Taxation Law - Promoters

Although promoters are the Tax Office's principal targets they are after any taxpayer who has used offshore bank accounts, credit and debit cards, offshore financial products and/or structures to conceal income or assets from them.  The ATO is alive to the widespread use by some tax advisers and taxpayers of promoters because the types of arrangements relied upon are far too sophisticated for the majority of taxpayers to develop and use.  Once again the operating trio involves promoters, professionals and participants.  Access to promoters is normally via an accountant/business adviser or financial planner.  Confidentiality is the name of the game and concealment the mechanism for efficacy.

The ATO is constantly on the lookout for promoters.  They identify them through -

1. Advertisements
2. Product Disclosure Statements
3. Disclosures by other parties and governments
4. Information Exchanges
5. Taskforce involvements
6. Enquiries, investigators and audits
7. Taxpayers
8. Austrac Analysis

Obviously the vast majority of promoters are engaged in selling products promoting tax evasion and not tax avoidance.  Many offshore promotions are based in tax havens and therefore cannot be prosecuted for tax evasion by Australian authorities leaving only the onshore professional and taxpayer to share the blame.  Of course in all these cases the taxpayer has been briefly advised and may have been seduced to enter into an arrangement by both the promoter and their own tax professional.  Greed plays its part and is the single largest motivator leading to the acceptance of these products and arrangements.

Where promoters pedal tax evasion products their conduct is grossly criminal. They may be charged with a range of offences where they are within the reach of the law.  These offences include fraud; conspiracy; obtaining property/financial advantage by deception; or aiding, abetting, counselling or procuring the commission of an offence by another person.  These offences apply equally to the promoter and professional with yet again some applying to the participant.  These penalties are in addition to any other penalties which otherwise apply.  Should you be engaged in any such scheme or arrangement introduced to you by a promoter then it may well be that you could be criminally prosecuted by the CDPP for criminal activity.Don't forget that many taxation offences carry custodial sentences for up to 10 years and where money laundering is involved, 25 years. 

There is a significant variation in penalties as to whether an unprompted voluntary disclosure is made as opposed to being detected.  Under current arrangements penalties as little as 5% of the amount of unpaid tax may be imposed or in cases of detection and intentional disregard of the law it is 75% of the tax shortfall.  The ATO has been increasing its compliance work in the area of tax havens and they prefer people to make voluntary disclosures before they are detected.  The principal reason being that it saves them a tremendous of time and resources dealing with non-complying taxpayers.  Obviously there are any number of legitimate reasons for dealing with a tax haven but where arrangements are entered into to avoid paying the correct tax in Australia and there has been no effective form of tax planning with arrangements seeming nothing more than mere shams then those  taxpayers are in trouble. 

The message from the Tax Office is clear - that through any number of initiatives including joint initiatives with other authorities both in Australia and overseas, there has been a significant increase in information coming to them which has led to a number of breakthroughs in detecting, investigating and dealing with abusive tax haven arrangements.  The OECD countries are leading the push in this are and are targeting tax havens mercilessly.  There is increased information sharing with other tax administrations around the world with greater reliance on more sophisticated analytical tools combined with either tax treaties, taxation information exchange agreements or mutual legal exchange agreements which allow for co-equal treatment of taxes as well as access to overseas tax and legal information associated with taxpayers who rely upon abusive arrangements to avoid paying the correct amount of tax. 

Further taxation information exchange agreements have recently been negotiated with Antigua Barbuda, The Netherlands Antilles, Bermuda and the Isle of Mann.  Negotiations with other tax haven jurisdictions are continuing and those who are far less robust than Lichtenstein will eventually give way and allow for some form of information sharing which will obviously make it far easier for the ATO and other tax administrations to identify non-complying taxpayers.  The problem is not that the taxpayer uses a tax haven but rather the lack of transparency, secrecy and concealment of the taxpayer's overseas interests including assets and income.  The ATO recognises that there are legitimate taxation minimisation arrangements which may entered into but they must not breach the general anti-avoidance rules which apply to Australian taxpayers.  The object of tax planning must be to achieve clear and recognisable commercial objectives in the most tax-effective manner possible.  Should tax planning get in the way of clearly defined commercial objectives then clients need to consider what is more important - commercial imperatives or the need to reduce tax.

Call LAC Lawyers for competent taxation advice and representation.  Confidentiality is always respected.