Tax office expects more fraud cases as a result of financial crisis

The Australian Taxation Office will target SMEs that attempt to illegally cut their tax bills to dodge any fallout from the financial crisis, the tax commissioner said yesterday.

The Australian Taxation Office will target SMEs that attempt to illegally cut their tax bills to dodge any fallout from the financial crisis, the tax commissioner said yesterday.

In a speech to the Victorian Tax Bar Association yesterday, Tax Commissioner Michael D’Ascenzo said he expects more fraud cases from SMEs to appear before the tax office.

He has also warned businesses to maintain sound governance structures, but says the tax office will do “everything possible” to help keep SMEs afloat.

“In the current environment it would be reasonable to expect an increase in losses and there will be temptation among some to use them inappropriately. There is likely to be an increased number of debt cases and, depending on behavioural changes, there may be an increased risk of lower disclosure and reporting.

“In those cases where a taxpayer is simply unwilling to pay any tax or superannuation guarantee charge that is properly payable, or trading with a tax debt while insolvent, we will be taking debt enforcement action,” D’Ascenzo says.

“This may include the use of garnishee notices, statutory demands and in some cases actions subject to court processes, depending on the circumstances.”

D’Ascenzo also says SME debt levels are a “major concern”, and that the financial crisis will likely exacerbate the problem. Small and micro businesses account for $14.6 billion or 66% of total collectable debt as of 30 June 2008.

“For those businesses that do have the capacity to pay the debt either now or in the foreseeable future, and have a mindset to ‘do the right thing’ when they can, we do everything possible to ensure the business stays afloat and stays in the system.

“(But) in those cases where a taxpayer is simply unwilling to pay any tax or superannuation guarantee charge that is properly payable, or trading with a tax debt while insolvent, we will be taking debt enforcement action.”

D’Ascenzo also said the tax office is investigating multinational companies attempting to transfer overseas losses into Australia.

“We have already seen attempts by multinationals to aggressively transfer existing or unrealised losses from foreign operations back into Australia, including those in the financial and manufacturing sectors.

“We are warning these entities that inappropriate attribution of foreign losses will attract tax liabilities, including penalties.”

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