Taxation Law - The Purpose of Tax Information Exchange Agreements (TIEA's) and the Current Status of Proposals for Australia on TIEA's - Part 3

Some practical points to note – Practitioner and Client

While there has been considerable attention given to the issue of tax evasion there are a number of important issues that taxpayers and their advisers should consider given the formalisation of TIEA’s by Australian authorities with overseas countries and in particular some recognised tax havens ( as noted above.)

Consequently, if a client has been involved or has entered into any offshore transactions or has an offshore bank account, there are some basic issues to consider. Some of these are:

1. make sure that the tax practitioner obtains full and proper instructions from the client;
2. make sure that the tax practitioner keeps up to date with the relevant taxation laws with respect to the clients matter;
3. keep the client informed at all times;
4. provide full explanations based on the clients instructions;
5. warn the client as to the risks, including the financial risks and revenue risks;
6. care should be taken with tax avoidance schemes and or any other questionable cross boarder transactions; and
7. if a cross boarder transaction is questionable, and or involves misleading and or deceiving the ATO, then the adviser should refuse to act for the client. 

In this respect, where an adviser decides to act for a client and the practitioner suspects the client is involved in either tax evasion, tax abusive shelters or money laundering then extreme caution is advised. The adviser should be aware of the penalties[1]that the client and adviser may be liable for defrauding the Commonwealth of its revenue and or be charged with conspiring to obtain a financial advantage by deception. Moreover the recent decision of Wheatley indicates that the ATO and other authorities are anxious to proceed against any transgression of local laws especially where tax evasion is concerned.

However notwithstanding the above comments a major obstacle is that, in order to prosecute tax cases, under the Prosecution Policy[2] there is a two-stage test that must be satisfied:

1. there must be sufficient evidence to prosecute the case; and
2. it must be evident from the facts of the case, and all the surrounding circumstances, that the prosecution would be in the public interest.

Furthermore once the relevant data is obtained pursuant to the application of S264A notice, there are other formal requirements which must be met under the provisions of the Income Tax Assessment Act 1936 for the Commissioner to issue an amended assessment and any penalties. In this respect, the obtaining of relevant offshore information relevant to a taxpayers affairs is only the first step in any successful amendment of an assessment. However, in cases where the ATO has decided to instigate criminal proceedings against the taxpayer, it is a matter of whether there is enough evidence to sustain a criminal prosecution. According to the CDPP, in determining whether there is sufficient evidence to prosecute must be satisfied that there is prima facie evidence of the elements of the offence, and a reasonable prospect of obtaining a conviction. The existence of a prima facie case is not sufficient. If you have been quizzed by the Tax office in relation to any offshore dealings, now is the time to contact LAC Lawyers and ask for Mr Frank Egan who can further assist and advise you on your options.