ATO spreads its global net

As governments around the world stepped up their data sharing and harnessed powerful technology to find tax cheats, the concept of the “tax haven” was dying, Tax Commissioner Chris Jordan cautioned last week.

Speaking at the Tax Institute of Australia’s national convention in Hobart on Thursday, he outlined the many steps the Australian Taxation Office (ATO) had taken to work more closely with offshore tax agencies bilaterally, multilaterally and through the OECD and the Joint International Tax Shelter Information Centre.

He also put Australians on notice that the ATO was working with other countries to target undeclared offshore assets and profit shifting to minimise tax.

He noted the ATO had already identified 86 high-risk profit shifting cases for investigation and warned: “If you are going to use ‘on the edge’ minimisation strategies in Australia, we are going to make our presence felt – we will check everything you do and we won’t walk away.”

At the same time, he urged all taxpayers with offshore assets to declare their interests as he unveiled a new offshore voluntary disclosure initiative called “Project DO IT” - a “last chance” opportunity to declare offshore assets and income before December this year, in return for reduced penalties.

Eligible taxpayers who make disclosures under Project DO IT will:

  • Only be assessed for applicable (open) periods of review (generally only the past four years).
  • Be liable for a shortfall penalty of 10 per cent (low-level disclosures will attract minimal or no penalties).
  • Be liable for full shortfall interest charges (these replaced general interest charges in relation to amended assessments after 1 July 2005).
  • Not be entitled to utilise any losses that arose in years for which they are not being assessed.
  • Be able to seek assurance regarding the ATO’s tax treatment of repatriated offshore assets.
  • Be able to enter into a settlement deed to obtain additional certainty (where circumstances call for additional surety).
  • Not be investigated or referred for criminal investigation by the ATO on the basis of their disclosures.

“Thanks to international cooperation, the ATO has made significant progress in collecting offshore tax revenue,” said Jordan. “Australia now has over 100 information exchange treaty partners and these treaties do bear fruit. Even countries previously thought of as 'tax havens', such as Switzerland and the Cayman Islands, are working to increase transparency. In 2012-13, our treaty partners helped Australia to collect around half a billion dollars extra in tax revenue and penalty and interest payments.”

Jordan also outlined details of the new relationship he wanted to forge with taxpayers, noting the ATO planned to play a greater role in developing tax law, using its know-how to influence and advocate for the laws that would have the best outcomes.

In addition, he denied recent media reports that the ATO was going to allow private sector accountants to sign off on some company tax returns. “While this is not exactly true, we are looking to draw on the already rigorous audit processes for listed companies,” he said.

“Indeed, our public groups and international area is exploring a new initiative for undertaking assurance work through the external compliance assurance process project. This aims to give some taxpayers with turnovers of between $100 million and $5 billion the opportunity to use their company auditors to review factual matters, rather than the ATO.”