Reseller jailed but tax fraud on the rise again

Reseller jailed but tax fraud on the rise again

One tax cheat is crying in his swill after being sentenced to two years in jail for defrauding the Commonwealth out of more than $1.2 million in sales tax.

However, many in the industry believe that a new spate of sales tax evaders have emerged and are slipping through loopholes in the six-month old accreditation system.

It took the Australian Taxation Office and the Australian Federal Police three years to finally get their man. The Melbourne County Court finding by Judge Ross against Michael Mihalakis, aged 34, is believed to be the largest prosecution of its kind ever completed against a personal computer trader in Australia.

Despite such strong warnings, Ross Whitelaw, general manager of Leading Edge Computers, Australia's largest cooperative of independent retailers, said his members are facing a new round of suspicious price competition.

He fields calls daily from all over Australia relaying news of competitor deals on hardware at prices better than his members can buy. Whitelaw feels the recent successful prosecution is a good result and a strong warning, but fears there is a lot more work to do.

"while the apprehension of one such trader is good news, we believe there are many more who need to be looked at to bring any sense of normality to this industry," Whitelaw said.

When contacted, two distributors who preferred not to be named, agreed there were some strange deals going around at the retail level and confirmed there was an increase of correctly credentialled tax exempt orders over the last two months. "It seems to be way too easy to get an accreditation number as a wholesaler," one said.

Police evidence put before the court showed Mihalakis had withheld sales tax totalling $1,204,042.07, over an 18-month period from October 1994 to April 1996.

Mihalakis had been issued with a sales tax registration number in the name of Nullawil P/L in November 1994 and commenced trading under the name of Just Printers.

Soon after, goods purchased with tax exemption were resold under trading names Just Printers, Printers and Computers Clearance Services (PCCS), Terrick Terrick Computer Services (TTCS) and Multi Level Computers (MLC) without assessable sales tax ever being paid.

No intention of remittance

The AFP case claimed "the success and profitability of these businesses was based on the fact that it was never intended for the sales tax to ever be remitted to the ATO as required.

"Mihalakis was able to substantially undercut prices of wholesalers who were legitimately including the 22 per cent sales tax," the court heard.

Found guilty on four charges, Mihalakis was ordered to serve 10 months behind bars before a further two-year good behaviour bond.

Initially claiming to be operating on behalf of "an Asian man" who did all the organising, in later statements Mihalakis conceded this person was fictitious. Four other men, Adam Abela, Christopher Hickey, Sheu Kit "Eddie" Poon and Chor Huat "Billy" Loh, one of which has been prosecuted, are before the court in relation to TTCS and associated transactions.

The AFP has seized goods under the Proceeds of Crime Act, including an RX-7 SP sports car, a Eunos sports car, a Pajero 4WD and a bicycle worth $6000.

Michael Cebalo, assistant commissioner of taxation, said 185 charges have been laid against resellers, including 21 that have involved "custodial sentences".

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