be resold to advantage if resumed. There is also a possibility that the State Government might be willing to acquire the land at the cost which would be involved in resumption.

5. Even after giving the land-owner the benefit of any doubt as to the meaning of the term 'Unimproved value' the discrepancy between the real and the stated values is so large as to justify suspicion of an attempt to evade tax.

6. The land-owner is not a person who is likely to have erred through ignorance, as he is a man of business quality and good intelligence.

Under section 69, drastic penalties are provided for undervaluation with intent to defraud.

It is considered that the Department can prove that there has been undervaluation to the extent of 25 per cent, in which case, should the jury agree, and should the land-owner be unable to produce satisfactory evidence that the undervaluation was not with fraudulent intent, such intent is to be presumed.

The taxpayer would probably set up the defence that the meaning of 'Unimproved value' is still a matter of conjecture, and that the High Court has not finally pronounced upon the principles of valuation so far as pastoral properties are concerned.

It would probably not be difficult for him to set up plausible reasons for writing down his unimproved value, and I am doubtful as to the outcome of an action instituted under this section.

Under section 48 there is a power to resume. The constitutionality of this section has been a subject of comment in Court and elsewhere, but no judicial decision thereon has yet been given.

Further, there is in the administration of this section a practical difficulty, viz., that the Department could not resume the lands unless the Government provided the necessary funds.

Resumption of land may therefore become a matter of policy, though the section places the initiative on the Commissioner, who may apply to the High Court for a declaration that the Commonwealth is entitled to acquire the land.

As the Governor-General must acquire the land, the matter would, I presume, resolve itself into a situation where the Minister on the advice of the Permanent Head, would act.

Would you therefore be good enough to advise me as to the proper method of action in either case, and whether it would be incumbent on me to take action under one or other section, irrespective of any action the Government might take should section 48 be resorted to?

Section 4 of the Land Tax Assessment Act 1910-1912 provides that there shall be a Commissioner of Land Tax, who shall, subject to the control of the Minister, have the general administration of the Act.

The Commissioner is thus charged with the due administration of the provisions of the Act, subject to the directions of the Treasurer, the Minister administering the Act.

Procedure under section 48

The object of this section is to provide for the acquisition of land in certain cases of undervaluation in order to protect the revenue.

The acquisition is carried out by the Governor-General, after a decision by a Justice of the High Court declaring that the Commonwealth is entitled to acquire the land.

As the object of the section is to acquire the land for the protection of the revenue, and as this can only be done by the Governor-General, acting on the advice of the Executive Council, I am of opinion that the Commissioner should only put this section into force when the Government intend to acquire the land in the event of the decision of the Court being favourable to the Commonwealth, and that the Commissioner should only act under this section with the approval of the Government.

Procedure under section 69

Section 69 is one of the sections dealing with penalties for offences against the Act. The penalties provided by section 69 are:

1. Five hundred pounds and an amount equal to treble the amount of the tax which would have been evaded if the value stated in the return had been accepted; or

2. Forfeiture of the land undervalued or any part thereof.

The object of this section is mainly to inflict a heavy penalty upon the offender, and it is only in the event of the Court inflicting the second penalty, that there is any necessity for action by the Governor-General acting with the advice of the Executive Council.

In my opinion, as the Commissioner is charged with the administration of the Act, he may, if he thinks fit, take action under section 69 for an offence against that section unless the Minister has instructed him to the contrary.

If the Court inflicts the penalty of forfeiture of the land, then the Government will consider the question of the acquisition of the land.

[Vol. 11, p. 485]