Tax Objections

Court Supports Norfolk's

By a staff reporter

Norfolk Island has again been in news following the introduction a bill into the Australian Parlia nt to introduce income tax into rfolk Island. rhe bill has yet to be debated. It s introduced by the Australian usurer, Mr Crean, without any or consultation with the Norfolk md Advisory Council. It is a lical and far-reaching piece of islation which affects not only rfolk Island, but the territories of cos (Keeling) Islands, and Christ s Island. It drops the description ;rritory of” before the words orfolk Island” and it seems that 5 may be an admission by the islature of the distinct and separate iition of Norfolk Island.

Following introduction of the bill, iresentations have been made by people of Norfolk Island to all stralian political parties for its hdrawal pending a full enquiry 0 the status of Norfolk Island and effects of the bill on the people the island.

Under the provisions of the bill, residents of the island, as well as idents of the other specified terri ies, will be subject to Australian ome tax, unless they can show that ir income is derived from strictly ined sources within their own, or other territories. [t is so far-reaching in its effect it it has been necessary to clothe 1 Commissioner of Taxation with cretions to allow people immunity m tax where they would otherwise vc been liable under the strict ms of the legislation. In a nut :ll, the bill provides that income : is payable on all forms of income :ept those specifically, or by the ;rcise of the commissioner’s dis ition, exempted from tax. There : no provisions for ensuring that y of the revenues collected are paid the territories concerned.

In the meantime, there have been lumber of other developments. On itember 22 four tax investigators ived on the island, and immedi ;ly started to scrutinise many of the mer island companies, almost all which are now in liquidation. Two ys later, on September 24, the Full gh Court of Australia delivered its Igment in the case of Esquire iminees Limited (as trustee for the anolas Trust) v. the Commissioner Taxation. By a majority of three

to one, the court ruled that the divi dend received by Esquire Nominees Limited had been derived from a source in Norfolk Island, and was net subject to Australian tax.

The court ruled, in effect, that once it was established that income had been derived by a resident of Norfolk Island from sources within the island, the Australian Income Tax Act did not apply at all to such income. The Esquire case was a test case.

Subsequently there have been public meetings on the island and a special meeting of the Norfolk Island Advisory Council, as a result of which a delegation put its views in Canberra on October 23. Mr Lani gan, the Second Commissioner of Taxation, arrived on the island on October 1, and the following day the two banks on the island were served with notices purporting to be issued under Section 263 of the Australian Income Tax Act, requiring the pro duction of records relating to named customers of the banks.

This brought an immediate chal lenge later the same day. In the High Court in Sydney, an application was made on behalf of one of the com panies concerned to serve short notice

for an injunction to restrain the Com missioner of Taxation and the Bank of New South Wales from producing the records.

The matter was argued briefly on October 3 and again later in the month, when the Chief Justice, Sir Garfield Barwick, reserved his de cision.

It is understood that Mr Lanigan has admitted that some aspects of the proposed bill go too far, and that it should be withdrawn and redrafted in part.

The present situation in which Norfolk Island finds itself is pre carious. Considerable capital expendi ture has been embarked upon by the Administration on the basis of ex pected high continuing returns from annual company registration fees.

This was recommended from Can berra. But this source of income has now virtually dried up and it is not going to be easy to balance the budget.

More importantly, Norfolk Is landers, without any corresponding advantages or handouts, are now to have the Australian Commissioner of Taxation scrutinise their personal affairs.