Targeting tax crime: a whole-of-government approach - November 2009
Targeting tax crime: a whole-of-government approach - November 2009
Issue two November 2009
Take a closer look at the government's fight against tax and superannuation crime in a new online magazine.
The second edition of Targeting tax crime: a whole-of-government approach (PDF, 2.4 MB) is now available for download.
In this issue you'll find interviews, commentary and the latest information on G20 activities, identity crime, tax havens abuse and more.
Targeting tax crime: a whole-of-government approach is achieved in cooperative partnership between the Australian Taxation Office, the Australian Crime Commission, the Australian Federal Police, the Australian Securities and Investments Commission, the Commonwealth Director of Public Prosecutions, the Australian Transaction Report and Analysis Centre and the Australian Government Solicitor.
Previous issues - Targeting tax crime magazine.
This edition of Targeting Tax Crime focuses on the work we do both here and overseas to protect Australia's tax and superannuation systems.
While the global financial downturn continues to be a challenge for revenue authorities and taxpayers, it has brought with it unprecedented opportunities for international cooperation and standard setting.
Countries that have previously been highly secretive in their banking and financial practices are committing to greater transparency and exchange of information - largely as a result of sustained pressure from the international community.
On the Australian front, this means the net is closing on the few who continue to avoid their tax obligations. Greater access to overseas banking information, combined with improvements in the way we work with our partner agencies, such as the Australian Transaction Reports and Analysis Centre, means their chances of being caught are higher than ever.
For some time now we have offered people an opportunity to come forward and voluntarily disclose any undisclosed income from offshore activities. People who do so before they are the subject of an audit, and make full and true disclosures, will have reduced penalties.
We are currently reviewing this offer including talking to key industry stakeholders. When we have done our analysis we will provide more information however, if we decide to revise the offer it is likely that it will be less concessionary.
If you were thinking of putting things off, don't wait. I urge people to review their tax affairs and if they have undisclosed income to contact us before we contact them.
Meanwhile, the risk of being caught for dealing in the cash economy, failing to pay excise or illegal access to superannuation has significantly increased with greater inter-agency cooperation and intelligence gathering.
In short, the ATO and its partner agencies are better equipped than ever to detect tax and superannuation crime both here and overseas.
I strongly urge those involved in dodgy tax practices to come forward and make a full and complete disclosure. We will treat you fairly.
Michael D'Ascenzo
Commissioner of Taxation
The Treasurer attended G20 meetings in London and Pittsburgh in September and in St Andrews in November to progress plans to strengthen the global financial system through transparent and well-regulated markets and financial institutions.
Treasurer Wayne Swan says the global financial downturn has opened up opportunities for us to forge close links with our international neighbours and lay the foundations for sustainable financial systems - worldwide.
'All Australians have a stake in making sure that the world comes together to avoid the regulatory shortfalls of the past that have been exposed by the global financial crisis,' Mr Swan said.
'It is vital for all nations to be able to appropriately monitor the offshore operations and transactions undertaken by businesses, including the improper use of tax havens and other non-cooperative jurisdictions.'
'The Tax Office has strongly contributed to positioning us as a leader in both regional and international efforts to improve the integrity of our tax and superannuation systems,' he said.
'This magazine provides a valuable opportunity to discuss the outcomes of our global activities and highlight the work done by the Tax Office to combat international tax evasion.'
A key component of the G20's plan to reform the regulatory framework of the financial sector is to strengthen the stability and integrity of some countries' tax systems.
'While most transactions in and out of these jurisdictions are lawful dealings, the financial, legal and tax systems which make them attractive for legitimate purposes can also be used to evade tax, or for other criminal purposes,' Mr Swan said.
At the G20 meeting in London in early September, Finance Ministers committed to measures to tackle those countries' tax systems that fail to meet regulatory standards and ensure developing nations benefit from the new cooperative tax environment.
'Over 80 jurisdictions have either implemented or have committed to implement high standards of tax information exchange and transparency, including over 30 jurisdictions originally identified as in need of reform,' he said.
The G20 Leaders' and Finance Ministers' meeting in Pittsburgh on 24-25 September committed to the reform of the global financial system architecture to meet the needs of the 21st century.
'The significant global cooperation achieved through the G20 in response to the global recession has enabled critical reforms to be progressed and transformational change in addressing financial system issues to be achieved.'
Australia's position at the forefront of international efforts to improve tax transparency was recently reinforced when it was elected Chair of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
This multinational forum is made up of more than 70 jurisdictions and is responsible for the widespread implementation of international standards of transparency and information exchange developed by the Organisation for Economic Cooperation and Development, and endorsed by the United Nations and the G20.
These initiatives are part of the Australian Government's efforts to ensure that, as we move through these difficult economic times, we have in place a better regulated and stronger financial system both at home and abroad - a system supported by transparency and effective international cooperation.
Tax and revenue agencies around the world traditionally ensure the integrity of their systems by scrutinising taxpayers' affairs based on their tax returns.
In Australia scrutiny is applied after income and other tax returns are lodged - at the end of the tax year. It's an effective system with many advantages.
However, Australia is also part of a worldwide trend to use real-time data to put people on notice, even before their returns are lodged.
The Tax Office is contacting people to ask about their current financial activities before they even lodge a tax return.
We analyse real-time data and compare it with historical patterns to detect risks. Tracking these financial activities as they happen gives the Tax Office a head start in detecting tax crime.
For example, in October 2008 the Tax Office and the Australian Transaction Reports and Analysis Centre (AUSTRAC) worked in real time to identify suspect transactions.
During routine work we noticed a spike in transactions involving money coming into Australia.
The monthly average for transfers of money from the United Kingdom to Australia is 60,000. In October 2008 transactions reached 95,000. Transactions from Jersey doubled from an average of 3,000 to an October high of 6,000.
However, there was no corresponding increase in transfers out of Australia. Usually, money in roughly equals money out, but not in October 2008.
International transfers of money are not necessarily illegal, but they can indicate attempts to evade tax. We asked the question - was this money overseas income that wasn't being declared?
Australian residents for tax purposes must declare all income regardless of where it is earned. Residents from overseas aren't always aware this is the case.
The hundreds of thousands of transactions relating to last October's spike were analysed to identify those worthy of a closer look. Twelve-hundred taxpayers were contacted about their transactions and put on notice that they would be subject to further scrutiny.
As a result, 80 people voluntarily amended previous tax returns, taking advantage of reduced penalties and other concessions available. $2.8m in undisclosed income was declared and $1m in tax and penalties were raised.
They are now on notice that the Tax Office will review future returns against the intelligence it gathers.
As it turned out, the main reasons for the increase in inbound transfers during October 2008 was the fall in the Australian Dollar.
Tax Office analyst Craig Philp said investors were spooked by the falling price of the Australian Dollar, particularly those with money in tax havens that didn't attract government guarantees to banks.
'It was the month that the shiver went through the entire financial industry,' Mr Philp said.
'If you had a large amount of cash in the Channel Islands, you were probably a bit nervous.
'It seemed wiser to bring it back to Australia and, because of the fall in the value of the Aussie dollar, there was a disadvantage in sending it elsewhere.'
Tax Office Assistant Commissioner (International Relations) Malcolm Allen said because of our strong partnership with AUSTRAC our analysts were able to get straight on to assessing these compliance risks as they emerged.
The Tax Office regularly uses AUSTRAC data to profile countries, financial institutions such as banks, and individuals, to assess risk as part of its international compliance activities.
AUSTRAC, Australia's financial intelligence unit, plays a pivotal role in the detection and investigation of tax haven abuse.
AUSTRAC is a primary source of data for identifying people who may be engaged in tax evasion using tax havens.
AUSTRAC obtains this data through financial transaction reports that banks, non-banking financial services, remittance (money transfer) services, bullion dealers and gambling businesses are required to submit under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Some of these businesses also report such financial data under the Financial Transaction Reports Act 1988.
Both Acts obligate these businesses to report international funds transfers into and out of Australia. This information is extremely useful for identifying tax haven arrangements, as information on both the customer and beneficiary of the exchange is captured by AUSTRAC's system.
AUSTRAC Chief Executive Officer John Schmidt said AUSTRAC receives almost 15 million reports every year.
'We use manual, automated and data-mining techniques to analyse anomalous activity. Key agencies, including the Tax Office, also have online access to the AUSTRAC database to search for suspect activity,' he said.
AUSTRAC and the Tax Office have a strong collaborative relationship. AUSTRAC's financial intelligence on tax haven countries supports numerous Tax Office initiatives, including monthly tax haven risk analysis and country reports.
AUSTRAC data has played an important role in Project Wickenby investigations.
'This work enables us to develop profiles detailing the use of complex corporate structures to hide true beneficial ownership behind funds transfers to havens, as well as the misuse of off-shore debit and credit card facilities,' Mr Schmidt said.
The value of this inter-agency collaboration is significant. In 2008-09, AUSTRAC information contributed directly to 1,193 Tax Office investigations, leading to tax assessments of $131.1 million. This represents a considerable increase over the 440 cases and $76 million in tax assessments to which AUSTRAC contributed in 2007-08.
A good example of this collaboration is the Tax Office's Offshore Voluntary Disclosure Initiative which, with the assistance of AUSTRAC information, raised $28.7 million in tax assessments during 2008-09.
CEO appointed
Mr John Schmidt was appointed Chief Executive Officer of AUSTRAC for a five-year term from 17 September 2009.
He previously held senior roles in the NSW Department of Premier and Cabinet and the NSW Cabinet Office.
From 1982 to 1991, Mr Schmidt worked extensively in taxation, firstly with the Tax Office and later in the private sector.
Project Wickenby is making a real difference to voluntary compliance among people at risk of using illegal tax havens and bank secrecy arrangements.
Since Project Wickenby commenced the Tax Office has collected significant amounts of unpaid tax and noticed a change in the behaviour of people subject to Wickenby actions.
At 30 September 2009 the Tax Office had collected $372 million including $223 million in voluntary payments as a direct result of Wickenby activity - boosted by a small number of high-value lodgements totalling more than $100 million.
To date, Project Wickenby has raised $463 million in tax liabilities and completed 878 audits (another 585 audits are in progress).
Forty-eight people have been charged with indictable offences.
People are getting the message that Project Wickenby means business.
While high-wealth individuals remain a focus, the Tax Office also has promoters, intermediaries and participant taxpayers in it's sights.
There have been a small number of cases where intermediaries including tax agents, accountants and lawyers who are associates of promoters were actively involved in establishing and running schemes. Many are now facing criminal charges including fraud and money laundering.
Tax Office Deputy Commissioner (Serious Non-Compliance) Michael Cranston said the achievements of Project Wickenby demonstrate to the public that tax evasion is a serious criminal matter - a crime against the community.
'When people get involved in this type of behaviour they are participating in tax fraud and criminal charges may apply,' Mr Cranston said. 'We believe the community is behind us when we say that tax evasion is unacceptable.'
Tax Commissioner Michael D'Ascenzo said we're working with partner agencies at local, national and international levels to out-manoeuvre tax criminals to preserve the integrity of Australia's tax and superannuation systems.
The offshore voluntary compliance initiative is also increasing compliance among people involved in offshore arrangements. The initiative allows people who have undeclared income in offshore accounts to make a voluntarily disclosure in return for low or nil penalties.
Since the program was launched in 2007 there have been more than 3,000 disclosures, totalling nearly $306 million in omitted income and raising nearly $65 million in liabilities.
The efforts of the Tax Office and its partner agencies are supported by a global community that is increasingly intolerant of tax haven abuse.
Wickenby cash collections to 30 September 2009
Government agencies have the authority to charge both promoters and participants under the criminal code, as well as apply a range of civil penalties.
What is Project Wickenby?
In February 2006 the Government funded a multi-agency attack on internationally promoted tax schemes.
Project Wickenby is led by the Tax Office working in partnership with seven other Federal department and agencies.
For more information on Project Wickenby please visit www.ato.gov.au
For more information on the Project Wickenby government partners, please visit:
Australian Transaction Reports and Analysis Centre
Australian Securities and Investments Commission
Australian Crime Commission
Australian Federal Police
Attorney-General's Department
Australian Government Solictor
Commonwealth Department of Public Prosecutions.
Tax barrister Michael Inglis comments on Project Wickenby.
We asked tax barrister Michael Inglis to share his views on project Wickenby.
I have advised and represented many Wickenby and other SNC* targets in recent years, ranging from tax reviews and audits all the way through to persons charged by the Australian Federal Police with indictable tax crime offences.
In light of that work and experience, I would like to make three points.
First, it's now quite clear to me that the Tax Office and its many partner agencies are simply not going to die on the journey.
Tenacity is a great ally, and the Wickenby agencies have now clearly withstood the storm of years of court challenges and collateral political and other attacks. Wickenby is still afloat, forward funding is secure, and the case officers are starting to really hit their straps.
This totally unprecedented Australian (and international) inter-agency cooperation, combined with the recent and spectacular OECD and G20 achievements, have all now sharply increased the risks and consequences of any potential Wickenby target actually being detected.
Second, the Wickenby agencies all need to do a lot more, I respectfully suggest, to effectively communicate the grave consequences for any Wickenby targets, of not getting very real very quickly, once they know they are being looked at.
Anyone who hears from the Tax Office or other Wickenby agencies has just had any relevant non-compliance risk go through the roof.
Yet, time and again, I see cases where the game plan in response has been, for many months, to just 'sit tight, she'll be right' or to just 'hang tough'.
Once an overt Wickenby tax review, audit or criminal investigation commences, the turbulent river, in which the target then finds themself, can (and usually does) get deeper, faster and wider very quickly.
Third, the Tax Office and other Wickenby agencies need to publicise more effectively the benefits where a potential, but yet undetected, Wickenby target chooses to mitigate their non-compliance risk aggressively, that is, to make their own full and complete disclosure to the Tax Office rather than simply waiting to be detected.
I have repeatedly found that those persons, who have the courage and good sense to do this sort of thing, are treated fairly and with consideration by the Tax Office and, if relevant, other Wickenby agencies.
In addition, they usually end up reducing any relevant penalties and interest significantly, and minimising (as far as may be) the risk or consequences of any relevant criminal investigation, or prosecution, as well.
Illegal scheme promoters advertise they can help people access their super early by establishing a self-managed superannuation fund.
The greatest threat to the integrity of self-managed funds comes from people who work with a scheme promoter to set up a fund with the sole intent of accessing their super savings early.
Tax Office Deputy Commissioner (Superannuation) Neil Olesen said it is illegal to access your super before you retire, except in very limited circumstances. These limited circumstances can include medical conditions or severe financial hardship.'
'Illegally accessed super is treated as income for tax purposes in the year it is withdrawn and comes with stiff penalties,' Mr Olesen said.
'We are working closely with the Australian Securities Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) to strengthen the rollover process from large super funds to self-managed super funds.
The Tax Office is further toughening the proof of identity requirements for registration of self-managed funds.
Close scrutiny by regulators and the super industry, and a robust regulatory regime, helps ensure illegal schemes don't succeed. This approach has already resulted in $1.7 million of super savings being frozen.
'We want to make it harder for people to illegally access their super early,' said Mr Olesen.
'Raising awareness about these schemes and the severe penalties is a priority.'
Protect your identity
Super savings could also be at risk from thieves using stolen identities to set up self-managed funds.
Identity thieves are using other people's details to register a self-managed super fund then arranging to roll victims' other super savings into bogus funds.
Posing as the trustee of the fraudulently established fund they then allegedly withdraw the savings and disappear.
Mr Olesen said we are in the very early days of investigating this risk to super savings.
'While the extent of this activity is still being explored, it is a timely reminder for people to safeguard their identity details.'
Keep your super safe
Protect your super:
- regularly check your super statements and contact your fund if there are any discrepancies, and
- only act on the advice of super professionals - ensure you understand all your responsibilities before establishing a self-managed super fund.
Protect your identity details:
- don't carry them in a purse or wallet or store them in a mobile phone
- shred or destroy documents containing identity details before disposal
- install up-to-date anti-virus software on your computer, and
- only provide identity details to trusted or reliable individuals or organisations.
- For more information on protecting your identity visit the Tax Office website at www.ato.gov.au/identitycrime
If offered advice or assistance on early access to super, contact:
- your super fund
- the Tax Office Super Line on 13 10 20
- APRA on 1300 131 060, or
- Crime Stoppers on 1800 333 000 or
www.crimestoppers.com.au
(for anonymous reporting of criminal activity).
For more information on legal and illegal access to super, visit:
John Lawler
The Australian Crime Commission (ACC) is the nation's peak criminal intelligence agency. New CEO John Lawler explains how the ACC is working with partners to fight organised crime, including abusive tax haven arrangements.
What is the role of the ACC?
The ACC is a national criminal intelligence gathering agency, which focuses on serious and organised crime. We work in partnership with other Commonwealth, state and territory agencies to deliver strategic and operational intelligence and provide Australia's national criminal intelligence database.
Our niche is to complement the efforts of other agencies by providing specialist law enforcement capabilities.
Everything we do is either with or for a partner agency, which is why our close collaboration with the Tax Office maximises efforts to tackle serious and organised crime in Australia.
The ACC is placing a high priority on detecting, targeting and monitoring criminal money flows and business structures of serious and organised crime.
How is the ACC targeting tax crime?
The ACC is leading Operation Wickenby, the intelligence and investigative component of the larger Australian Tax-Office-led Project Wickenby.
We investigate and develop intelligence on people or organisations involved in abusive tax haven arrangements and money laundering. This has resulted in the investigation of nine separate criminal matters relating to the tax evasion schemes devised by a Swiss-based financial services provider.
We are also collecting and analysing intelligence to understand and detect vulnerabilities associated with abusive tax haven arrangements. We are identifying people exploiting these vulnerabilities and in turn providing targeting opportunities for other agencies.
What specific capability is the ACC bringing to Project Wickenby?
Our coercive powers have been an effective strategy in gathering intelligence and unravelling complex tax evasion schemes.
These coercive powers, similar to those of a Royal Commission, enable us to summons witnesses and compel them to provide information they have on criminal activities in which they or others are involved.
They also compel these people to provide documents and other evidence we require.
Intelligence and evidence obtained as a result of exercising these powers has revealed the extent of tax fraud schemes and the alleged involvement of both off-shore based service providers and Australian promoters and participants.
These and other efforts by Wickenby agencies have resulted in improved compliance by participating taxpayers and a return to the Australian Government of more than $366 million.
Should an organised crime agency like the ACC be involved in combating tax evasion?
Current ACC intelligence suggests organised crime costs the Australian community more than $15 billion each year, mostly from drug trafficking. However tax fraud poses a huge risk.
While those involved in tax crime may not fit the traditional picture of organised criminals, they are operating highly sophisticated schemes, knowing full well their implications.
Tax evasion is effectively stealing from the Australian community and means less money for hospitals, schools, housing and other government services and activities.
Does this mean organised crime is changing?
Organised crime has always been motivated by money and power, but the organised crime networks that pose the greatest threat to Australia are often hard to distinguish from normal business and social activity.
The skills offered by accountants, financial advisors, lawyers and technology enable organised crime to operate and compete in commercial environments here and overseas.
For more information about the Australian Crime Commission please visit www.crimecommission.gov.au
There has been no legal tobacco-growing in Australia since October 2006. Despite that, the Tax Office is still finding plenty to do, as are the four other regulatory and law enforcement bodies combating the illegal tobacco trade.
Tax Commissioner Michael D'Ascenzo said seizures of illegal crops have steadily declined from around 18 tonnes in 2006 to amounts of less than a tonne in subsequent years.
However, he said a seizure just two months ago in the NSW Southern Highlands underlined the need for ongoing vigilance.
'We seized and destroyed four tonnes of tobacco leaf, nine tonnes of stripped tobacco plants and a highly sophisticated hothouse and kiln far away from traditional tobacco growing areas,' Mr D'Ascenzo said.
'The value of the excise evaded by this crop alone was $1.2 million and highlights the organised tactics of those involved in the racket.'
Mr D'Ascenzo has a message for those who believe they can outfox the system - the Tax Office and its partner agencies are out there watching.
'We have investigators who identify new crops, and monitor known growing areas using various methods including aerial surveillance and ground verification for evidence of tobacco growing and cultivation.
'We also receive information and intelligence from other agencies and the public,' he said.
It seems the risks of growing tobacco illegally in Australia are forcing those involved to change tactics.
Shortly after the Southern Highlands bust, Australian Customs seized 4.8 tonnes of tobacco being smuggled from Lebanon and arrested four men.
Combined forces combating illegal tobacco
Australian Taxation Office
Australian Crime Commission
Australian Federal Police
Australian Customs and Border Protection Service
Australian Quarantine and Inspection Service
There's a new era of professionalism in the tax industry with the establishment of a national Tax Practitioners Board and a new regulatory system.
The new board has the power to take dodgy operators out of circulation. It replaces six state based boards and oversees a national registration and regulation system for both tax and Business Activity Statement (BAS) agents.
Tax Commissioner, Michael D'Ascenzo, said he's looking forward to a strong collaborative relationship with the board as it administers the new regulatory system.
'I welcome the appointment of Mr Dale Boucher PSM as the inaugural chair of the board - he has the management experience and expertise to ensure a smooth transition to the new regime,' Mr D'Ascenzo said.
'The new board brings a wealth of experience covering all areas of tax and BAS agent activities and will help ensure greater consistency and transparency for individual practitioners, the profession and the community.'
He said it will bolster the integrity of the industry by administering a code of professional conduct with which all registered practitioners will have to comply.
'It will safeguard consumers from dodgy preparers and promote a new level of protection in the industry.
'The code of conduct is based on values including honesty and integrity, independence, confidentiality and competence.
'These values aren't new to tax professionals, in fact most are already working with these values in mind and have been for a long time.'
Mr D'Ascenzo said those who fail to comply now face tough penalties including suspension and deregistration.
'While we don't expect this to happen often, we do expect it to act as a deterrent to those agents who may contemplate working outside the code.'
The board has the power to impose penalties of up to $137,500 on those who pose as tax professionals and/or illegally prepare tax returns.
'It's unfortunate that in the past a small minority have compromised the professionalism and integrity of the whole industry and left consumers vulnerable.
'We can now clamp down on this type of illegal activity which enhances the professionalism of the industry and protects consumers'.
National Tax Practitioners Board
Chair:
Board members:
- Mr Matthew Addison
- Ms Cynthia Coleman
- Professor Gordon Cooper AM
- Mr Roger Cotton
- Mr Chris Doogan AM
- Mr Michael Evans
- Mr George Fox
- Ms Miriam Holmes
- Professor Dale Pinto
- Mr Russell Smith
Did you know?
- The new regulatory system protects taxpayers who use tax agents or BAS agents from some penalties, provided they properly supply their agent with accurate information.
- Breaches of the code of conduct can result in practitioners being ordered to undergo training, work under supervision or have restrictions placed on their work. Breaches can ultimately lead to being deregistration. Civil penalties can follow if they fail to comply.
- The board will receive administrative support from the Tax Office but operate independently.
For more information please visit www.tpb.gov.au
Australia has been elected the inaugural chair of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum).
At its Mexico meeting on 1 and 2 September 2009 the Global Forum elected Australia chair for a two-year term. China, Germany and Bermuda were elected as vice chairs.
Assistant Treasurer Senator Nick Sherry said it was an honour that Australia was chosen out of the 62 jurisdictions present.
'Under Australia's chairmanship, the Global Forum has set itself a wide-ranging agenda for the coming years,' Senator Sherry said.
'The agenda will boost the overall integrity of the international tax and financial system, as we plot the path to recovery from the global recession,' he said.
The Global Forum was established by the OECD in 2000 to monitor tax havens and promote tax information exchange. It aims to stop evaders from using banking secrecy to shield abusive tax arrangements and has played a central role in developing internationally accepted standards of transparency.
The September meeting of the Global Forum was attended by almost 200 delegates and focused on improving transparency and exchange of banking and ownership information.
As a result of the meeting, a Peer Review Group (the Group) was formed to ensure the international standards developed by the OECD and endorsed by the G20 and the United Nations are fully implemented.
The first priority for the group, of which Australia is a member, is to measure the effectiveness of the information exchange provided by members of the Global Forum. A progress report is scheduled for the end of 2009.
Tax Office Assistant Commissioner International Relations, Malcolm Allen said the Global Forum was all about ensuring effective and transparent exchange of information, particularly among tax havens.
'Over the past 10 years we've been working hard to get all countries to agree to greater transparency and easier exchange of information arrangements - that work is now paying off,' Mr Allen said.
The forum also decided to expand its membership and to speed up the process of negotiating and concluding information exchange agreements. For example, it resolved to build a 'technical assistance program' to help smaller jurisdictions implement the standards quickly.
The Mexico meeting coincided with the publication of the Global Forum's annual report, Tax Cooperation 2009: Towards a Level Playing Field - 2009 Assessment by the Global Forum on Transparency and Exchange of Information. The report notes that the standards are now almost universally accepted.
As reported in issue one of Targeting Tax Crime, Australia has already implemented the standards - a commitment reflected in our many double taxation and exchange agreements.
Australia has signed nine exchange agreements with individual countries to promote the exchange of information and we are in advanced negotiations with another 16 jurisdictions.
Most recently, on 28 October 2009, Senator Sherry signed an agreement with the Cook Islands.
Senator Sherry said the pace with which jurisdictions are coming onboard is continuing to increase - the Cooks Islands is now the fourth jurisdiction to sign a tax information exchange agreement with Australia in as little as four months.
New Tax Office data mining technology has identified 25,000 suspect tax returns worth around $260 million.
Using new technology and existing systems the Tax Office has sifted through more than 3.6 million returns lodged since 1 July 2009. It has identified everything from sophisticated scams to basic non-compliance.
Tax Commissioner Michael D'Ascenzo said we are picking up tax returns that warrant closer scrutiny. When it comes to protecting the integrity of Australia's tax and superannuation systems - prevention is better than cure.
'Identifying suspicious activity and stopping fraudulent claims before they go out is far more effective than trying to re-coup refunds after they have been paid,' Mr D'Ascenzo said.
'Combining our usual scrutiny with new technology means suspect claims are even more likely to attract our attention.
'We owe it to the overwhelming majority of taxpayers who do the right thing to use the full force of the law against those who don't, and to deter those who believe they won't get caught.'
Mr D'Ascenzo said the new technology also uses identity crime models to identify potentially fraudulent claims involving identity theft.
He said increasingly sophisticated schemes are tricking people into divulging personal information.
'People need to ensure they protect their personal details because once your identity is stolen, it can take years to rectify the damage.'
For more information on online security, how to protect against identity crime, and how to report tax crime, go to www.ato.gov.au/identitycrime or phone 1800 060 062.
Think that dabbling in the cash economy may cut your costs or give you an edge over your business competitors? Think again.
Tax Commissioner Michael D'Ascenzo said you might consider how the five defendants currently before the courts facing 68 charges, most involving the cash economy, are feeling.
'They would almost certainly be considering the 5½ year and 4½ year jail sentences handed down in late June to two defendants in Melbourne; or the 7½ year sentence handed down in early September in Adelaide,' he said.
'A a further four people are currently waiting to see how many charges they may be facing... they'd probably wish they had a chance to reconsider their actions.'
Mr D'Ascenzo said there's just too many ways to get caught.
'Last year we wrote to, phoned or visited more than 68,000 businesses and undertook 7,300 reviews and audits.
'And we had more than 50 prosecutions during that year.
'We will remain vigilant by increasing our visibility in the community and taking firm action against those who evade their obligations at the expense of the overwhelming majority who do the right thing.'
Mr D'Ascenzo said compliance modelling, data matching and information provided by individuals and businesses means that those who dabble in the cash economy will be caught.
'If you think doing business by cash means there's no record of your activities and you can't be detected, you're very mistaken,' he said.
'It only takes one of the people or businesses you deal with to do the right thing, and keep appropriate records, and you are vulnerable.
'If this alone doesn't give you reason to rethink involvement in the cash economy… then you'll probably be talking to the Tax Office quite soon.'
Profile of a tax cheat
John (not his real name) provided seasonal workers to orchards and vineyards.
His non-compliance with his GST, PAYE and PAYG obligations came to the attention of the Tax Office as a result of an audit on a vineyard for which he provided workers.
John's Business Activity Statements didn't correspond with the vineyard's GST records. In fact he recorded his total income for one financial year as nil. He was also seriously under-reporting PAYG tax on more than $400,000 paid to his workers; and income he declared in his personal income tax was well below what the audit of the vineyard indicated it should be.
John was charged with a total of 48 charges involving nearly $2 million in tax he attempted to evade. Charges were also laid against an accomplice identified during the subsequent investigation.
John was convicted and sentenced to a total of seven and a half years' jail.
The pressure of the global economic downturn has tempted some small businesses to seek an unfair advantage by not recording and paying tax on all of their transactions, particularly cash transactions.
To make it harder for dishonest operators to get away with not reporting cash income the Tax Office has developed performance benchmarks which make it clear what is expected from businesses in a range of industries.
The Tax Office will look at ratios of:
- cost of goods sold to turnover
- labour to turnover
- rent to turnover
- GST-free sales to turnover, and
- motor vehicle expenses to turnover.
Tax Commissioner Michael D'Ascenzo said we will use these benchmarks to identify businesses who may not be paying their fair share.
'We understand there will be times when there are good reasons for a business to have costs outside the norm or a real decline in income - and we will support people through these times.'
'However, where we see on-going performance outside the benchmark range we will investigate and take appropriate action to restore a level playing field.
'These performance benchmarks are published on our website, and I urge anyone who thinks they may be at risk to do the sums,' he said.
Go to www.ato.gov.au/businessbenchmarks to compare your business performance to the financial norms of similar businesses with a similar financial turnover range.
If after comparing your business performance against the benchmarks, you identify you may have made a mistake in your tax affairs the Tax Office recommends you make a voluntary disclosure which reduces any penalties that may apply.
Fifty-eight benchmarks have been published covering businesses in:
- manufacturing
- construction
- retail trade
- accommodation and food services
- transport, postal and warehousing
- rental, hiring and real estate services, and
- administrative and support services.
How benchmarks can help
Benchmarks provide an easy way to show how a business is performing within its own industry and whether it's on the right track to meeting its tax obligations.
You can:
- compare your business performance against others in your industry
- assess your record-keeping
- check that the information you're reporting to the Tax Office accurately reflects your business income and expenses, and
- assess if you're likely to be selected for an audit.
Two types of benchmarks have been developed for the small business (micro-market) sector.
Input benchmarks
Based on information from industry participants and trade associations.
Performance benchmarks
Based on information small businesses report on income tax returns and business activity statements.
The Tax Office has released new performance benchmarks which along with existing input benchmarks provide a full range of small business benchmarks.
For more information go to www.ato.gov.au/businessbenchmarks
Crime & Money
Help us break the link. Stop dirty money in its tracks. See the anti-money laundering and counter terrorism financing laws on the Crime & Money pages on the Attorney-General's Department's website at www.ag.gov.au
FIDO
The 'Financial tips and safety checks' page on the Australian Securities and Investments Commission's website offers money tips, advice about financial products, and information about scams and warnings. Go to www.asic.gov.au/fido
SCAMwatch
SCAMwatch, at www.scamwatch.gov.au is a website designed to help individuals and small businesses protect themselves from scams. It is administered by the Australian Competition and Consumer Commission. It tells you how to protect yourself from scams, report a scam, and gives you access to the Little black book of scams.
Crime fighters
The Australian Crime Commission works with a number of other agencies in the fight against nationally significant crime. Go to www.crimecommission.gov.au
Protect your financial identity
The 'Protect your Financial Identity' website was developed by the Australian Bankers' Association, the Australian High Tech Crime Centre and the Australian Securities and Investments Commission. The website provides information for the public about how to protect financial identity in everyday life and minimise the damage if a problem occurs. Go to www.protectfinancialid.org.au
How to report a tax crime
Help the Tax Office ensure everyone pays their fair share of tax. Report information on tax crime to the Tax Evasion Referral Centre on 1800 060 062.
For information on how to report tax crime online, by mail or fax or for answers to frequently asked questions.
Making a voluntary disclosure
The Tax Office encourages taxpayers who have made a mistake in relation to their tax affairs to make a voluntary disclosure. This can lead to reductions in shortfall penalties and interest, particularly if the voluntary disclosure is made before the notification of an audit.
Voluntary disclosures can be made in writing, electronically, by phone, or via other methods available in specific circumstances.
Full details about how to make a voluntary disclosure can be found at www.ato.gov.au
Taxpayers with undisclosed income from offshore activities can contact the Tax Office to make a voluntary disclosure.
Full details about making a voluntary disclosure, including information on eligibility can be found at ato.gov.au/offshorevoluntarydisclosure/
We value your opinion and we're interested in your response to this magazine. Please send any comments or suggestions to targetingtaxcrime@ato.gov.au
Last Modified: Thursday, 28 January 2010
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