Tax havens and tax administration

Tax havens in context

In Australia, residents are subject to tax on their worldwide income. The Australian tax system protects confidentiality and privacy but allows us to verify that taxpayers are complying with the law.

Most dealings with tax havens are within the terms of the law. Unfortunately, some Australian residents try to exploit the secrecy of tax havens to conceal their assets and income and so avoid paying the amount of tax properly payable under the law.

Tax haven abuse is a worldwide issue. In May 2007 Mr Jeffrey Owens, Director of the Center for Tax Policy and Administration at the Organisation for Economic Co-operation and Development (OECD), testified before the United States of America's Senate Finance Committee on Offshore Tax Evasion.

Mr Owens said, 'We know the offshore evasion problem is big but we do not have a precise estimate of the amount of tax at risk. Given that the main reason that tax evaders go offshore is the secrecy provided to enable them to hide their assets and income from their tax administrations, this is not surprising. We can approach the issue by looking at the size of the offshore sector and its tremendous growth over the last decade:

• Using data from the BIS (Bank for International Settlements), IMF (International Monetary Fund) and OECD, we estimate that a total of $US5-7 trillion is held offshore.
• Brazil reports a commercial deficit of $US4 billion with the Caribbean islands.
• Singapore has now joined Luxembourg and Switzerland as the top private wealth centers of the world.
• The Bahamas is now ranked among the top five locations in the world for offshore mutual funds and trust funds and has also developed a significant inter-bank market.
• The Cayman Islands are the world's fifth largest banking center and the first among offshore jurisdictions, with a prominent position both in the inter-bank business and in private banking.
• The British Virgin Islands has developed into one of the most successful centers for international business companies. Conservative estimates put the number of shell companies at over 300,000.'

Sections within Tax havens in context

• What is a tax haven?
• Extent of tax haven use
• The law in Australia
• Lawful use of tax havens
• Arrangements we are concerned about
• What we are seeing and doing