Criminal charges to Hightrade

http://www.theaustralian.com.au/business/news/chinese-man-faces-75m-gst-probe/story-e6frg90f-1225791511865


THE Australian Taxation Office is investigating a Chinese national over an alleged $75 million-plus GST fraud relating to numerous business developments in NSW, including a luxury Hunter Valley resort.

Criminal charges could also flow from the investigation into Li Zhang, 46, and the High Trade group of companies, according to senior investigators at the ATO.

But the probe has stalled due to recent action by Mr Zhang in the Federal Court, where he is challenging the manner in which five raids were conducted in April this year and says the search warrants used were "bad on their face".

Court documents allegedly reveal the "sham" transactions related to GST credits claimed. It is alleged that High Trade operated multiple companies "supplying and providing various building and construction services controlled by the same group of people but using either fictitious identities or the identities of employees to conceal the common ownership or control of the companies".

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Invoices were inflated, or no goods or services were provided, according to affidavits filed by tax investigators. High Trade group companies then claimed the GST input credits on their Business Activity Statements while the "suppliers" went into liquidation without paying GST to the tax office.

The tax office has also traced bank accounts and says payments did not go where they were meant to. It says it has identified a series of "round robin" transactions.

A director in the tax office's serious non-compliance (SNC) division, Paul Anderson, said documents seized in the April raids were "crucial" to the ongoing investigation.

"I consider this investigation to be the most important investigation being undertaken by the SNC Operations," Mr Anderson said in an affidavit.

"The investigation can't properly continue until the investigators are given access to the ... material seized."

Mr Anderson also said he was concerned that "records may be destroyed or lost" and that "one of the suspects has left the country and not returned".

A senior investigator in the tax office, Alan Crowe, said he believed 38 of the 125-odd companies in the High Trade group were involved in the alleged offences.

One of the developments under scrutiny is the luxury Crown Plaza Hunter Valley Resort, for which the ATO has issued a revised $29 million tax bill.

A further $8m tax bill was issued to property development company Pakshun, formerly High Trade Company Pty Ltd.

Both assessments are being disputed, with the companies denying any "sham" transaction and saying the tax office has incorrectly calculated GST.

It was "no secret" the companies had loans. They say they have been denied "natural justice" by the tax office, which is acting in an "arbitrary" and "capricious" way.

Last week the Federal Court ruled the tax office was not allowed to use the seized documents until a further hearing took place regarding the search warrants. Justice Geoffrey Flick said "a serious question exists as to whether documents may have been seized without proper regard to the terms of the warrants themselves".

High Trade-related building sites have been raided by immigration authorities at least six times in relation to Chinese nationals allegedly working at building sites without work visas, according to recent reports.

The company has not been prosecuted in relation to those raids.