Taxation Law - Enforcement

A lot has been said over recent years about the ATO’s commitment to various initiatives it has put in place. It should be remembered that for high profile risks the ATO established in July 2003 the Serious Non-Compliance (SNC) Business Line which deals with people who set out to deliberately evade their taxation obligations and/or fraudulently abuse the system to obtain an improper benefit. The ATO has always been concerned with onshore tax non-compliance but it is becoming more and more obvious that there has been and is a serious risk posed to the revenue by international tax schemes. As a result they have increased their focus on this area both internally and externally and are relying on far greater co-operation with other tax authorities and other international jurisdictions to identify the offshore taxation exploitation of the Australian taxation system.   As has often been said, the multi-agency approach has been taken for tactical and strategic reasons to better position all agencies to achieve a better outcome whether civil and/or criminal. By adopting joint taskforce initiatives they are able to operate far more effectively on a collective basis and are able to apply a wider range of remedies and powers to combat fraud, evasion, money laundering, aspects of counter-terrorism financing, identify theft, schemes and arrangements which involve tax crime.

The serious non-compliance business line is the sharp end of the Australian Tax Office which identifies those individuals or entities which deliberately set out to avoid their taxation obligations forcing them to take the firmest possible enforcement action including referral to the CDPP for criminal prosecution. Although the ATO collects approximately $240B in tax annually voluntarily there is still a large amount of revenue outside the system and it has become the focus of the ATO to recover this.   In essence where compliance action reveals possible serious criminal behavior the matter is referred for investigation either internally or jointly with the relevant law enforcement agency. Principally the ATO works very closely with the Australian Federal Police and the CDPP in this regard. Where any taxpayer, including any entity deliberately omits to provide information about income or assets and is detected this will amount to serious crime which will be criminally investigated. Under the Memoranda of Understanding between various agencies and more particularly in the case of the AFP they are involved earlier to ensure that nothing is overlooked to assist compliance and deterrence. 

Taxation penalties where taxpayers make false statements focus on international disregard, reckless and carelessness. The most serious consequences accompanying intentional disregard and the test is subjective whereas with recklessness and carelessness it is looked at objectively on the basis of what is reasonable in the circumstances. Sometimes taxpayers wish to ignore the obvious by being subconsciously ignorant and this may manifest itself as either recklessness or intentional disregard. Irrespective the ATO has become much more serious about compliance activities and the need for enforcement action where taxpayers have deliberately disregarded their taxation obligations. As has been said in earlier articles virtually all taxation prosecutions have been successful with the majority of them having resulted in gaol terms. Deliberate tax non-compliance is at the top of the ATO’s hit list and taxpayers who are detected have real problems.

Whenever promoters, professionals or participants try to exploit the Australian taxation system for their own benefit in an attempt to either evade tax on legal or illegal income and where detected they will confront the SNC, a formidable adversary. It has approximately 750 staff mainly intelligence analysts, auditors and criminal investigators whose job is to concentrate on the more extreme aspects of fraud and evasion where people deliberately set out to manipulate the Australian taxation system for their own benefit. Where they identify irregularities they can rely upon proceeds of crime legislation to combat fraud and evasion and other criminal activity concerning the revenue. Under Commonwealth legislation where proceeds of crime offences are involved the Commonwealth can confiscate property on a civil basis without proof of a crime by court order. Where there is property within the jurisdiction this becomes a formidable weapon in the hands of the authorities who may confiscate it which helps to secure the taxpayer’s non payment of tax. Where property is held overseas by a non-complying taxpayer they can be put on airport watch, their passport withdrawn and remain in the jurisdiction until matters have been resolved. 

All scheme promoters who set up arrangements which are concealed from the ATO and other authorities are very much the target of this new whole of government approach involving multi-agency task forces. Recent events underscore how wide-reaching this is and countries such as Vanuatu, Lichtenstein and Switzerland readily come to mind together with the names of a number of prominent individuals which have received much publicity. The ATO, together with a number of other agencies have demonstrated their resolve working with overseas governments and agencies to obtain information relevant to these matters. 

In some matters both search warrants and police raids have been involved including the assistance and engagement of overseas revenue authorities to procure greater access to financial, business and taxation information and data. The ATO’s aim is to strengthen the revenue base, to remove loopholes, to maximise voluntary compliance and where they identify deliberate non-compliance these taxpayers can expect the firmest possible enforcement action including prosecution to ensure deterrence and to discourage illegal arrangements which lead taxpayers to engage in tax non-compliance as part of their wealth creation strategies.  

Just as this article was due to be posted on our website we draw your attention to an article in the Sydney Morning Herald today part of which we quote:

“He arrived windswept but defiant, swathed in an elegant camel coat and flanked by a high profile barrister better known as a crown prosecutor than a defender...

...Dressed in a steel grey suit, white shirt and fire-engine red tie, he began his battle against extradition proceedings to bring him to Australia on possible charges of defrauding the Commonwealth and tax fraud.

De Figueiredo, a resident of Geneva, was arrested in his native Jersey, in the Channel Islands, where he has a holiday cottage in the island’s east. He spent the night of December 30 in custody after a late-night swoop by the island’s crimes unit.

The Jersey Attorney-General’s representative told the court that de Figueiredo, a principal of the Swiss tax-haven specialists Strachans, is believed by Australian authorities to be a key strategist of the offshore schemes at the centre of Operation Wickenby, Australia’s biggest investigation into taxation fraud...

... Mr Edmonds told the court that Australian authorities had confirmed their full case would be provided inside the required period and asked the court to set aside February 16 to begin arrangements for the extradition hearings” 

This confirms that the ATO and other members of the multi-agency task force have not gone soft on tax evasion and tax crime irrespective of the outcome. They are serious; it may have taken five years to get this far but they are dedicated and ever-vigilant. They intend to get results and will continue unabated despite criticism and perhaps ridicule.