Collector of Revenue v Norman George and Associates [2012] CKHC 31; CR435-438.2012 (31 August 2012)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CRIMINAL DIVISION)
CR no's 435-438/12
477-484/12

BETWEEN

COLLECTOR OF REVENUE
Informant

AND:

NORMAN GEORGE & ASSOCIATES
a duly incorporated company having its registered office in Takuvaine, Rarotonga
First Defendant

AND:

NORMAN GEORGE
Barrister & Solicitor of Vaimaanga, Rarotonga, Cook Islands
Second Defendant

Hearing: 31 August 2012
Counsel: Ms M Henry for the Informant
Ms L Rokoika for the Defendant

Sentence: 31 August 2012

SENTENCING NOTES OF WESTON CJ

[1] Mr George, you are here today for sentence in relation to 4 charges against you personally for failing to furnish Income Tax Returns in the periods ended 2006 through to 2009. And in addition to that you are here today effectively representing your company through which you conduct your law practice in relation to 8 charges of failing to furnish VAT returns for periods in 2005 through until 2012. The last period in the VAT charges is April 2012.

[2] I understand that, notwithstanding the current charges, you have yet to file any returns for the relevant periods let alone VAT returns for the more recent period.

[3] The income tax charges relate to a period prior to your involvement as a defendant in what has been known as the Operation Slush case. That concerned the period 2008 to January 2011.

[4] Ms Rokoika has submitted that your significant involvement in the Operation Slush trial should be assessed by me as a discounting factor in relation to my sentencing today. I accept that your involvement in that case would have been distracting and at times overwhelming. I believe it does explain, to some extent, the problems you had in providing income tax returns but it certainly does not provide a complete answer.

[5] The same comment applies in relation to the VAT charges concerning your business company. These defaults started in March 2005 which indeed was the date that you incorporated your company and from which time the company became responsible to file VAT returns. That company has never filed VAT returns and, as I have already said, still has not done so.

[6] The Operation Slush trial would have distracted you in the period around about 2008 to 2011 but it does not explain the period prior to that, nor the short period afterwards. In my opinion there has been no good reason given to justify the continuing failure of your company to provide VAT returns.

[7] The Collector has advised me that assessments have been made both in relation to income tax arrears and the VAT arrears. Allowing a credit of $126,000 that emerged out of the Operation Slush trial there is still some $93,000 arrears, most of which relates to income tax. I have been advised these arrears are being paid off on a drip-feed basis as a deduction from your parliamentary salary.

[8] Ms Rokoika has drawn to my attention the principle that I referred to in an earlier tax case which is there should be a balance between finding an appropriate penalty for failure to comply with tax obligations and the need to ensure that a defendant continues to run a profitable business and meet tax arrears over time. I am conscious of this in assessing the penalties in this case.

[9] At the outset Ms Rokoika raised an argument as to the propriety of the VAT charges by reference to s 15, Criminal Procedure Act. She has now withdrawn that submission in the face of s 41(2), Value Added Tax Act. This means that in relation to the various VAT offences, Mr George's company is exposed to penalties in relation to each of the relevant months in each of the eight or so years involved.

[10] The Crown has suggested penalties in relation to the VAT charges in the first year of $200 a month and $300 a month thereafter. By contrast, Ms Rokoika submitted that there should be annual amounts to total for each year of $100 for 2005 and $200 thereafter. In my opinion that is unrealistic.

[11] The figures of $200 and $300 referred to by the Crown are consistent with previous sentencing in this area. I am familiar with this having been involved in two of the cases. There is a powerful argument available that the penalties or the fines which should be imposed against Mr George should be in excess of this figure because he really does not have the excuses that were open to the defendants in the other cases. He is a lawyer, he does know the law.

[12] Equally, I need to bear in mind the point made by Ms Rokoika about the effect of the Operation Slush trial. I also bear in mind the submission made by Ms Rokoika that Mr George takes on a significant contribution to the work of the Criminal Court and that much of his work is pro bono. That is a matter that I will weigh in the equation.

[13] I also need to bear in mind that the penalty must be a balance between what can be afforded and what is a relevant deterrence.

[14] In setting a figure I have been influenced by what seems to be the ongoing and unexplained failure to provide VAT returns. I would have expected Mr George's company to have got on and got that problem sorted well before now.

[15] By way of conclusion then in relation to the VAT charges, while I think there is argument that the figures set out by the Crown are too light, I propose to adopt those set out in paragraph 15 of the Crown submissions. The total for those I am told, but I have not independently calculated, is some $21,800 for the VAT offences. So those are the fines in relation to Mr George's company.

[16] I then come to the question of the four years of income tax failures that I have already introduced. The credit factors that I have mentioned by reference to Operation Slush and Mr George's work in the criminal arena apply here also. I also need to bear in mind that in the only previous case which appears to have dealt with a failure to provide income tax returns, the taxpayer paid fines of $2,000 for each year of failure to provide returns.

[17] Knowing, as I do, the circumstances in that case, I think there is an argument that Mr George should pay more than that. However, I am minded to take into account the factors mentioned already about Operation Slush and Mr George's contribution to the Criminal Court. I think the appropriate balance can be met by fining Mr George $2,000 in respect of each the four years, making a total of $8,000 in that.

[18] The result of this means that Mr George's business operation in the broader sense will meet penalties of approximately $30,000.

[19] Court costs of $30 per information are payable, which is a total of $360 in addition to that.

[20] Mr George will need time to make these payments. I don't think it is appropriate that I try and negotiate the scope of that today. The figure is such that it may impact on Mr George's ability to do that within a known timeframe, so I leave it to him and the Collector to sort out a reasonable time to do that. If anyone has difficulties about that, I will be happy to give some views but it needs to be a realistic timeframe.

[21] While Ms Rokoika sought continuance of the Name Suppression Orders made so far, and made various arguments in support of that proposition, I am satisfied there are no lawful grounds to seek continuation of name suppression and therefore the previous Order is lifted and Mr George's name can be published.

_______________________
Tom Weston
Chief Justice