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Tax office’s Project Do It ‘missed $4.3bn in revenue’

AUSTRALIAN BUSINESS REVIEW   September 14, 2018   Chris Merritt

Michael Cranston faces two charges of abuse of public office. Picture: AAP

The peak national body for independent contractors has called for an inquiry into the Australian Taxation Office’s management of a tax project that it believes may have cost Australia up to $4.3 billion in lost revenue.

A research report prepared by Self Employed Australia says the ATO unveiled Project Do It soon after Switzerland agreed in 2013 to release details of Australians with secret bank accounts.

It raised $260 million in back taxes from income earned on previously undeclared offshore assets, the report says.

But without this initiative, it says the tax raised from those tax evaders would have been between $1.2bn and $4.3bn.

“There is no question in our mind that an independent investigation of the ATO needs to occur,” Self Employed Australia executive director Ken Phillips said.

However, the ATO last night disputed key parts of the research report and said Project Do It was not an amnesty and had recovered revenue from previously hidden assets in 90 jurisdictions, not just Switzerland.

“Given increased international co-operation, increased information exchange and moves for greater global transparency, this was a ‘last chance’ for eligible taxpayers to come forward to make a disclosure,” deputy commissioner Will Day said.

“More than 5900 taxpayers came forward under the initiative, which was about bringing people back into the tax system.

“Previously undisclosed income of approximately $656m and previously undisclosed assets of approximately $6.7bn were disclosed under the initiative.”

The report by Self Employed Australia, which is being made public today, says Project Do It was overseen by Michael Cranston, a former deputy commissioner of taxation who is facing two charges of abuse of public office over an unrelated matter involving his son, Adam.

If it had applied standards used by the US, it would have recovered $2.3bn instead of $260m, the report says.

Once the federal government had signed the tax treaty with Switzerland in July 2013, “the days of Australians hiding money in Swiss bank accounts were over”.

It was only a matter of time before any Australian fraudulently hiding money in Switzerland would have been caught, it says.

“Such persons would face, under ATO standard tax rules, back tax bills of a scale large enough to potentially even bankrupt them,” it says.

“They would also face potential jail for tax fraud.”

However, Mr Day said the project was not focused solely on Swiss bank accounts.

The ATO also disputed the report’s assertion that Project Do it had targeted “high-wealth individuals” and said it had been open to everyone.

The report says the terms of Project Do It were far more generous than the terms imposed on self-employed small businesspeople when they are accused of tax fraud.

In Project Do It, the report says the ATO declared that if individuals admitted to undeclared overseas income, the ATO would impose 10 per cent penalties on just four years of undeclared income and interest of just 4.5 per cent would be imposed on the penalties.

But when self-employed people fail to declare income and are accused of fraud, the report says the ATO “goes back as many years as it wants”, imposes up to 90 per cent penalties and charges interest of about 9 per cent.

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