The Australian Taxation Office moved fast when an international group of journalists revealed a huge trove of information had been leaked about who actually owns a large number of the shell companies based in well known tax havens.
The ATO says a “significant number of Australian residents” are named in a tranche of data that relates to “a Panamanian law firm” which is presumably Mossack Fonseca, the source of the “Panama Papers” that were leaked to the journalists. Yesterday, the agency confirmed it had already begun cross-referencing with its own information:
“Currently we have identified over 800 individual taxpayers and we have now linked over 120 of them to an associate offshore service provider located in Hong Kong.”
The media companies who collaborated to investigate the leak have only published a fraction of millions of documents so far and the full impact of the information is yet to be seen.
International tax evasion is difficult to prove because most of the individual steps in the process are themselves legal. The ATO says leaks and tip-offs — not usually as dramatic as the Panama Papers — are often required to break the silence:
“ATO intelligence on tax evasion comes from a variety of sources, including from concerned citizens, advisers, partner agencies and international bodies. For example the ATO has raised tax liabilities of around $400 million from data supplied by confidential informants.”
As digital technology improves and information sharing between government agencies improves, both within Australia and overseas, officials say catching tax cheats is getting easier. In 2014, the ATO offered an amnesty to offshore tax evaders if they came forward by December 19 of that year — under the unsubtle banner “Project DO IT” — which came with a stern warning from a deputy tax commissioner, Greg Williams:
“I want the people who have undisclosed money offshore to realise they are on notice. If they think they can remain undetected, they should think again. We are just one step away from knocking on their door.
“… We now have a greater ability to follow the trail of money across borders to the end beneficiary. Tax evaders should be aware that complex structures designed to throw authorities off the scent won’t stand up.”
The ATO has “ramped up” its compliance efforts since Project DO IT ended, and will try to deal with Australian taxpayers who have undeclared offshore assets and didn’t take advantage of the amnesty, according to yesterday’s statement.
Deputy commissioner Michael Cranston says the new information from the Panama Papers mentions some taxpayers who have been previously been investigated and “a small number who disclosed their arrangements with us under the Project DO IT initiative”.
Reducing tax avoidance by people and organisations with large amounts of wealth to hide — on a lean government budget — and relies on sharing information and coordinating compliance efforts with foreign counterparts as well as domestic partners like the Australian Federal Police. Despite the ATO’s tough talk, it’s an uphill battle. Cranston said:
“We have been analysing the latest data against information these taxpayers had reported to the ATO and against the information we already have.
“We are also working closely with the AFP, Australian Crime Commission and AUSTRAC to further cross-check the data and strengthen our intelligence. Some cases may be referred to the Serious Financial Crime Taskforce.
“This Taskforce builds on the success of Project Wickenby where we raised $2.29 billion in tax liabilities and there were 46 criminal convictions.”
The ATO has already begun to take action against some of the Australians implicated in the massive leak who are deemed “high wealth individuals” and Cranston repeated the warnings that hiding wealth is becoming harder all the time:
“Through data analysis we have been able to identify patterns such as clusters of individual taxpayer and advisers for further investigation.
“The message is clear – taxpayers can’t rely on these secret arrangements being kept secret and we will act on any information that is provided to us.”