|Court Action Freezes Multimillion-dollar Share Holdings Leonie Wood|
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Shares worth millions of dollars in Australian-listed companies have been frozen by the Federal Court as the Tax Commissioner pursues companies linked to a Swiss-based Belgian businessman over $28 million of outstanding tax assessments.
The Tax Office's inquiry into companies linked to Peter Borgas and his wife, Winny, who are based in Neuchatel, Switzerland, also focuses on the activities of the Sydney-based accountant and trustee Vanda Gould of Gould Ralph and some of his clients.
The court has been told the investigation arose as part of the long-running Wickenby investigation into tax avoidance.
In Melbourne on September 2 Justice Sue Kenny heard that the Tax Office believes the Borgas-related companies invested tens of millions of dollars in Australian shares over several years, via hundreds of individual transactions, and that they repatriated the sale proceeds overseas without paying Australian tax.
Speaking to BusinessDay on September 2, Mr Gould denied wrongdoing and denied being involved in tax avoidance. He said that as far as he knew ''the majority of income'' from the share sales by the British companies was distributed to charitable institutions in Australia, Africa, Asia and elsewhere. The court has heard the Moore Theological College in Sydney received a distribution of $1 million.
Some of the five foreign entities affected by the freeze order own parcels of shares that place them among the top-20 shareholders of listed Australian biotech companies.
The order has been imposed on Australian assets owned by Chemical Trustee Ltd of London, Derrin Brothers Properties of London and Bywater Investments of Nassau in the Bahamas, all of which have Mr and Mrs Borgas as directors. The freeze order also applies to Southgate Investment Funds Ltd of London, and Hua Wang Bank Berhad, which has a banking licence issued by Western Samoa.
It is not yet clear what significance the Tax Office is placing on the Gould connection, but the court was told the Tax Office has become aware of many loans over the years from Hua Wang Bank to clients of Mr Gould.
Mr Gould told BusinessDay that the investigation and assessments arose because of what he said was the Tax Office's changed policy towards tax on proceeds of share sales by foreign-based entities. ''It's been very poorly and sloppily done,'' he said.
David Russell, QC, for the Borgas-related companies, told the judge his clients believe the Tax Office assessments are ''misconceived''.
The freeze order, imposed on August 12, was extended on September 2 until September 7. It covers all securities in Australia owned by the five foreign companies and specifically refers to any holdings in Cyclopharm, Vita Life Sciences, Genetic Technologies, CVC Ltd, Cellnet, Pro-Pac Packaging and Mnet Group.
Chemical Trustees has substantial stakes. Its freeze orders cover holdings in 26 companies including Woodside, Westfield, AWB, AMP, Globe International and Alumina Ltd.
Chemical Trustees also owns 15.7 per cent of Vita Life Sciences, 16 per cent of Cyclopharm and, along with Derrin Brothers Properties and Bywater Investments, it is one of the top-20 shareholders in CVC Ltd. Mr Gould is chairman of all three of these listed companies.
Ian Martindale, SC, for the Tax Commissioner, told the court that while there is nothing illegal about registering companies in tax havens or having sophisticated financial structures, the court needed to make some inferences in this case.
He said some of the ''suspicious factors'' included that the Borgas-related companies were incorporated overseas, had engaged in ''substantial transfers'' of funds into and out of Australia, each had derived income from share trading in Australia and only one had lodged tax returns.
Submissions prepared by the Tax Office in support of the original freeze orders indicate that in the 10 years to September 2009, Hua Wang Bank transferred more than $547,000 to Australia and expatriated $8.66 million to Western Samoa.
The Tax Office also claims Chemical Trustees engaged in 448 international transfers that resulted in $66.4 million coming into Australia between 2001 and mid-2007 and $61 million being sent out. Derrin Brothers was said to have transferred $6.5 million to Australia and expatriated almost $11.1 million, while Bywater transferred $42 million and sent back $73 million.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Sept.14, 2010