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  • Dealing with those who cheat the system

    Most people try to do the right thing. However, there are some who intentionally abuse the tax and superannuation systems or act dishonestly for financial gain. This deprives Australians of revenue that could be invested in essential services. In a global economy, we need to be vigilant about emerging risks arising from new technology.

    While we focus our efforts on preventing non-compliance, it is also our role to protect the integrity of the tax system and ensure everyone pays the right amount.

    We take firm action against people who intentionally falsify information on their tax returns, including penalties or prosecutions in serious cases. In conjunction with partner agencies, we target people who profit from criminal activity and work to protect taxpayers from fraudulent activities.

    We use analytical models to assess tax forms, and share data and intelligence with our global partner agencies to detect and prevent fraud. In 2016–17, we stopped over 26,500 tax returns and denied $89.6 million in attempted fraudulent refund claims.

    Our approach to tax crime focuses on three major phases:

    • Analysis of intelligence to identify risk and appropriate treatment.
    • Partnerships to prevent, detect and deal with tax crime.
    • Encouraging confidential reporting of suspected tax evasion and tax crime.

    Targeting tax evaders

    In cooperation with our partner agencies, we use various information sources and sophisticated analytics, to identify people who deliberately break the law to either:

    • avoid paying the right amount of tax
    • claim refunds or other payments they are not entitled to.

    In 2017–18, more than 2,000 individuals and companies were prosecuted for failing to lodge, failing to respond to notices, or making false or misleading statements, resulting in $13.748 million in fines. A further 23 convictions for defrauding the Commonwealth resulted in 21 custodial sentences, ranging from three months to seven and a half years.

    Targeting offshore tax evasion

    The Serious Financial Crime Taskforce continues to disrupt offshore tax evasion. Since its introduction it has successfully prosecuted seven individuals who received criminal convictions and custodial sentences, ranging from two to 14 years.

    In 2018, Michael Issakidis was sentenced to 10 years and three months' jail for his involvement in the largest prosecuted tax fraud case in Australia's history. This follows the conviction of co-accused Anthony Dickson's 14 year sentence – the longest jail time received for tax fraud and money laundering.

    We work with our international partners to combat tax evasion on a global scale. Following raids on a Swiss bank’s branches in Britain, France, Germany and the Netherlands, 346 Australian account holders were identified in a leak of details of 50,000 accounts. In May 2018, we began contacting 106 Australian private clients of the bank to discuss more than $900 million in suspicious transactions linked to secret numbered accounts.

    To date, 11 taxpayers have come forward to make a voluntary disclosure. We continue our compliance action through the Serious Financial Crime Taskforce and are committed to uncover anyone who seeks to mask the true nature of their tax affairs.

    The Joint Chiefs of Global Tax Enforcement

    In July 2018, Australia, Canada, the Netherlands, the United Kingdom and the United States established a joint operational alliance known as the Joint Chiefs of Global Tax Enforcement (J5).

    The J5 is an operational group committed to combatting international and transnational tax crime and money laundering.

    The group works together to:

    • gather information
    • share intelligence
    • conduct joint investigations.

    Never before have criminals been at such risk of being detected as they are now. It’s not a matter of 'if' but 'when' we will uncover tax crimes.

    Find out how we target tax crime:

    Black economy initiatives

    The black economy refers to people who operate entirely outside the tax and regulatory system, or who are known to the authorities but do not correctly report their tax obligations.

    The Australian Government will inject $318.5 millionExternal Link over four years to implement new strategies to combat the black economy.

    Key strategies include:

    • new mobile strike teams and an increased audit presence
    • a Tax Integrity Centre for the community to report known or suspected phoenix, tax evasion and black economy activities
    • improved government data analytics and educational activities.

    Disrupting illicit tobacco activity

    The Illicit Tobacco TaskforceExternal Link (ITTF) aims to protect Commonwealth revenue by proactively targeting, disrupting and dismantling serious organised crime syndicates that deal in illicit tobacco.

    As of February 2019 we have:

    • prosecuted eight tobacco related fraud matters
    • undertaken 39 seizures
    • seized and destroyed approximately 240 tonnes of tobacco with an estimated excise duty value of $204 million.

    In January 2019 the ITTF seized and destroyed eight acres of illegal tobacco crops and seedlings with a potential excise value of more than $9 million from a property near Araluen in New South Wales.

    In August 2018, the ITTF seized and destroyed 1.5 tonnes of illicit tobacco with a potential excise value of approximately $1.4 million from a property near Grafton in New South Wales.

    Recent law changes enacted in August 2018 have strengthened and simplified tobacco related offences and penalties in the Excise Act, Taxation Administration Act and Customs Act, which will further assist in combatting illicit tobacco in Australia.

    See also:

    Tax Avoidance Taskforce

    The Tax Avoidance Taskforce is a key element of our efforts to ensure that large businesses and wealthy individuals pay the right amount of tax in Australia.

    The taskforce investigates and challenges the most aggressive tax avoidance arrangements, including profit shifting. We work with our partner agencies and other jurisdictions to ensure the fairness and integrity of our tax system for all Australians.

    In the two years up to June 2018, the taskforce has:

    • collected more than $5.6 billion in revenue and issued liabilities of more than $10 billion
    • conducted more than 700 audits and reviews of wealthy individuals and private groups
    • 71 audits covering 67 multinational corporations underway
    • ensured an additional $7 billion in sales are properly accounted for in Australia
    • undertaken assurance work with large businesses and wealthy individuals assuring more than $218 billion in business income was correctly taxed
    • closed many loopholes being used by companies to avoid their tax obligations in Australia through the Base Erosion and Profit Shifting (BEPS) program
    • seen many companies restructuring their finances to ensure profits earned in Australia are taxed in Australia, due to the introduction of the Diverted Profit Tax (DPT) and Multinational Anti-Avoidance Legislation (MAAL).

    See also:

    Phoenix Taskforce

    Illegal phoenix activity is when a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts, including taxes, creditors and employee entitlements. This fraudulent activity costs up to $5.13 billion per year and impacts the business community, employees, contractors, the government and the environment.

    The Phoenix Taskforce comprises 34 federal, state and territory agencies that share intelligence and coordinate action against high risk phoenix operators and their facilitators to combat illegal phoenix activity.

    Since the taskforce's inception, together with ASIC we have prosecuted 25 illegal phoenix operators. ASIC has taken action against 12 registered liquidators and 79 company directors.

    The taskforce has also achieved the following results:

    • For the period 1 July to 31 December 2018 the taskforce has raised over $160 million in liabilities and collected over $54 million in cash.
    • For the period 1 July 2018 to 31 January 2019 the taskforce has had five successful prosecutions from ATO-related matters, resulting in criminal convictions and custodial sentences ranging from three, to three and a half years.
    • For the period November 2014 to 31 December 2018 we have completed over 3,400 audits and reviews relating to Phoenix activity.
    • We have raised liabilities of approximately $1.185 billion and collected around $510 million.

    See also:

    Serious Financial Crime Taskforce

    We are a lead agency in the fight against serious financial and organised crime. The Serious Financial Crime Taskforce (SFCT) is multi-agency and focuses on financial crime related to international tax evasion, fraudulent phoenix activity, superannuation and trusts.

    Since the taskforce was established on 1 July 2015, it has:

    • achieved seven convictions
    • undertaken 1,043 audits
    • raised liabilities of more than $738 million
    • collected more than $288 million.

    Since July 2018 the taskforce has:

    • raised over $137 million in liabilities
    • collected over $52 million
    • assisted in the prosecution of two individuals resulting in custodial sentences of seven years and six months', and seven years.

    The Government has provided $182 million to us over four years to extend the SFCT from 2019–20. This extended funding shows the government's confidence in the achievements of the taskforce, and how we holding serious offenders of financial crime accountable.

    The increased capability of the taskforce enables it to respond to new and emerging risks, including transnational crime that impacts Australia's tax and super systems.

    See also:

    Black Economy Taskforce

    We know there is a strong sense of community outrage at the unfair disadvantage created by the black economy. The Black Economy Taskforce Final ReportExternal Link found ‘honest businesses are being penalised by the black economy’ and it allows some to play by their own rules and penalises businesses, employees and consumers who do the right thing.

    The government response to the final report included the announcement of a number of initiatives designed to deliver stronger enforcement through new approaches to data sharing, analytics and on-the-ground resources.

    These initiatives will involve a standing partnership between Australian Government agencies, including us, and the private sector.

    Last modified: 01 Jul 2019QC 57208