Press Conference
4 Treasury Place, Melbourne

Thursday, 20 July 2006

1.30 pm

SUBJECTS: Project Wickenby arrests, Federal – State relations, Australians in Lebanon

TREASURER:

This morning three people were arrested by the Australian Crime Commission and they have been charged with tax evasion offences.

They were arrested at the Southport Police Station on the Gold Coast and they have been charged with conspiracy to defraud the Commonwealth.

It is alleged that between 1999 and 2005 the benefit that the trio received through defrauding the Commonwealth was $6.6 million. Convictions on these charges carry jail terms of up to 10 years. Proceeds of crime action has already been taken and $10 million in assets are currently being restrained.

This arrest has been made under Project Wickenby. Project Wickenby is a project which has been funded by the Australian Government with $305 million and brings together the Australian Tax Office as the lead agency, the Australian Crime Commission, the Australian Federal Police, the Australian Securities and Investments Commission and the Commonwealth Director of Public Prosecutions.

Project Wickenby was established after information became available that international tax scams were operating in Australia and some Australians had engaged in them which was a deliberate effort to take income outside the operation of Australia’s tax laws.

The Project has been set up with very, very considerable funding bringing together all of those agencies of the Commonwealth and these are the first arrests. It is expected that there will be further people charged in relation to these matters. Any person that wants to come forward in relation to these matters can contact a Government information line, obviously by coming forward and assisting authorities they would place themselves in a better position than if the authorities come to them first.

The reason the Australian Government has invested so much money in Project Wickenby is that international tax scams do represent a threat to the Australian taxation system. If some people don’t pay their fair share of tax everyone else pays more. But if all people pay their fair share of tax, everyone else can pay less and the Government has just introduced a new round of tax cuts which started on the 1^st of July this year. It is our desire to keep taxes as low as possible in Australia and to do that we are pledged to take every effort available to bring those people who try and keep their income out of the Australian tax system to justice.

JOURNALIST:

Mr Costello what did the tax scam involve?

TREASURER:

It is alleged that international promoters marketed to Australians the hope that they could keep money outside of Australia and thereby avoid the Australian taxation system. That is not how our tax system works. If you are an Australian citizen and you derive income you are taxable on it and any person that tells you that they can keep this money offshore or can make it available to you whilst keeping it secret from the Australian Taxation Office is not giving you proper advice. All Australians are liable to tax on their income and their earnings and by keeping money offshore and by putting it in the hands of international promoters you do not avoid the Australian taxation law.

JOURNALIST:

What precisely (inaudible) was it men, women, businessmen?

TREASURER:

I can tell you that they are three men, that they were arrested this morning at the Southport Police Station, that they have been charged and the ordinary course of law will now take place. I can also tell you that the Project continues and it is expected that further charges will be laid and possibly further arrests will be made.

JOURNALIST:

Mr Costello how do you rate this breakthrough for Project Wickenby?

TREASURER:

This is an enormous breakthrough for Project Wickenby. Project Wickenby is a $305 million, multi-Agency investigation involving all of the premier law enforcement and tax bodies of the Commonwealth. To have made an arrest, to have laid some charges is an enormous breakthrough but the agencies are going to continue their investigations and believe that further charges may well be laid.

JOURNALIST:

How many people are targeted by this investigation?

TREASURER:

A very large number.

JOURNALIST:

Can you quantify…?

TREASURER:

I can’t give you the number because investigations are ongoing but I can tell you that there are many more people that are subject to this investigation.

JOURNALIST:

Why can’t we know the names of the people who have been charged?

TREASURER:

Well I don’t think it is appropriate for me to give out the names at this stage. They will appear in court in due course and that is a matter for the courts.

JOURNALIST:

When will they appear in court?

TREASURER:

Well I would imagine that they would appear in court as soon as the courts are able to hear any application that they may want to make.

JOURNALIST:

Are they well known persons?

TREASURER:

I am not going into matters of identity.

JOURNALIST:

Did they present themselves voluntarily?

TREASURER:

They came to the Police Station and they were charged at the Southport Police Station this morning.

JOURNALIST:

What kind of business were they in?

TREASURER:

Well I won’t go into that.

JOURNALIST:

Were they listed businesses? Listed companies?

TREASURER:

I am not going into the companies that are involved.

JOURNALIST:

Were the three people who were arrested the people who were actually selling this product or were they people who had been taken in by it?

TREASURER:

Well it appears to us as if there were people overseas that were integrally involved in this activity and of course there were people in Australia who were assisting them. And the people in Australia who were assisting them, if they have broken the law, will expect to face charges. And I want to re-emphasise Project Wickenby is extremely well funded. It has enormous resources, it brings together under the lead of the Australian Taxation Office all of the significant law enforcement bodies of the Commonwealth and this Project will continue to run on and if any person thinks that they may be of interest I would encourage them to contact the authorities and to assist the authorities with their enquries.

JOURNALIST:

Are those agencies co-operating with agencies offshore?

TREASURER:

Yes.

JOURNALIST:

In what countries?

TREASURER:

Well the extensive investigations to date have involved Australia, Switzerland, the United Kingdom and China.

JOURNALIST:

So the three arrested today are not Australian citizens Mr Costello?

TREASURER:

No the three arrested today were all in Australia.

JOURNALIST:

How much has Operation Wickenby cost to date?

TREASURER:

Well we have set aside $305 million over seven years for Project Wickenby and to date it has been running since 2004, so we have spent about two sevenths of that.

JOURNALIST:

Sorry my question originally was whether or not they were all Australian citizens not whether or not they were in Australia.

TREASURER:

They were all in Australia and were arrested this morning.

JOURNALIST:

What about the people who were brought into this scheme, were they all to be targeted by the operation?

TREASURER:

Oh yes, you tend to find in relation to tax scams that there are people who promote it and people who market it and who take a fee for running it and then there are people who join it in the hope that it will minimise their tax liability. The people who join it in that hope will find that this hasn’t minimised their tax liability, they will be liable for tax, they will be liable for penalties, they will be liable for interest and the people that have run it will be liable for much more serious charges.

JOURNALIST:

Mr Costello from what we have seen today it appears as if these three men arrested today are key figures in an international tax scheme, tax scams?

TREASURER:

Well the three that have been arrested today have been charged with conspiracy to defraud the Commonwealth and those charges will be held in accordance with law, everybody has the presumption of innocence but what I am telling you is that Project Wickenby has not concluded. This is not all the charges that we expect to come out of Project Wickenby. The investigations continue and if the evidence comes to light as expected we would expect more charges.

JOURNALIST:

How big is the hole in the tax revenue caused by these activities?

TREASURER:

Well if this were allowed to go unstopped, if people were able to avoid paying Australian tax by keeping money offshore or hiding it with international promoters, you have got a threat to the revenue of billions of dollars. Now, as I said the investigation is now starting to catch up with people and I expect that that will prevent leakage of revenue. In fact if the investigation is successful we should recover all of the revenue that otherwise would not have been paid.

JOURNALIST:

How much is the, what is the dollar amount of this revenue that has not been paid?

TREASURER:

Well as I said it is our hope and expectation that we recover all of it. In fact there won’t be any lost and that is the object of this.

JOURNALIST:

Given these individuals had a benefit of $6 million, I think you mentioned earlier, these charges must relate simply to the tip of the iceberg in this matter. Can you quantify…

TREASURER:

Well that is what it is alleged. You have to be very careful here, it is alleged that that was their benefit but you have got to remember that the benefits to people who participate in the schemes which they would claim would be very much greater than that. So that is what I said, those people who think the schemes work they won’t, they will have to pay that tax in the end and that is why I would hope with this successful investigation that none of that tax would be lost but that will take time.

JOURNALIST:

The fact that you are asking people to come forward to give more evidence, does that suggest a certain weakness in the case so far?

TREASURER:

No not in the slightest. It just makes this point, sometimes somebody comes to you with a tax scheme and says enter this scheme and you won’t have to pay any tax and these schemes never work. And if you have been approached and somebody has put you into one of those schemes and you now realise that it won’t work and you want to voluntarily disclose it, it is very much in your interest to make disclosure because if you make disclosure the penalties are much less. That is what I am saying to people, if you think you have been put into one of these schemes don’t wait for someone to come and find you, it will be very much in your interest to go and make disclosure to the Tax Office because that is taken into account in relation to penalties.

JOURNALIST:

How many people do you think might be involved (inaudible)?

TREASURER:

Look, I am not going to put any numbers on it, the investigations go on but it is expected that it is going to be more than this.

JOURNALIST:

Can you explain what prompted the charges being laid today?

TREASURER

Well, what has prompted is that the agencies believed that they had enough evidence to make an arrest and to lay some charges.

JOURNALIST:

Are we not going to see a swoop of all people that have been investigated for years at once or is it going to be a staggered process?

TREASURER:

The investigations will go on and if evidence comes to light that warrants the laying of further charges that is what will be done.

JOURNALIST:

Can you say whether (inaudible) were involved?

TREASURER:

I’m not mentioning any names.

JOURNALIST:

When are you going to start targeting Victorians?

TREASURER:

Pardon?

JOURNALIST:

Victorians, when are you going to start charging Victorians?

TREASURER:

I’m sure Victorians will be charged if there is evidence against them.

JOURNALIST:

Treasurer can I just as ask, COAG last week appeared a cooperative and successful occasion and the Premiers were very critical of your comments on Federalism, do you stand by those comments you made prior to COAG?

TREASURER:

Well I think that improvement of our Federal Relations would be a major reform in the interests of Australia. And I think most people would say that there is room for improvement and of course those of us that are interested in getting more accountable government at a lower cost will continue to work to improve Federalism in this country.

JOURNALIST:

Didn’t COAG prove that it is working?

TREASURER:

Well if you think there are no further problems and there won’t be any further problems in the next hundred years I suggest that you would be amongst a small minority.

JOURNALIST:

(inaudible) on another matter, in light of other countries (inaudible) should Australia be embarrassed at its efforts for getting our nationals out of war torn Lebanon?

TREASURER:

Well can I say the Australian Government and the Department of Foreign Affairs and the Embassy in Lebanon are doing everything that they can. We know this is a terrible situation for people who are caught up in Lebanon. We know that, we know that they are suffering hardship, we know that they will be frightened, worried and I just want to assure their relatives here in Australia that everything that can be done is being done. But it is a war situation, and it is a war situation where the airport has been taken out of action, where most of the roads have been bombed and so the principal way of exit is by sea. And it is difficult when there are so many people trying to get out of Lebanon to get available vessels. But the Australian Government is doing everything that can possibly be done to get those vessels and to make them available for Australian citizens.

JOURNALIST:

(inaudible) Australian citizens on those docks watching other people from other nations being evacuated and they are sitting there on the dock?

TREASURER:

Well I share the disappointment and the frustration that people would feel but you have got to remember that to get a ship into a war situation you have got to hire it, we are not the only country that is trying to hire these vessels. The vessels have to get into a port in a city which has been subject to air attack and they have to get out in a way where they will not be subject to air attack themselves. And it is very difficult to get vessels in those circumstances, the Department of Foreign Affairs is doing everything that they can possibly can to look after those Australians.

JOURNALIST:

If there is going to be an air attack it is going to be from Israel. Are you disappointed that Israel that isn’t doing more considering the large number of nations that are trying to get their innocent civilians out?

TREASURER:

Well I think that we have cooperated with the Israeli Government in notifying them of the Australian exits because obviously you want it to be known that they are Australians, that they are not combatants. You don’t want any errors to be made and the Israeli Government is cooperating with us. But you have got to remember it is also intent on destroying any of the combatants that are trying to flee, particularly if they are trying to flee with mobile batteries. And this is what happens in war, it is very delicate to make sure that legitimate targets are the subject of your aims and your ambitions and to be careful that civilians are not hit. And we have to be very careful about that. Last question.

JOURNALIST:

Are you fearful that the Hezbollah might use Australians or other people as shields?

TREASURER:

I’m not saying use them as shields but there are combatants that may be trying to flee from the combat zone, may even be trying to move assets from the combat zone. They are legitimate targets, there are Australians who are civilians who are just trying to get out of the combat zone and they are not legitimate targets. And we need the cooperation of those involved to ensure that the civilians are safe and it is very delicate and very difficult and the consequences can be quite extreme. Thanks very much.