April 2011 marked the fifth anniversary of the introduction of the promoter penalty laws. Our experience in administering these laws shows a positive impact in deterring the promotion of tax avoidance and evasion schemes and changing behaviours in relation to the promotion of aggressive arrangements.
These laws provide a flexible set of remedies for the Commissioner to apply to deter the promotion of tax avoidance or evasion schemes and implementation of product ruling arrangements in ways that result in materially different tax outcomes for investors. In addition to accepting voluntary undertakings, the Commissioner can apply to the Federal Court for restraining or performance injunctions and/or seek civil penalties of up to $2.75 million per entity per scheme.
Our approaches for the first two years focused on helping tax intermediaries to prepare for the changes that these laws meant for their important roles in the system.
Since then, we have worked with a variety of tax intermediaries to educate them about the risks of engaging in conduct prohibited by these laws, both in general and through specific contacts about arrangements of concern.
We encourage tax practitioners to report such arrangements to us to help eliminate the competitive advantage that less scrupulous tax intermediaries may otherwise enjoy. We act upon referrals received from tax practitioners and the community to identify at-risk/high-risk arrangements and those who are involved in promoting them. Where appropriate, we have issued taxpayer alerts to advise the community of our concerns and followed up with the promoting entities, their associates and participating taxpayers to enforce compliance.
Since the commencement of the laws, we have conducted over 550 reviews of the conduct of entities potentially involved in arrangements that may have contravened these laws.
In most cases, entities we contact about specific conduct regarding doubtful arrangements correct their conduct without us needing to impose sanctions under these laws. Many have taken material off websites, changed seminar materials, altered scripting content or even ceased marketing particular products.
In addition to this self-correction, some entities involved in more complex or higher value arrangements have offered us enforceable voluntary undertakings for the purposes of these laws, which we have accepted.
In other cases where entities have not self-corrected at first instance, we have warned them of our concerns, highlighting the risks they run in continuing with their conduct, which has resulted in further self correction.
For the most serious cases involving the highest levels of risk and lowest levels of self-correction, we will initiate proceedings in the Federal Court to seek a civil penalty or an injunction as appropriate.
Last Modified: Friday, 1 July 2011