Virgin Blue’s massive tax avoidance scheme stopped by the ATO
A highly revealing report in the Weekend Australian by Elizabeth Coleman has claimed that Brett Godfrey, CEO of Virgin Blue had entered into an elaborate financial scheme now stopped by the ATO, to avoid $A70m in GST payments in Australia and that Mr Godfrey stood to personally gain up to $A2.1m under the plan, which involved restructuring the airline’s leases on 11 Boeing aircraft.
In addition Richard Branson’s Virgin Group was also to be paid up to $US18 million, allegedly to buy its approval for the controversial financial scheme.
Under the terms of the plan, which became known inside Virgin Blue as “The Scheme”, the airline and accounting firm Ernst & Young proposed altering plane leasing agreements in a manner that the ATO now describes as “tax avoidance”.
The Weekend Australian revealed that US-based International Lease Finance Corporation (ILFC) leased to Virgin Blue the 11 Boeing planes that made up its first fleet, charging Australia’s second-biggest airline a fee and as a foreign company, was able to claim GST refunds from the tax office.
They further revealed that the restructuring proposed by Mr Godfrey was allegedly designed solely to extract extra GST credits by creating a series of transactions to shuffle the ownership of the airliners between different companies and that Mr Godfrey wrote to ILFC in November 2000 with a proposal to shift the planes and the leases to two new entities.
In response to questions from The Weekend Australian, which revealed the affair on Saturday, Mr Godfrey said the restructure was for “commercial” reasons.
A report by The Mole
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