Show download pdf controls
  • Guidelines for dealing with bribery of public officials

    These guidelines draw on the OECD's Bribery and corruption awareness handbook for tax examiners and tax auditorsExternal Link (2013) and are designed to:

    • increase awareness of the legislative provisions that disallowing a deduction for any loss or outgoing determined to be a bribe to an Australian or foreign public official
    • provide advice on reporting suspected bribery.

    On this page:

    Background

    The Australian Government is a signatory to the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. We are committed to a whole-of-government approach to addressing the incidence of bribes to foreign public officials in business transactions. The convention also allows for the OECD to review the implementation of the convention by signatory countries.

    Phase 1 of the OECD review occurred in 1999. Along with other outcomes, it resulted in the enactment of section 26–52 ‘Bribes to foreign public officials’ of the Income Tax Assessment Act 1997 (ITAA 1997). Section 26–53 ‘Bribes to public officials’ of the ITAA 1997 was also enacted via a government initiative at a similar time. These provisions specifically disallow deductions for any loss or outgoing determined to be a bribe to a public official. They became effective from the 1999–2000 income year.

    Phase 2 of the OECD review was completed in January 2006. It included a recommendation that the ATO prepare guidelines to assist tax officers in identifying non-deductible amounts that have been claimed for bribes to foreign public officials by:

    • better understanding how they can be concealed
    • identifying bribe payments to foreign public officials
    • highlighting the legislative provisions denying deductibility for bribe payments
    • including a requirement that tax officers report all information of bribery (intelligence, suspicions or actual) of foreign public officials to the Integrated Compliance business line.

    Although the convention is concerned with combating bribery of foreign public officials, these guidelines also apply to bribes made to Australian public officials.

    Australia’s Phase 3 review was completed in December 2012. The Phase 3 report included recommendations for Australia to strengthen its enforcement of the foreign bribery offence. In 2014, the Australian Government announced the creation of the multi-agency Fraud and Anti-Corruption (FAC) Centre within the Australian Federal Police (AFP). The FAC Centre is responsible for identifying and thoroughly evaluating referrals of alleged foreign bribery. The ATO works closely with the AFP as a member of the FAC Centre and the Serious Financial Crime Taskforce.

    In 2016, the AFP established two dedicated foreign bribery investigative teams and a further Fraud and Anti-Corruption investigative team. In addition, the Office of the Commonwealth Director of Public Prosecutions increased its foreign bribery expertise, creating a centralised system for the referral of foreign bribery matters. ATO officers refer most suspected bribery payments to the AFP.

    The OECD completed its Phase 4 evaluation of Australia's implementation of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions on 15 December 2017. The resulting report made 15 recommendations to further strengthen Australia’s foreign bribery regime, and raised 12 issues for follow-up. The two-year follow-up to Australia’s Phase 4 evaluation is scheduled to take place at the December 2019 plenary of the Working Group on Bribery. The follow-up report prepared by Australia, and summary and conclusions prepared by the OECD Secretariat and lead examiners adopted by the Working Group, will be published on the OECD website.

    See also:

    Legislative provisions

    The relevant legislative provisions of the ITAA 1997 that relate to bribes are:

    • section 26–52 (bribes to foreign public officials)
    • section 26–53 (bribes to public officials).

    Bribes to foreign public officials

    Section 26–52 of the ITAA 1997 specifically denies deductibility to a taxpayer for a loss or outgoing that is determined to be a bribe to a foreign public official.

    Definitions

    Division 995 of the ITAA 1997 adopts the definition of 'foreign public official' under section 70.1 of the Criminal Code. The full text of the definition of foreign public official in section 70.1 of the Criminal Code is as follows:

    Foreign public official means any of:

    • an employee or official of a foreign government body
    • an individual who performs work for a foreign government body under a contract
    • an individual who holds or performs the duties of an appointment, office or position under a law of a foreign country or part of a foreign country
    • an individual who holds or performs the duties of an appointment, office or position created by custom or convention of a foreign country or of part of a foreign country
    • an individual who is otherwise in the service of a foreign government body (including service as a member of a military force or police force)
    • a member of the executive, judiciary or magistracy of a foreign country or of part of a foreign country
    • an employee of a public international organisation
    • an individual who performs work for a public international organisation under a contract
    • an individual who holds or performs the duties of an office or position in a public international organisation
    • an individual who is otherwise in the service of a public international organisation
    • a member or officer of the legislature of a foreign country or of part of a foreign country
    • an individual who is either     
      • an authorised intermediary of a foreign public official covered by any of the above paragraphs
      • holds himself or herself out to be the authorised intermediary of a foreign public official covered by any of the above paragraphs.
       

    A foreign public official can only be a natural person. However, the benefit may be provided to another natural person, another entity or a government body with the intention of influencing that foreign public official.

    Record-keeping requirements

    For tax purposes, section 262A of the Income Tax Assessment Act 1936 (ITAA 1936) requires that records are kept for all transactions and that those records are adequate to explain the transactions.

    For facilitation payments, the Criminal Code in Division 70 also sets out particular record-making and retention obligations, in certain circumstances, for records to set out:

    • the value of the benefit concerned
    • the date on which the conduct occurred
    • the identity of the foreign public official to whom the conduct occurred
    • if that foreign public official is not the other person mentioned in paragraph 70.2(10(a) – the identity of that other person
    • particulars of the routine government action that was sought to be expedited or secured by the conduct
    • the person’s signature or some other means of verifying the person’s identity.

    Failure to maintain records in that form may have important consequences if a person is prosecuted for an offence of bribing a foreign public official under the Criminal Code. The person will not be able to rely on a defence that the payments were legitimately made, even if the defence would otherwise be available, if the person has not kept the required records. However, a failure to maintain records in the form required under the Criminal Code will not necessarily mean the person cannot claim a tax deduction.

    For the purpose of taxation law, the question is whether the person has kept records in a way that complies with section 262A.

    See also:

    Bribes to public officials

    Section 26–53 of the ITAA 1997 specifically denies deductibility to a taxpayer for a loss or outgoing that is determined to be a bribe to a public official.

    The benefit may be any advantage and is not limited to property.

    Definitions

    Division 995 of the ITAA 1997 defines 'public official' as follows:

    • ... an employee or official of an Australian Government agency or a local governing body.

    Division 995 of the ITAA 1997 defines 'Australian Government Agency' as follows:

    • ... either    
      • the Commonwealth, a state or a territory
      • an authority of the Commonwealth or of a state or a territory.
       

    See also:

    Bribery is a criminal offence

    Division 70 of the Criminal Code includes provisions making the bribery of foreign public officials a criminal offence.

    Divisions 141 and 142 of the Criminal Code include provisions making the bribery of Commonwealth public officials a criminal.

    See also:

    Referral of instances of suspected bribery

    The ATO is primarily concerned with the protection of revenue and maintaining community confidence in our administration of the tax and superannuation systems by identifying and dealing with deductions that are bribe payments.

    However, we also have an important part to play in the whole-of-government effort to combat corruption and bribery. We refer information on suspected or actual bribe transactions to the AFP for potential criminal investigation and prosecution.

    How to report suspected bribery

    To report an instance of suspected bribery, you can:

    • phone us on 1800 060 062, 8.00am to 6.00pm, Monday to Friday, excluding national public holidays
    • complete the tip-off form (The form is also available in the 'Contact us' section in the ATO app), or
    • write to us at – mark all letters 'in confidence' and post to:

    Australian Taxation Office
    Tax Integrity Centre
    Locked bag 6050
    DANDENONG VIC 3175

    If you do not speak English well and want to talk to us, phone the Translating and Interpreting Service on 13 14 50 for help with your call.

    Tax professionals can provide information by calling 13 72 86 (Fast Key Code 3 4).

    Remember to make note of the reference number when you submit your tip-off form. You will need to quote it if you want to add any information later.

    See also:

      Last modified: 11 Dec 2019QC 19159