ATO in off-shore crackdown

finance.news.com.au

August 22, 2004

AUSTRALIA—THE Australian Tax Office (ATO) will investigate hundreds of secret Swiss bank accounts and target tax havens this year in a crackdown on offshore tax-evasion.

The campaign could affect everyone from retirees earning income from a foreign pension to corporate criminals.

In the wake of the scandal surrounding disgraced stockbroker Rene Rivkin's activities in Switzerland, the ATO will analyse transactions involving accounts in that country, as well as in Singapore, Austria, Belgium and Luxembourg.

Banking secrecy provisions there allow tax cheats and corporate criminals to hide income and evade the scrutiny of Australian authorities.

Meanwhile, treaty negotiations are under way with tax havens Jersey, Guernsey, Antigua and Barbuda, Bermuda and the Isle of Man.

Australia wants to secure information-sharing agreements that would help it prevent residents squirrelling away funds out of reach of the ATO.

As the tax office unleashes hundreds of extra staff on tax compliance auditing this year, Commissioner Michael Carmody has already signalled increased attention will be focused on extra income earned from the property boom, including capital gains and rental expense deductions.

Accountants and tax agents are also set to come under the ATO microscope.

"Our current profiling has identified at least 700 agents who we will contact to discuss the results and possible reasons," Mr Carmody said.

"As necessary, compliance responses for the agent and his or her clients will be developed."

Separately, investigators will audit 1450 individuals earning overseas income in a targeted campaign expected to recover millions in unrecouped revenue.

An ATO spokeswoman said the investigation was sparked by specific information, and people should come forward early to declare foreign earnings.

"Its primary focus is aimed specifically at foreign income derived, for example, from foreign pensions, interest and dividends," she said.

"The tax office is encouraging Australian residents who derive income from overseas sources to declare that income in their tax returns."

Treasurer Peter Costello has pledged to reduce offshore evasion, but the battle could prove fairly tough.

Negotiations with tax-haven governments have been reasonably slow, and recovery efforts last year yielded just $1.4 million from 33 individual taxpayers.

Rivkin - last week stripped of his licence to provide financial services - reportedly used Swiss accounts to hide shares in Offset Alpine - a company whose premises were destroyed in a mysterious 1993 fire.

Rivkin is currently serving a nine-month periodic detention sentence for insider trading involving Qantas shares, but was barred from giving financial advice for medical reasons.

This financial year, the tax office will allocate 600 extra staff to compliance, at a cost of $3.5 billion - which is more than half its total budget.

The ATO hopes to recover at least twice that amount. Last year, it recovered $6.4 billion - up $270 million.

Most of the extra effort will focus on audits, investigations and prosecutions.

"We will be increasing our attention to serious and purposeful non-compliance with our revenue laws, including through the use of tax havens and countries with bank-secrecy laws," Mr Carmody said.

–The Sunday Telegraph