Excise: refusal to grant a licence on the basis that refusal is necessary to protect the revenue

Is a person's poor compliance history a relevant consideration in determining whether refusal of a licence is necessary in order to protect the revenue under section 39A of the Excise Act 1901 (Excise Act)?

Yes. A person's poor compliance history is a relevant consideration in determining whether refusal of a licence is necessary in order to protect the revenue under section 39A of the Excise Act.

A person has applied for a licence under the Excise Act.

The person has a poor compliance history with regard to their income tax obligations. The client has failed to maintain adequate taxation records, has made significant and repeated errors in determining their taxation obligations, and has lodged returns and paid tax after the due dates.

Subsection 39A(1) of the Excise Act states: The Collector may grant, or refuse to grant, a licence.

Subsection 39A(2) lists a number of specific circumstances under which the Collector may refuse to grant a licence. It states that: (2) Without limiting subsection (1) but subject to subsection (3), the Collector may refuse to grant a licence if, in the Collector's opinion: ... (l) refusal to grant the licence is necessary to protect the revenue.

The meaning of 'necessary to protect the revenue" was considered by Deputy President Forgie in Martino v. Australian Taxation Office [2002] AATA 1242. Commencing at paragraph 51 of the judgement in that case she said: 51. the ordinary meanings of the word " protect " include " keep safe, take care of " (The New Shorter Oxford English Dictionary, 3rd edition, 1993) and they would seem to be in the senses in which the word is used in the expression " protect the revenue ". Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally. 52. What is meant by the word " necessary "? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447: "As to the word 'necessary' it does not have, in my judgment, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way. As Pollock CB said in Attorney General v Walker (1849) 3 Ex 242; 154 ER 833: 'It may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment.'" (page 452)

The following principles may be drawn from Deputy Forgie's judgement: • The Commissioner may refuse to grant a licence if it is considered reasonably necessary for the protection of the revenue. • The protection of the revenue encompasses two elements. Firstly it equates to the need to ensure that the Commonwealth receives all that it should in the form of any excise that is ultimately payable. Secondly it equates to the Commonwealth not having to incur excessive expenditure in ensuring clients' compliance with their excise responsibilities.

In this instance, the client has a poor compliance history with regard to their taxation responsibilities. If a client has demonstrated poor compliance with one aspect of their taxation obligations, this may indicate (in the absence of mitigating factors) that they may be unwilling or unable to comply with their excise responsibilities.

Therefore a person's poor compliance history is a relevant consideration in determining whether refusal of a licence is necessary in order to protect the revenue under section 39A of the Excise Act.