A ‘fine’ conflict of interest

Guest post by Gavin R. Putland

In Victoria, if you are pinged for exceeding the speed limit by less than 10kph, and if it is your first offence for at least two years, you can apply to have the fine withdrawn and replaced by a warning. Most police officers know about this loophole, whereas most other citizens don’t. And that, according to Police Commissioner Simon Overland and Deputy Commissioner Key Lay, is why police officers caught speeding are 25 times more likely to be let off than the public at large.

But if you are caught speeding, and if police records show that you are eligible for a warning instead of a fine, why don’t the police tell you about this opportunity or presume that you will apply? Answer: revenue. And why haven’t police and politicians pointed out this loophole on every previous occasion on which fining people for minor speed infringements has been alleged to be about revenue? Answer: because it really is about revenue.

Not that the “loophole” amounts to much. The police still don’t have to waive the fine; but to qualify for a waiver, you do have to admit that you were speeding. So what’s to stop the police from using the possibility of a waiver to induce a confession, and then using the confession to fine you?

When a breach of the law is punishable by a fine, the executive branch of government stands to profit from the breach. Yet the primary duty of the executive branch is to ensure that the laws are obeyed. This is a conflict of interest of the worst possible kind, at the highest possible level.

Any state government could purge its conflict of interest by introducing legislation requiring all proceeds of fines to be invested in 10-year federal bonds, so that the revenue can’t be spent until 10 years later, by which time the other party might be in power. To bridge the interruption in revenue without creating a new incentive for fines, the same legislation could also provide for a fixed schedule of sales of state government bonds. The lack of such legislation, contrasted with the never-ending stream of legislation creating new offences punishable by fines, is further evidence that it’s all about revenue.

Alternatively the Federal Parliament, using its conditional-grants power (s.96 of the Constitution), could legislate so that the proceeds of fines received by each state are deducted from federal grants to that state, while proceeds of fines received by the Commonwealth go into the pool to be distributed as grants to the states. A one-off adjustment of grants would avoid any hiatus in revenue. The lack of such legislation is consistent with federal complicity in using fines as de-facto taxes.

To date there has been only one constraint on fining people for honest mistakes: the legislators and enforcers are bound to make some of the same mistakes, and therefore need some way to get off without being seen to be beneficiaries of favouritism. The solution is to create legal loopholes which in theory are available to everyone, but which in practice are better known to the legislators and enforcers than to the general public. Hence the ruckus in Victoria.

If governments will not implement a scheme for eliminating their conflict of interest, the citizens have not only the moral right, but also the civic duty, to implement their own. Such a scheme, to be effective, must involve either (1) the certainty that the government will lose at least as much revenue as it gets from fines, or (2) a credible risk that the government will lose far more revenue than it gets from fines.

Here’s a scheme of type (1): If you own your home, and if you are fined by the State, don’t sell your home and buy another next time you have to move. Instead, let your old address to tenants and rent your new address, using some of the savings in stamp duty to negotiate whatever security of tenure you need at the new address. That way, the State misses out on the stamp duty that the buyer of your old home would have paid, and (if you are moving within the State) the duty that you would have paid on your new home.

Of course you’ll become liable for capital gains tax on your old home if you sell it later; but that tax goes to the Feds, not the State! Besides, with the housing market so overpriced, I wouldn’t be counting on any substantial capital gains any time soon.

Of course not everyone owns a home. But for present purposes not everyone needs to. Because revenue from stamp duty exceeds revenue from fines by about one order of magnitude, and because the typical stamp-duty bill is about two orders of magnitude bigger than the typical fine, it doesn’t take many disgruntled home owners to wipe out all the revenue from fines.

The most obvious scheme of type (2) involves the stamp duty on new cars. If the High Court sticks to the definition of an “excise” that it accepted in Ha v. NSW (1997), the stamp duties charged by the states and territories on new (not used) vehicles are duties of excise, in which case they contravene s.90 of the Constitution. So, if you have ever bought a new vehicle, and if you are fined inappropriately, you can recover your losses by suing for a refund of the stamp duty. You can also demand vindication by insisting that you won’t settle the constitutional case out of court without a public admission that the stamp duty is indeed an excise, in which case the State will be obliged to pay back all the duty it has collected in the past (ouch!). It shouldn’t matter how long ago you bought the vehicle, because the Constitution trumps any statute of limitations purporting to limit the time available for lawsuits. Neither does it greatly matter if you bought the vehicle in another state and have to sue that state, because the outcome of the suit will be a precedent for all states.

What if you’ve never bought a new vehicle? Then you can argue that payroll tax is unconstitutional, and that you’re a victim of it because it reduces your job prospects and/or reduces your pay and/or increases your cost of living.

What if you’re being persecuted by the Feds instead of the State? Then you can argue that requiring employers to remit PAYE tax and GST at their own expense contravenes s.82 of the Constitution and, like payroll tax, is reducing your job prospects, etc. Such a claim would also have implications for state governments because they receive GST revenue.

Promising to recover your fine by suing over an unconstitutional tax won’t get you off in a situation where you don’t have a ghost of an excuse, because that would be seen as an admission that the tax is unconstitutional, in which case the constitutional battle might as well be joined. But where you do have an excuse or special circumstance, the risk of a tax being declared unconstitutional will encourage prosecutorial discretion.

Of course, most of the above schemes could be partly or fully neutralized by appropriate tax reform. But that would be a good thing. It might even yield a growth dividend which would reduce the apparent need to get extra revenue from fines.

In the mean time, if it’s good enough for the State to game the system in order to separate citizens from their money, it’s good enough for the citizens to game the system in order to force the State to sod off.

8 thoughts on “A ‘fine’ conflict of interest

  1. I doubt it’s simply a lack of knowledge, although my evidence is entirely anecdotal. I used to volunteer at a community legal service and the girl there had a fine for travelling I think something like 4 kph over the limit and it was the first fine she’d ever received after eight years of driving and one of the staff solicitors drafted it and she still got the fine.

    It would be interesting to see what the difference in application success between the two groups is also.

  2. I don’t support speeding fines—but I’m a resident of Queensland and I received my first speeding fine while driving in Victoria. I was doing 109 km/h in a 100km/h zone.

    I still have my speeding fine from 2008, and it states without going into details) at point four, that you can have your speeding fine reviewed. I did a quick search online (‘victoria speeding review’) and found the information I needed to make this happen.

    I gave them a quick call, and they were actually quite good about it. Over the phone, I informed them that I wanted to have it reviewed and instantly received an extension on my due date to get everything organised.

    I had to provide my driving history from Qld Transport and admit that I was ‘speeding’, but after that my review was successful.

    Victoria is lucky to have this process. From my understanding, Queensland doesn’t have one.

  3. Yet the primary duty of the executive branch is to ensure that the laws are obeyed.

    I’m not sure I agree with this being their primary duty.

  4. Thanks to David Leyonhjelm for posting the article.

    The contrast between comments 1 and 2 shows part of the problem: lack of consistency. But if the police always have to ask themselves “Can we waive this fine without admitting that we have a constitutional liability?” then at last they’ll be consistent.

    Concerning comment 3, I am obviously curious as to what *is* the primary duty of the executive branch.

    One might reasonably ask how another executive function that I have invoked, namely clemency, is to be reconciled with a duty to maintain the laws. One could answer, in part, that an executive duty to maintain the laws implies a legislative duty not to make laws that are designed to be breached.

  5. I read this post. It is a difficult problem, I think. A large percentage of my work in recent years has not been made public yet, or projects that will never be public. This makes life very difficult.

    I think it’s always better to show the portfolio section for all related parties and obtain their approval before publicly display line. It’s slow and tedious process, and do not always get the permission to publish it in the final.

  6. Another scheme of “type (2)”, involving a challenge to stamp duty on new homes, is suggested by the following letter — which the Melbourne Herald Sun has so far declined to print, although the Hun has been waging a campaign against conveyancing stamp duty since September 16. By reducing the supply of housing, stamp duty on new homes increases the cost of housing for everyone, so that all residents in the offending state, including citizens and non-citizens, should have standing to challenge the duty.

    STAMP DUTY UNCONSTITUTIONAL?

    Congratulations to the Herald Sun for taking a stand against conveyancing stamp duty, which is not only regressive and inefficient, but also possibly illegal.

    The Australian Constitution forbids the States to impose excise duties. The High Court has defined an excise as “an inland tax on a step in production, manufacture, sale or distribution of goods”. Various court decisions indicate that this definition covers any “sale” up to and including the last sale before the consumer, but not second-hand sales.

    Houses are not classified as goods. But they certainly embody goods. A tax on the sale of a new house may therefore be construed as a tax on those goods at the last step before the consumer — in which case the stamp duty on new homes is unconstitutional.

    Stamp duty could be made constitutional by (i) exempting new homes, or (ii) apportioning the duty to the increase in the land value since the last sale, thus excluding goods embodied in the building, or (iii) turning the duty into a capital gains tax with the usual deduction for capital expenditure, so that expenditure on goods embodied in the home is excluded.

    Any one of these reforms would remove the burden on construction and thereby make housing more affordable.

  7. In Victoria, if you are pinged for exceeding the speed limit by less than 10kph, and if it is your first offence for at least two years, you can apply to have the fine withdrawn and replaced by a warning.

    Could you cite the exact legislation that allows for the fine to be withdrawn? A friend of mine got a speeding fine recently and is hoping to get it excused.

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