ATO sniffs out overseas havens for stashed cash and goods

The Australian Taxation Office is on the hunt for 5600 Australian taxpayers who didn’t respond to letters about hiding cash and assets in tax havens as part of the Offshore Voluntary Disclosure Initiative.

The ATO says it is well placed to track them down, last week unveiling a new weapon in its fight against tax haven cheats known as the Multilateral Convention. Australia and 42 other countries from across Europe, South America and Africa have agreed to share information and conduct joint audits.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters —?developed jointly by the Organisation for Economic Co-operation and Development and the Council of Europe?—?allows for the exchange of taxpayer information, as well as for assistance in the recovery of taxes and for the service of documents. It will also allow tax auditors to enter other countries to interview individuals and examine records. Membership of the accord is expected to grow.

Crikey understands the ATO is currently pursuing some old international debt cases. A Tax Office spokesperson said:

“For operational reasons we cannot disclose specific information on the secrecy jurisdictions that are on our watch list. However, given the information made available publicly to date, I can confirm that Switzerland is among the jurisdictions where Project Wickenby continues to have a major focus. Other secrecy jurisdictions of concern where there is no effective exchange of information with Australia include Hong Kong, Luxembourg, Panama and the Seychelles.”

The OVDI initiative?—?the Tax Office wrote to taxpayers offering them a deal to make voluntary disclosures in return for lenient treatment such as reduced penalties?—?has now ended. The ATO sourced information from banks, the Australian Transaction Reports and Analysis Centre and other authorities overseas to come up with a hit list of potential cheats.

More than 8000 taxpayers came forward to disclose over $950 million in omitted foreign income, capital gains and over-claimed deductions from assets across 60 jurisdictions. The value of offshore assets held by individual taxpayers, companies, partnerships and trusts ranged from as little as $1 up to $80 million.

Taxpayers submitted disclosures as far back as the 1970s, declaring a vast range of foreign assets and income. Disclosures varied from simple bank interest and dividends to more complex structures involving trusts, foreign investment funds and Wickenby arrangements (Project Wickenby is a cross-agency taskforce charged with combating tax evasion).

“Simple investments disclosed were mostly linked to the United Kingdom, Hong Kong and Singapore, with the more complex arrangements involving funds controlled by financial institutions operating out of Switzerland,” said Mark Konza, the ATO’s deputy commissioner of taxation.

After the offer closed, the Tax Office conducted a follow-up review of the cross-border fund transfers of taxpayers who did not respond to letters sent under the OVDI. This resulted in over 9000 cases, raising another $216 million in net revenue. “A further 5600 taxpayers will be reviewed in 2013,” said Konza.

This article first appeared on Crikey.