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Wednesday
Jul202016

Kerr's tax dodge - thanks Allens

Allen Allen & Hemsley's Uncle Charlie tax scheme for Sir John Kerr ... Kerr's last drunken months as GG were spent planning an elaborate tax subterfuge ... Cloak and dagger for Mr Frederick King  

Kerr: the tax avoiding Queen's man

THERE'S an exciting new chapter in Professor Jenny Hocking's revised version of The Dismissal Dossier, her spellbinding book on the 1975 sacking of the Whitlam government by governor general Sir John Kerr.  

It concerns an elaborate structure so that Sir John Kerr could avoid paying up to $300,000 in tax on his memoirs Matters for Judgment.  

The GG's agent Harry M. Miller thought the book would return an income of possibly $500,000, and Kerr was looking at a 60 percent top tier tax rate.  

On Kerr's behalf Miller went to Greenwood Challoner for advice, and the accountants referred him to Allens.  

Hocking says it was important for Kerr to avoid the appearance of the book's income being earned in Australia. However, use of an offshore tax haven required the approval of the Reserve Bank, in order to ensure that Australian tax was not being avoided.  

Kerr was GG until December 1977, and he was planning his tax arrangements during the time he held office and was sworn to "do right to all manner of people after the laws and usages of the Commonwealth of Australia".  

Kerr did not want to be identified in the proposed offshore tax structure, so he adopted a pseudonym for this purpose, Mr Frederick King. 

Hocking says:  

"For the next three months Frederick King and Allens deliberated on a scheme that would effectively subvert the usual oversight of the Governor General's financial dealings by the Reserve Bank of Australia and so avoid both disclosure and tax."  

Bob "Bulldog" Fitton from the tax office, when asked whether he considered Allens a reputable firm, is reported to have replied:   

"From my point of view, no ... They were giving more than just legal advice, they were actually encouraging people to engage in activities that were most immoral in my opinion."  

The Uncle Charlie scheme for Kerr involved a trust in the UK, a company in the Netherlands, a second company in the UK, and necessitated a trip to Hong Kong by "Mr King" to sign the relevant documents.  

This would place Kerr's earnings offshore out of the knowledge and reach of the ATO and the Banking (Foreign Exchange) Regulations would have no application.  

The UK company that held the copyright in the book was Aprolon Ltd, with a registered address in Jermyn Street, London.  

On December 9, 1977, the day after Kerr's resignation as GG took effect, he was on his way to London, with a stop-over in Hong Kong. He was carrying instructions for Mr Carter, Allens' man in HK:  

"Mr Frederick King and his wife are arriving in Hong Kong on Saturday 10 December and will be staying at the Peninsula Hotel. Mr King will have with him:  

1. Three powers of attorney in favour of yourself; 

2. Three deeds of agreement in duplicate; 

3. A letter from me to you with instructions. 

I have told Mr King that you will telephone him at the Peninsula Hotel first thing on Monday morning with a view to calling upon him to collect the powers of attorney and ... for the purpose of executing the various agreements in accordance with the instructions contained in my letter to you."  

Carter was only one of two people who knew the true identity of Mr King. Hocking describes the arrangement as "a triumph of legal chicanery over personal, and vice-regal, propriety".  

Kerr had intended to relocate to London, but three weeks before his term as GG ended and before he was due to leave Australia, Allens advised him that London was not the place to live while writing his book. British tax laws would apply, wiping out the carefully planned arrangements to avoid full tax on the income from Matters for Judgment.  

Allen suggested that the book be written elsewhere "say, in France".  

On February 9, 1978, prime minister Malcolm Fraser announced that Kerr had been appointed as Australia's ambassador to UNESCO, based in Paris. This was an extraordinary appointment because two years earlier Fraser had abolished the post as a cost saving measure.  

Labor MP Clyde Cameron described it as "the resurrection of a sinecure". By now Labor politicians were in full cry. Senator Jim McClelland had called the GG, a "vulgar race-course drunk".  

On March 1, Kerr arrived in Paris and as Hocking put it, "in his first and only action as ambassador to UNESCO, resigned".  

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