Taxation Law - The Purpose of Tax Information Exchange Agreements (TIEA's) and the Current Status of Proposals for Australia on TIEA's - Part 2

Using TIEA’s for Information Gathering and Possible Criminal Prosecution for Serious Non Compliance.

From a practical point of view, there is some concern that proceeds of crime have become associated with  fraud,  tax evasion and other criminal activity .As a result  Commonwealth legislation has been introduced to address this issue whereby proceeds arising from criminal offences against Commonwealth laws may be forfeited.

For example in 2005-06[1], Serious Non-Compliance achieved the following:

1. 367 investigations
2. 178 briefs of evidence referred to the CDPP
3. 107 matters dealt with by the courts, with 102 resulting in successful prosecutions. 56% resulted in prison sentences, and
4. 363 audits finalised resulting in adjustments of $121.4 million.

It should be noted however that relevant data or information for offshore activities is very difficult to obtain. However, when it comes to the issue of tax evasion in offshore jurisdictions, the ability of relevant authorities to target tax evasion and illegal activities is quite difficult. Consequently, the role and relevance of TIEA’s for government agencies to obtain details concerning offshore business and other dealings is of considerable importance.

Tax Information Exchange Agreements: The way forward

As has been noted above, the use of tax havens and the increase in tax evasion is of considerable concern not only in Australia but also overseas. On a global received increasing attention and growing concern. While the use of S 264A notices may appear a useful means of addressing the issue of tax evasion it is suggested that the use of TIEA’s is an important part of any attempt to reduce the use of tax havens and the associated tax evasion.

Usually TIEA’s agreements are formalised as part of Australia’s double tax treaties with another country. However it is also suggested that a multi dimensional approach is needed to address the issue of tax evasion. The reason for this is a need for regulatory authorities to be able to exchange information between countries on a multi jurisdiction basis. In the current global world of commerce and business transactions it is very easy to effect business transactions between a number of offshore locations. Consequently in order to determine the use of offshore transactions, and the role of offshore jurisdictions in tax avoidance, it is necessary that the authorities are able to link and trace transactions where they cross a number of jurisdictions. Such power is needed not only by the ATO but also for other regulatory bodies to address tax evasion, and other activities such as money laundering, which may be linked to criminal activities[2]. Consequently it is suggested that Double Tax treaties and any TIEA’s should be developed on a multi dimensional basis to facilitate information transfers on a broader basis.