Panama to Point Piper seminar
19 May 2016
With multinational tax avoidance now a huge focus for the Turnbull Government, BDO’s Sydney office hosted a seminar last week to discuss this issue and invited two senior Tax Officers - Deputy Commissioner of Taxation Michael Cranston and Assistant Commissioner Jeff McAlister – to share their insights into the activities of the Australian Taxation Office within the context of international and domestic income tax issues.
Senior BDO Tax Partner Carlo Moretti has worked closely with BDO clients and the Tax Office in navigating through the various voluntary disclosure programmes initiated by the Tax Office (such as Project DO IT and previous Offshore Voluntary Disclosure Initiatives) and matters around Project Wickenby. Carlo has a long and successful track record with assisting clients in this area of taxation.
With so much scrutiny on high wealth individuals and large private groups, now is the time for companies to take a pro-active approach to their structures and cross-border arrangements or deal with increasing disclosure regimes – accompanied by new and significant penalties. Taxpayers should be under no illusions about the resolve of Revenue Authorities across the globe.
Some of Carlo’s key learnings from the BDO Sydney session include:
- The so called ‘Google tax’ should be viewed as an opportunity for taxpayers to engage with the Tax Office on transfer pricing and the application of those rules.
- In the context of the big end of town, there is a strong focus by the Tax Office on cross border mismatches, procurement and marketing hubs, the shifting of intangibles offshore, tax transparency, mandatory disclosure rules around tax avoidance promoters and e-commerce/the digital economy.
- Revenue Authorities around the world are vigorously pursuing promoters of tax schemes and have agreed mandatory disclosure rules in place to identify the promoters of tax schemes. The Tax Office stated they will not hesitate to hand over promoters to the AFP, ACC and CDPP.
- The most dynamic change in the landscape is the co-operation and exchange of information between Revenue Authorities - with over 90 countries signed up to multi-lateral conventions to collect tax debts on behalf of participating jurisdictions. Hence Revenue Authorities are now effectively in the business of collecting taxes for each other. These multi-lateral conventions sit like umbrellas over double tax treaties.
- Serious Financial Crimes Taskforce is built on the success of Project Wickenby. There is a high collaboration between multi government agencies like the AFP, ACC, CDPP, AUSTRAC, ASIC and the Tax Office etc.
- Tax Office want potential affected taxpayers to come forward to discuss and voluntarily disclose any issues they may have with the purpose of resolving those issues with the Tax Office. For example, one area the Tax Office is seeing a lot of disclosure is with Family Businesses where the patriarch stashed money offshore years ago, never disclosed the offshore assets to the Tax Office and now the patriarch does not want to leave any negative legacy issues for the children. BDO has prepared and lodged many voluntary disclosures in this context and where necessary, negotiated tax settlements to the mutual satisfaction of the Tax Office and private family group.
Carlo also noted some activities by large private groups and High Wealth Individuals (HWI) which are attracting the attention of the Tax Office including:
- CGT valuations in the context of accessing CGT concessions like small business CGT relief
- R&D concessions where aggressive positions are taken
- International tax schemes that conceal beneficial ownership of foreign assets through nominee structures
- Inappropriately accessing profits from companies with poor or low documentation – potential application of Division 7A (deemed dividends) and / or other anti-avoidance tax provisions that could result in over 100% tax including penalties and interest charges
- Business and personal income inappropriately streamed into complying self-managed super funds – this may result in the super fund losing its complying status and paying tax at the rate of 49%
- Residency issues where HWI migrates to Australia but claims to be a non-resident or Australian resident moves offshore and inappropriately claims to be a non-resident
- Taxable Australian Assets held by non-residents
- Back-to-back loan arrangements
- Share warehousing where you buy stock offshore.