Tax integrity package—establishing the tax avoidance taskforce

Budget Review 2016–17 Index

Kali Sanyal


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.

[1].         M Wilkinson (Journalist, Four Corners, Australian Broadcasting Corporation), Evidence to Senate Economics References Committee, Inquiry into Corporate tax avoidance, 21 April 2016, pp. 1–3.

[2].          Australian Taxation Office (ATO), ATO Statement regarding release of taxpayer data, media release, 4 April 2016.

[3].          Australasian Lawyers, Panama Papers: ATO talks Aussie links, Blogpost, 22 April 2016.

[4].          Ibid.

[5].          C Jordan (Commissioner, ATO), Evidence to Senate Economics References Committee, Inquiry into Corporate tax avoidance, 21 April 2016, p. 22.

[7].          P Costello (Treasurer), Government provides extra funds to combat tax scams, media release, 8 February 2006.

[8].          Australian Taxation Office, ATO Statement regarding release of taxpayer data, media release, 4 April 2016.

[9].          ATO, Australians with undisclosed offshore income urged to come clean, media release, 27 March 2014.

[10].       ATO, Project DO IT - the deadline is fast approaching, media release, 10 December 2014.

[11].       G Stein, A Noolan and S Howari, Australia: Disclosing your offshore income-Project Do It-today!, Mondaq website, 2 November 2015.

[12].       ATO, ATO Statement regarding release of taxpayer data, media release, 4 April 2016.

[13].       Australian Federal Police (AFP) Fraud and Anti-Corruption Centre, AFP website.

[14].       K O’Dwyer (Minister for Small Business and Assistant Treasurer), Government multi-agency approach to fight serious financial crimes, media release, 14 October 2015.

[15].       Ibid.

[17].       Australian Government, Federal Register of Legislation, Tax Laws Amendment (Implementation of the Common Reporting Standard) Act 2016 (Cth).


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