Blog

Almost 1,200 people were prosecuted and convicted for tax and superannuation offences in Australia last year, new figures show.

The statistics were released by Tax Commissioner Michael D'Ascenzo, who said that: “The ATO's use of sophisticated data matching technology is helping to close the net around those exploiting the tax and super systems.”

In total, 48 people were prosecuted and convicted of serious tax crime offences, with sentences ranging from three months to nine years and 11 months. Six of these convictions occurred under Project Wickenby, a cross-agency task force established in 2006 to prevent the promotion of or participation in illegal offshore structures.

From its launch to January 31, 2012, Project Wickenby has resulted in AUD1.26bn (USD1.32bn) in tax liabilities raised, and AUD597.14m in tax collected. 65 people have been charged under the project with serious offences, with 22 people convicted.

1,149 people and 370 companies were prosecuted and convicted for other tax offences in 2011. Such offences included failing to lodge a tax return, providing false and misleading information, or receiving a fee for preparing an income tax return when not being a registered tax agent.
As part of its Compliance Program the ATO is also increasing its focus on non-complying taxpayers in the goods and services tax (GST) system. Last year’s budget provided AUD337m in funding for this project over the next four years. The emphasis is on identifying people who do not lodge their business activity statements, and detecting businesses that over-claim entitlements or deliberately under-report taxable supplies that they make. In 2011, the ATO prosecuted 545 individuals and 211 companies for over AUD12.55m worth of GST offences.

Also increased is the ATO’s scrutiny of businesses deliberately not reporting cash income. Over 1.9m small businesses were evaluated against the ATO's risk detection systems during 2011. Last year, the ATO prosecuted 41 individuals and nine companies for over AUD3.22m worth of cash economy offences.
Commenting on the figures, D'Ascenzo said:
“People deliberately committing tax evasion are often caught by the sharing of information between government departments and other third parties. Cooperation across government departments has led to increased intelligence sharing and improved information gathering which is driving our data matching capabilities to new levels."

"We use advanced technology to bring together information from a range of government departments and other third parties to cross check personal and business records such as car registrations and supply orders for businesses. The ATO also undertakes risk profiling to identify people and businesses that may have not declared all their earnings or overinflate their deductions."
"We can see how personal and business claims compare to other tax payers. If alarms are raised the ATO investigates those claims and taxpayer records more closely."

.

The British Virgin Islands office of leading international offshore law firm Ogier has noted that its involvement in a number of global transactions over recent months is reflective of the strong demand of late for BVI-based corporate structures.

Recent high-profile transactions involving BVI structures have included:

• Canadian-based financial institution Scotiabank’s USD1bn acquisition of a 51% stake in Colombia’s Banco Colpatria Red Multibanca Colpatria S.A., that country’s fifth largest financial group, representing Scotiabank’s largest ever-international takeover;
• UK private equity group CVC Capital Partners’ purchase of a 51% controlling stake in Virgin Active - the fitness chain part of Richard Branson’s Virgin Group, valued at GBP900m;
• Australian-listed diversified services company UGL Limited’s GBP77.5m acquisition of the trading operations of UK-listed property services company DTZ; and,
• NYSE-listed global agri-tech provider, Monsanto Company’s acquisition of Beeologics, a start-up that researches and develops biological tools for targeted pest and disease control.

“The array of blue-chip companies, geographies and industry sectors covered by these deals underscore Ogier BVI’s capabilities as a trusted advisor to international business on all types of corporate transactions,” said Ray Wearmouth, Managing Partner, Ogier BVI.

“Ogier’s involvement in these arrangements also represent the continued confidence of the global financial community in the BVI as a stable and high-quality jurisdiction for structuring multi-national transactions,” he added.

The Italian Revenue Agency’s Director, Attilio Befera, has announced that its new, revamped ‘redditometro’ – the computer data system which compares taxpayers’ income declarations with their spending habits – is now expected to be fully operational by June this year.
Befera has already pointed out that the Agency’s new ability to crosscheck taxpayers’ spending against declared incomes as the weapon that might win the government’s war on tax evasion. He has previously expressed the hope that, as taxpayers become more aware of the armoury now at the government’s disposal, they will be more willing to become tax-compliant voluntarily.

The ‘redditometro’ has been long in its experimental stage, but Befera explained that, as the system needed to be “sound and easy to use”, the Agency has wanted to take the time to make sure it worked well and there would be no problem when it finally went into operation.
It will look at whether a taxpayer’s declaration of taxable income is coherent with his or her overall spending capacity, as against the previous ‘redditometro’ which was based upon the possession of certain assets, such as yachts or large cars. The new system will be able to trace individuals' expenditure in more than 100 different categories to find disparities between spending and declared incomes.

The categories of spending are divided into seven areas. For example, under the category of housing are included first and second residences, mortgages, restructuring work undertaken, and furniture purchased; while information on a taxpayer’s social security contributions and insurance policies are also collected, as are recreational pursuits and a family’s education spending.
Spending capacity is based upon actual, not estimated, expenditure, and it is said that the system will be able to compare the data of over 22m families or around 50m individuals. The system’s methodology is also able to differentiate between eleven different categories of family unit including couples or singles and families with children, together with the region of Italy in which the taxpayer resides.

Most recently, simulations have been made by inserting typical taxpayer examples into the system. From the first results, it has been seen that, in many cases, the difference between the taxpayers’ lifestyle and declared income reached over 20%; the level which will, when the system is operational, mean a taxpayer will be contacted for further information.
In addition, it has been suggested that the ‘redditometro’ could also be extended to cover the taxable incomes of artisans and other individuals in business. In that case, the Agency could be able to discover, not only unpaid amounts of individual income tax (IRPEF), but also value-added tax, the regional tax on production (IRAP) and social security and welfare payments.