Doubts over Ross IRD windfall
A 30-year tax specialist has claimed offers of tax refunds for swindled David Ross investors, possibly worth about $20 million, are not as generous as they sound.
A recent letter from the Inland Revenue Department detailed what steps investors in Ross Asset Management could take to have tax returns from 2008 onwards reassessed, for tax paid on what has since emerged as fictitious investments.
Ram operator David Ross was recently sentenced to 10 years abd 10 months in jail for operating the scheme which robbed investors of at least $115m.
Ram Investors Group head Bruce Tichbon estimated the total refund could be worth between $15m and $20m, as liquidators revealed Ross Asset Management portfolios were overstated by more than $300 million in 2012.
But Brent Gilchrist, a 30-year tax specialist who worked for IRD for 10 years, said the refund offer was not as generous as it may sound.
A few years ago he worked to get returns for investors in another Ponzi scheme, in which Donald Rea defrauded investors of about $26m.
Rea died from a heart attack two days into his trial in 2006.
Gilchrist said in that case he had found making detailed case-by-case submissions for each investor made it unnecessarily difficult to process refunds.
"The story was the same for everybody, they got ripped off, and the amount they got ripped off was known, because they had all the information.
"I just get the feeling with this Ross thing IRD's only reluctantly coming to the party and only to what they can get away with."
Gilchrist, who is serving 10 months' home detention for his role in a fictitious invoice-writing scheme, planned to address the issue in his next tax etcetera newsletter.
"It seems that IRD is refusing to accept that Ross was a thief that stole money off people."
IRD said it had not conducted the investigation into Ross, with its role being to ensure the company and investors achieve the correct outcome in regards to their tax affairs.
It was important the tax positions of those investors who request an amendment were assessed correctly.
But Gilchrist said if IRD wanted to be really helpful, it would come out and write to the investors with what it thought an individual's claim might be.
There was also a hint refunds might be given for only the last four years. He advised investors to seek refunds on all tax paid from 2005.
The letter says any applications should include an explanation as to why any adjustments relating to the 2008 or earlier years are a result of a clear mistake or simple oversight.
"It's enough of a public issue, I would have thought, for IRD to make it a priority to be helpful towards the victims," Gilchrist said.
Victoria University law professor John Prebble, an income tax law specialist, said whether investors had made a mistake, and as such would be entitled to refunds of eight years, was a matter of statutory interpretation.
He said the situation of the investors could be compared to a batsman being bowled a googly in cricket.
When the ball left the bowler's hand, it would look as though it should turn one way, but when it landed, would turn the other.
If the batsman missed it and was dismissed, he would say he made a mistake.
"This particular case is somewhat similar because the bowler intentionally deceived the batsman, and in the game of cricket you're allowed to do that.
"But David Ross intentionally deceived his investors, and in investment you're not allowed to do that.
"Nevertheless, the effect on the investor is the same as the effect on the batsman and both of them made a mistake in respect of what they have received."
IRD said Ross' liquidators PwC had provided it with the estimated amount of foreign investments made for 2007 to 2012 to assist those who are seeking amendments to their income tax returns.
The overall amount of tax involved was still not clear, given a significant lack of documentation in the Ross case.
Earlier Tichbon had estimated about $20m of returns might be available, with some investors learning their individual returns could be worth tens of thousands of dollars.