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Tax office dual standard demands probe

AUSTRALIAN BUSINESS REVIEW   September 18, 2018  Robert Gottliebsen

Michael Cranston. Picture: John Grainger

The threat to the Australian taxation revenue base caused by lack of community confidence in the ethics of the Australian Taxation Office has been multiplied as a result of The Weekend Australian report by legal affairs editor Chris Merritt.

Suddenly the actions of the ATO and its former deputy commissioner Michael Cranston are in the spotlight for the reverse of ATO abuses of small business — the ATO is being accused of being too generous to rich families.

The ATO small business abuses have already led to the small business minister (Michaelia Cash) and the shadow small business minister (Chris Bowen) proposing an independent appeal body to curb the ATO abuse.

But it’s now possible that a dual standard exists. Generous treatment of rich Australian families has been put in the spotlight so we need to seriously consider the proposal of opposition leader Bill Shorten for bipartisan support to establish a national integrity commission. Labor will set up the body if it wins the next election.

Such an integrity body must start with the ATO.

The latest saga starts with actions by the ATO back around 2013-14.

Merritt quotes the research of Self Employed Australia, which says the ATO‘s “Project Do It”, organised by former deputy commissioner Michael Cranston, cost Australia billions in taxation. The ATO denies this.

The story is fairly simple. Over many decades Australians parked or diverted at least $6.7 billion into a multitude of international tax havens. Much of it, but certainly not all, was in Switzerland.

Merritt extracted from the ATO the fact that more than 5900 Australian taxpayers were involved in “Project Do It” and they had not disclosed an enormous $6.7 billion in assets and $656 million in income. Only $260 million in tax was levied.

What has not been revealed is whether the concealed assets and income of the 5900 Australians were evenly spread or whether there were a small number of incredibly wealthy people who had been concealing assets and income on a massive scale.

Self-Employed Australia believes that that the $6.7 billion was dominated by large accounts in Switzerland. We need an integrity commission (or senators) to discover the truth.

There is no doubt that among the 5900 were migrant refugees. Last March Marc Leibler revealed that his firm (Arnold Bloch Leibler) was established more than 60 years ago to advise migrants, many of them refugees, who had fled war-torn Europe.

“Many of these people had been reluctant or unable to bring all their money with them and, over time, they found themselves in a fearful bind. They wanted to bring the money they’d left behind back to Australia but couldn’t because of the potential tax problems that would arise”

There is no question that part of $6.7 billion was owned by genuine migrants in that category. But the $6.7 billion asset figure uncovered by Merritt is too big for a small time migrant situation unless the migrants had monumental amounts of money.

Self Employed Australia believes that the $6.7 billion is dominated by a relatively small number of individuals engaged in old-fashioned tax avoidance. Switzerland was at the core. This is a serious allegation and to protect the integrity of the ATO the full truth needs to be revealed and in particular whether the affair was linked to the fact that on July 30, 2013 the Swiss and Australian governments had signed a new tax treaty.

The effect of this treaty was that the Swiss government would release to the Australian government details of Swiss bank accounts held by Australians.

According to Self Employed Australia it was then only a matter of time before any Australians fraudulently hiding money in Switzerland would be caught. Under standard ATO tax rules, such people would face back tax bills on a scale— large enough to possibly even bankrupt them. They would also face potential jail time for tax fraud.

The Michael Cranston view, which was embraced by the ATO, was that the ATO should cut a deal. And so Project Do It was conceived and three months after the Swiss tax deal, the ATO announced an amnesty for individuals who had hidden money in overseas bank accounts.

Under the amnesty anyone, including high-wealth people (that is, anyone worth more than $30 million) could declare their secret overseas money and be treated exceptionally lightly by the ATO. The amnesty went into effect on March 27, 2014 and closed on December 19, 2014. 3

The ATO proudly announced it had collected $260 million in tax. The $6.7 billion was back in the tax system and all was forgiven.

Self Employed Australia says the high wealth individuals who “owned up” and benefited from Project Do It were people who had potentially and allegedly committed fraud by not declaring income on international-related income (for example, interest in foreign bank accounts, or deductions claimed for money paid to secret offshore accounts). Further, some of them were almost certainly illegally shifting “black” money overseas and returning that money to themselves by way of false “loans”.

By comparison, in cases where self-employed, small business people have allegedly committed fraud by not declaring income, the ATO goes back as many years as it wants; imposes up to 90 per cent penalties; applies around 9 per cent interest.

The way small business is treated is totally different to the way the rich have been treated. The dual standard is unfair.

These are important allegations that need to be investigated.

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