Taxation Law - Overseas Dealings

Often clients want to use their accountant to lend legitimacy to their taxation affairs and to deny any knowledge of overseas dealings, interests or assets as they say their adviser filled out their return and answered questions about overseas interests, assets and holdings as "No".  From that point on they have lost credibility.  Do not forget that information sharing plays a major part in identifying recalcitrant taxpayers particularly where the taxing authorities are a member of the OECD Club like Australia.  Even if a taxpayer is not picked up here they may be picked up overseas because of their overseas dealings involving inter-jurisdictional cashflows and cross-border financing.  Big brother is watching and any taxpayer so engaged needs to be extremely consistent, disciplined and lucky to escape any taxing authority for life.  Even if this occurs the problem is foisted onto the next generation and if they are less mindful than their parents then they will bear the burdens, humiliations and defeats imposed on them.

In my experience some taxpayers have been advised by either their accountant and/or promoter that if approached by the ATO or anyone else just deny it and it will go away.  Think again, it won't.  Normally by the time you receive a letter or notice or simple enquiry from the Tax Office it may be too late.  In most cases they already possess some information about your affairs about which they are seeking clarification before they attack.  After all they are there to collect and protect the revenue.  For a number of months now they have circulated a letter to a large number of taxpayers about their overseas dealings and/or interests asking them to come forward.  Taxpayers who are being offered substantial benefits when making a voluntary disclosure do not want to be detected otherwise reduced penalties may not be available or if available will not be reduced anywhere near as much as where a disclosure is made voluntarily before detection.  The ATO states "If you have undeclared foreign taxable income (including capital gains) or you have over-claimed deductions involving international transactions in your tax return it is very likely you have a tax liability".  Don't forget that if you disregard any such opportunity then these benefits will not be available once an audit is initiated.  The definition of an audit does not favour the taxpayer.

There is a lot of information which the ATO has on a number of non-compliant taxpayers in Australia and overseas. Some of that information arose from Project Wickenby and led to the detection of Glenn Wheatley.  Many members of the public are familiar with that case and they understand Wheatley was recently advised after receiving a Parker direction that his sentence may well be increased rather than reduced if he were to press ahead.  Putting that aside there are a number of other taxpayers who are still under investigation details of which will be made public over the ensuing months and years after the ATO  and the AFP have exhaustively investigated them. The ATO has concentrated its efforts on a number of tax havens including those to the north east of Australia as well as Europe.  They have been negotiating taxation information exchange agreements and mutual legal assistance agreements in a number of jurisdictions including tax havens where there are no tax treaties currently in place.  This leads to greater transparency both from a taxing point of view and other inter-jurisdictional legal matters. 

According to the newspapers the UK Revenue has recently purchased for A$200,000 the bank details of 100 of Britain's richest families.  Apparently this occurred when German authorities raided dozens of private homes including four politicians.  Apparently this information and more is available to be shared with any interested foreign government. The focus is Lichtenstein which is one of the most effective tax havens in the world where there is almost total secrecy and this information is not normally available.  Irrespective, the Australian Tax Office is currently investigating a number of wealthy Australians who have secreted large sums of monies in secret bank accounts in Lichtenstein.   The ATO was already active in Lichtenstein before the raids occurred. Obviously this information will prove useful to them and will allow them access to otherwise secret information.

Out of the 33 tax havens currently utilised around the world there are only six which really provide the level of protection required by their clients.  As has often been said by the ATO there is nothing wrong with utilising a tax haven provided it is done legitimately and all transactions are transparent.  Despite this the majority of taxpayers prefer to conceal their overseas arrangements involving tax havens which places them at great disadvantage when discovered.  Essentially all of the OECD countries have joined together in an attempt to force tax havens to disclose information about their citizens' residence.  The USA is the most invasive and persuasive of them all.  They are all working together focusing on Lichtenstein bank accounts which are used to evade tax.  The ATO has already issued a number of overseas information notices and conducted a number of unannounced access visits where there are suspected links to Lichtenstein bank accounts of illegal entities.  Should you be concerned about the consequences of detection and need to obtain competent legal advice and representation do not hesitate to contact LAC Lawyers now.  Confidentiality is assured.