Australian tax authorities move following Paradise Papers revelations

Australian tax authorities have been working with partner agencies around the world for months in preparation for the release of the Paradise Papers, the latest offshore tax avoidance leak from the International Consortium of Investigative Journalists (ICIJ). The Australian Taxation Office (ATO) had been tipped off about the latest data leak of 13.4 million records from Bermuda-based offshore law firm, featuring major corporate names such as Glencore, Apple, Nike and Uber.

“The ATO has been working closely for several months with our partner agencies here and overseas in anticipation of a data release by the ICIJ. These relationships have enabled the ATO to commence analysis of the intelligence received to identify possible Australian links,” the ATO said in a statement issued this morning.

Australian tax authorities are still deeply involved in investigating an estimated 1,175 Australians who were named in the Panama Papers leaks in 2015. Neil Olesen, second commissioner at the ATO, told a recent parliamentary inquiry that the tax authorities had raised A$50 million after 600 people came forward during a voluntary amnesty. The ATO was investigating another 575 individuals.

“We’ve finalised a little under half, about 250. We’ve got another 125 in progress and the remaining 200 we will have completed by June 30 next year,” Olsen told the inquiry.

The release of the Paradise Papers will add significantly to the number of people the ATO is investigating. The authorities have urged individuals and companies to come forward voluntarily, as they did with the Panama Papers.

Mark Konza, deputy commissioner at the ATO, said that the agency was cross-referencing information from a number of sources, including from concerned citizens, advisers, partner agencies and international bodies. It is using data from the Australian Transaction Reports and Analysis Centre (AUSTRAC) to cross-check information and build an intelligence datbase, as well as undertaking audits. Where appropriate the ATO refers cases to the Serious Financial Crime Taskforce for criminal investigation.

The Australian tax authorities are part of an ongoing offshore tax evasion taskforce with the Australian Criminal Intelligence Commission and the Australian Federal Police.

“The data we are receiving from our international and domestic sources is comprehensive and current. This robust intelligence coupled with our powerful analytics capabilities, assists us to continue to tackle tax avoidance head-on. We anticipate further data may be published by the ICIJ and the ATO will continue to work closely with other tax administrations to share intelligence on advisers operating globally,” Konza said.

Global Financial Integrity (GFI), the Washington DC-based research and advisory firm, said the leaks once again demonstrated the disconnect between law firms and other advisers’ public statements about regulatory compliance and their private advice. It called on governments including Australia to push ahead with the regulation of so-called Designated Non-Financial Businesses and Professions (DNFBPs).
“Law firms and other DNFBPs cannot continue to be left to police themselves. Jurisdictions need to require and publish public beneficial ownership information,” said Heather Lowe, GFI’s legal counsel and director of government affairs. “Appleby has shown on paper that
it is aware of its requirements to conduct thorough and honest customer due diligence with potential and existing clients but the leaked files seem to show that it’s rarely putting this into practice.”

International partnerships

Internationally, members of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) have been collaborating following the statement issued by law firm Appleby last month. JITSIC brings together 37 national tax administrations that have committed to more effective and efficient ways to deal with tax avoidance, including Australia.

“Given our early analysis of the data and the ability of the JITSIC member countries to come together quickly to build on each other’s intelligence holdings and insights, I am confident the ATO is in a position to respond decisively to this data release,” Konza said.

The ICIJ said the Paradise Papers were the largest ever leak of offshore financing documents, eclipsing even the Panama papers. It features 13.4 million records, exposing ties between Russia and U.S. President Donald Trump’s billionaire commerce secretary, the secret dealings of the chief fundraiser for Canadian Prime Minister Justin Trudeau and the offshore interests of the queen of England and more than 120 politicians around the world.

“The leaked documents … show how deeply the offshore financial system is entangled with the overlapping worlds of political players, private wealth and corporate giants, including Apple, Nike, Uber and other global companies that avoid taxes through increasingly imaginative bookkeeping maneuvers,” the ICIJ said.

Country-by-country reporting

The documents in the Paradise Papers reveal that Glencore’s Australian division used cross-currency interest rate swaps and offshore entities in Bermuda to minimise its tax liabilities.
Raymond Baker, president of GFI, said multinational companies should be required to report their number of employees and facilities and revenue on a country-by-country basis to help reveal tax abuses.

“Allegations regarding Appleby’s relationship with Glencore demonstrates this insidious relationship perfectly. From purportedly helping handle Glencore’s moves in Congo with Katanga Mine and Dan Gertler, to maintaining a ‘Glencore Room’ to help shore up the company’s claim of a Bermuda office for tax purposes,” Baker said.

Non-government organisations (NGOs) in Australia have been quick to condemn the level of corporate tax evasion that has been exposed in the latest data dump.

Helen Szoke, Oxfam Australia chief executive, said the continued data leaks from offshore centres exposed the urgent need for tax reforms.

Oxfam has backed the calls for reforms to make large companies’ tax affairs public for every country in which they operate. They have also called for reforms to make public the individual beneficial owners of companies and trusts, and special provisions to make mining companies reveal their tax practices.

“Oxfam is again calling on the federal government to follow suit and introduce public country-by-country reporting as the first step in stemming the billions of dollars being siphoned offshore to tax havens, and to make the register of beneficial ownership public,” Dr Szoke said.

GFI estimates that tax havens, anonymous companies, trade-based money laundering and lax financial crime enforcement are having a significant impact on developing countries in particular. It said that illicit financial flows through developing countries has surged to between 14 percent and 24 percent of developing country trade each year.

“This global shadow financial system bleeds the world’s poorest economies and propels crime, corruption, and tax evasion,” GFI said in a statement.

Treasurer Scott Morrison said the ATO was successfully investigating multinational tax avoidance and has has 13 major companies under review.

“I think what that demonstrates is the ATO being on the job,” Morrison said. The federal government has not supported the Opposition’s calls for the introduction of country-by-country reporting.
The Paradise Papers come from two offshore services firms, Appleby and Estera, as well as from 19 corporate registries maintained by governments in jurisdictions that serve as “waystations in the global shadow economy”, the ICIJ said. The leaks were obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.

Published 06-Nov-2017 by
Nathan Lynch, Regulatory Intelligence

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