Kali Sanyal
Introduction
On 4 April 2016, global news agencies, including the
Australian Broadcasting Corporation (ABC), released a series of reports on the
offshore financial schemes under the banner 'The Panama Papers'. ‘The story was
based on 11.5 million leaked records from a Panamanian law firm, ‘Mossack
Fonseca’, a firm that creates offshore shell companies on an industrial scale.
Some 214,000 companies, trusts and foundations were created over the years.’[1]
Australian Taxation Office (ATO)
action on ‘Panama Papers’
In a statement released on 4 April 2016, the ATO stated that
they had received data in relation to ‘Mossack Fonseca’ containing names of a
significant number of Australian residents, of which over 800 individual
taxpayers were identified. After scrutiny of the papers the ATO linked over 120
of them to an associated offshore service provider located in Hong Kong.[2] There are around 80 names that matched with the Australian Crime Commission’s
crime intelligence database.[3]
The ATO further revealed that ATO intelligence on tax
evasion comes from a variety of sources, including from concerned citizens,
advisers, partner agencies and international bodies. For example the ATO has
raised tax liabilities of around $400 million from data supplied by
confidential informants.[4]
In a Senate Committee inquiry hearing on 21 April 2016, the
Commissioner of Taxation, Mr Chris Jordan acknowledged that ‘(t)he sheer size
of the data release means that no single jurisdiction can tackle this challenge
alone’.[5]
The 2016–17 Budget measures
Against the backdrop of the ‘Panama Papers’, the 2016–17
Budget enhances the role of the Australian Taxation Office (ATO) in targeting
tax evasion and avoidance. The Government announced that the ATO will receive $679
million over four years to establish a Tax Avoidance Taskforce. The Taskforce is expected to recover $3.7 billion
in tax liabilities over four years. It is intended that the Taskforce will also
deter taxpayers from attempting to avoid and evade their tax obligations.[6]
The objective is to enhance the ATO's current compliance activities
targeting large multinationals, private groups and high-wealth individuals, and
extend the activities to 30 June 2020. The suggested operational framework allows
the ATO to work closely with partner agencies including the Australian Crime
Commission (ACC), the Australian Federal Police (AFP), the Australian
Securities and Investments Commission (ASIC) and the Australian Transaction
Reports and Analysis Center (AUSTRAC). Similar to ‘Operation Wickenby’, the
Taskforce will also investigate alleged breaches of taxation law involving deliberate
tax evasion and avoidance. The Government tasked the Commissioner of Taxation
to provide regular progress reports, with the first report to be provided
before the end of 2016.
As part of the reviewing the work of the group, a panel of external
experts, including a number of eminent former judges will review proposed
settlements with the ATO in order to ensure that they are fair and appropriate.
Past tax evasion and avoidance programs
Operation Wickenby
Beginning in the second half of 2005, under the codename Operation
Wickenby (later named Project Wickenby), the ATO worked with other agencies to detect
fraud and crime in offshore tax evasion and tax avoidance arrangements.
On 8 February 2006, the then Coalition Government provided
the ATO with extra funds to combat tax scams. At the time, the Government
provided an additional $305 million over the next six years, to further
resource a multi-agency operation directed at promoters of and participants in
off-shore tax schemes and fraud.[7]
Project Wickenby focused on tackling offshore tax evasion
and crime, and concluded in June 2015.
On 4 April 2016, the ATO disclosed that on the successful
completion of the Project Wickenby last year, the Government could raise $2.3
billion in tax liabilities and had 46 criminal convictions.[8]
Project DO IT
After the successful completion of Project Wickenby, the ATO
embarked on an agency initiative in 2014 entitled Project DO IT. On 27 March
2014, the ATO announced that the project was a one-off opportunity to allow
eligible taxpayers to come forward and voluntarily disclose unreported foreign
income and assets pursuant to certain undertakings by the ATO.[9] The ATO emphasised that it would use powers it has under bilateral or multilateral
agreements between Australia and other countries to exchange information about
hidden or undisclosed offshore income and assets. Project DO IT offered the
most generous terms ever announced by the ATO for making a voluntary tax
disclosure.
Under this scheme disclosures about offshore income and
assets were required to be made by 19 December 2014 in order for taxpayers
to take advantage of the terms offered under the initiative. Taxpayers making
disclosures would be assessed only for the last four years, be liable only for
a maximum shortfall penalty of 10 per cent, and would not be referred for
criminal investigation.[10]
Under the project, an undisclosed number of disclosures have
been lodged and concluded by way of settlement deed with the ATO.[11]
Serious Financial Crime Taskforce
Since the completion of Project DO IT, the ATO has bolstered
its compliance work and has coordinated with other agencies. The project may
refer some cases to the Serious Financial Crime Taskforce (SCFT)—which is an
offshoot of Project Wickenby.[12] The SFCT is a multi-agency taskforce that forms part of the Australian Federal
Police led Fraud
and Anti-Corruption Centre [13] and started operation on
1 July 2015.
While Project Wickenby focused on tackling offshore tax
evasion and crime, the SFCT will have a broader remit to target the highest
priority serious financial crimes.
The 2015–16 Budget provided $127.6 million over four years
to fund the new SFCT to ensure Commonwealth financial crimes are disrupted and
deterred.[14]
The Taskforce has been operational since 1 July 2015 and by
the middle of October 2015 there were eight new matters under investigation
involving serious financial crime. Further, more than 580 tax audits were
undertaken and more than $85 million in liabilities raised.[15]
The priorities for the Taskforce include investigations into
serious international tax evasion and criminality related to trusts and phoenix
activity.
OECD Common Reporting Standard
The Common Reporting Standard (CRS) is the single global
standard for the collection, reporting and exchange of financial information on
foreign tax residents. Under the CRS, banks and other financial institutions
collect and report to the ATO financial information on non-residents. The ATO will
exchange this information with the participating foreign tax authorities of
those non-residents. In parallel, the ATO will receive financial information on
Australian residents from other countries' tax authorities. This will help
ensure that Australian residents with financial accounts in other countries are
complying with Australian tax law and act as a deterrent to tax evasion.[16]
The Tax Laws Amendment
(Implementation of the Common Reporting Standard) Act 2016[17] received Royal Assent on 18 March 2016 and will take effect on 1 July 2017. The
first exchange of information will occur in 2018.[18]
In relation to corporate tax avoidance, the ATO has implemented
other measures. For example, the ATO has strengthened the transfer pricing
rules to OECD best practice and tightened the thin capitalisation rules.
All online articles accessed May 2016.
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