Panel discussion between tax experts Mark Leibler and Michael Bersten and ATO deputy commissioners Michael Cranston and Greg Williams, facilitated by television presenter, David Koch,
Project Do It: Why come forward now
Koch: Let’s talk about this offshore disclosure further. Taxpayers with offshore assets are being, obviously if you’re following in the media, encouraged to declare their interest before a global crackdown on international tax havens. To get this moving, the ATO has kicked off a voluntary disclosure initiative called Project Do It. Basically people holding offshore assets can avoid penalties by getting their affairs in order before December. So Greg, with these sort of tools that you’ve got at the moment, you’ve gone through the data matching, everything like that, is there such a thing as an offshore tax haven anymore? Do you get access to all jurisdictions basically now?
Williams: Oh, look, it is certainly moving that way, David. I mean, I think what you’ve, well, we’ve touched on a few things. We’ve touched on one, administrations are working closer and closer together, so Michael’s spoken about that. We’ve done a lot of work with HMRC, we’ve done a lot of work with the IRS. The IRS brings a fair bit of muscle to the table as you could well imagine, and we’re able to leverage off that. Last year we had a project with them which was around a simultaneous release around a project called ‘No Safe Havens’ which was based again on a piece of, some information that was received. You’ve got a whole lot of these countries that actually want to be transparent. They’ve actually opened things up, they’re signing agreements. So you’ve kind of got, in the wake of I suppose post the global financial crisis, and a whole lot of the pressure’s been brought to bear internationally, people are opening up their borders.
The third thing is I think what we’re seeing is we do see people come forward and put information on the table. People are trusting, are actually selling that information or providing it from a conscious point of view. And then finally we’ve actually now got the power analytically from a data matching point of view. So my sense is a bit like Michael said, it’s kind of not a question in that world whether or not we will find you, sorry, it’s not a question of if we find you, it’s going to be when we find you.
Koch: Yep, and how.
Williams: Yeah, and as Mark has said, then the consequences of being found after the Project Do It finalises, they could be significant for people.
Koch: Yep. Michael Cranston, run us through Project Do It, what’s involved for anyone with assets or investments overseas.
Cranston: Yep, okay, I think just following from what Mark was saying about it’s going to be very hard to hide, Project Do It is a last chance opportunity, and I want to sort of say that, because it is. Because I think the environment, we’ve spoken about the international environment, a common reporting standard, every country’s going to share this data. We’ve already got data now, we’re looking at it, so basically, we’ve got some more that’s going, there’s about 1,700 audits, right, but we can’t audit everybody, it’s very resource intensive. So Project Do It’s basically saying “Look, you’ve got till the end of December. It’s your last chance. Trust us, what we say is what we’re going to live up to, and basically we’ll only go back four years and amend for four years. The penalty, we’ll reduce it to 10%, it could be a lot worse than that. Also there will be some interest charged”.
I think there’s two other important components. One we’re saying that you can actually unpack your fund or your structure overseas and bring it back to this country. And the laws get very complex around that. So we said “We’ll work with you, and as long as you’ve paid tax in the last four years, we’ll make sure that those monies you bring back will be free of tax”. And I think that’s a big incentive. And then the last thing is we’re saying, and we’ve got the other law enforcement agencies saying this, that we will not initiate a criminal investigation, they’re supporting us on this, the other law enforcement agencies, we won’t initiate a criminal investigation, and we won’t start one. And you can actually, and that’s specified in the deed, and you can get a deed to all those aspects I spoke about.
So some say it’s very concessional, well, I think it’s still, it’s fair in that Australia will get these people back into the tax system, or at least this income back into the tax system, and we are asking for four years of back taxes, but look, it can be a lot worse, as Greg was talking about before.
Williams: I think what’s important about that, and Mark kind of mentioned at the outset, we’ve done some of these things before. The difference in this time is that we actually work with people like Michael and Mark to understand why didn’t people come forward before? What was holding them back? How could we make this work for them this time, given that this will be the last time? Because we want to be open and transparent around that, because the world is changing, we want to give people a chance to actually understand that and come in, and I think through the work that we’ve done around that, it’s a much better product.
Koch: Mark, any question marks over it?
Leibler: Well, I think the first thing that needs to be said is following on from what Greg just said now there’s been a lot of consultation in relation to this, so whatever question marks there may have been before it was issued, have been resolved. For my part I am very happy with this offshore voluntary disclosure initiative. Look, can I just say this. This is a unique, once in a lifetime opportunity. Anyone who doesn’t take advantage of it would have to be insane, frankly. It is quite unique, it is very, very favourable. I mean, if you start off with $1 million in a bank account over there, and the tax office catches you, half of it will go in tax, the other half is going to go in penalties.
So the tax office’s starting position is they’ll take all your money, and you’ll pay them some more, and you may end up with a criminal prosecution as well. In this, under Project Do It, there’s no criminal investigation. You pay tax on four years’ worth of income, which may be, in terms of $1 million might be up to 30, 40, $50,000.00. The big advantage, so that’s a huge advantage to the taxpayer. The big advantage from the point of view of our tax system and the government is that it brings a huge amount of money, I believe it will be billions of dollars, into the tax system, the amount of tax collected now may not be huge, but in future, tax will always be paid on that money. So this is a unique opportunity, anyone who doesn’t take advantage of it, particularly if they’re getting advice from their tax agent or their lawyer or their accountant, will have been very, very badly served.
Koch: Right. Michael, what about your high net worth individuals? How are they reacting to this, and how are you advising them? Because you guys are in a bit of a conflict, aren’t you, because you’re meant to add value to your clients, and in the past it’s been this almost battle between the tax office and yourselves to say “Okay, well, they plugged this hole, but here, there’s another one”. It’s getting harder and harder now.
Bersten: Well, the first thing to say is whatever it might have been in the past, it ain’t that way now. Our client base, this might be of interest, we haven’t got anybody currently from our client base who is coming forward for Project Do It. Either they’ve come forward before, or we don’t believe they’ve got anything to disclose. I think that really reflects the premise that if you’re well advised you will have come forward already or you’ll come forward now for all the reasons that Mark has said.
To me the critical question now is the communication to people who should come forward, how do we get that message to them is the critical question. It’s, as Mark said, there could be a number of reasons for it, but I’d go back to some of the messages from earlier. If you have something to disclose, you should come forward, it’s in your own best interest. Get some further advice, and find out what your position is. But probably another message I just want to add is the tax office has gone through a really fantastic process here of consulting and ensuring this is a robust, fair and balanced program, in the best interests of Australia, but also in the best interests of the individuals concerned.
Koch: So they’ve consulted guys like you, and you’ve said “Okay, it’s the best way to do it”?
Bersten: They’ve consulted, yep. What I’d be asking, and I ask all of our clients, is “On this one, I know you might not have a history of feeling comfortable trusting the tax office, but trust the tax office, this is the best deal in town. But believe me, and trust me, if you don’t come forward, and you should, you are going to be in a world of hurt”.
Koch: Right, okay.