ATO Commissioner Outlines Progress Of Australia's Tax Compliance Program

by Mary Swire, Tax-News.com, Hong Kong

20 October 2009

The Second Commissioner of the Australian Taxation Office (ATO), Bruce Quigley, set out the major aspects of its 2009-10 compliance program in a recent speech to the Tax Institute of Australia in Tasmania.

“We believe our focus areas for 2009-10 address the current major risks to the tax and superannuation systems while fostering an environment that promotes high levels of voluntary compliance,” he said. “As part of our support for the majority of people trying to do the right thing, we are putting in place a number of measures that could be described as ‘prevention is better than cure’ initiatives.”

The ATO’s four focus areas, Quigley added, are “supporting people and businesses in financial distress, promoting a level playing field, paying a fair share of tax whatever your income, and preventing abusive use of tax havens.” He recognized that, while the economy appears to have shown some improvement, there is still a degree of fragility about the market, and the ATO’s latest survey showed that 49% of businesses believed the current financial conditions would make it more difficult to meet tax obligations over the next 12 months. In that situation, the ATO has adjusted its approach to reflect this difficult operating environment by engaging early with people and businesses who are struggling to remain viable but trying to do the right thing, and promoting a level playing field for business by dealing firmly with those who deliberately avoid their responsibilities and obligations.

In particular, Quigley said, the Small Business Assistance Programme was established to help small businesses stay on top of their obligations and help them prevent problems from arising in the first place. In the 2008–09 financial year, the ATO assisted almost 102,000 small businesses via seminars and workshops, outbound education calls, and on-site assistance visits. In a recent assessment of the effectiveness of the program, it was found that small businesses that received assistance from the ATO improved their compliance with tax obligations significantly.

“This targeted support includes the new measures to help small businesses with an annual turnover under AUD2m (USD1.85m) which were announced in June 2009 – namely, 12-month interest-free payment arrangements and deferrals of payment due dates for activity statements," said Quigley. "At 25 September 2009 we had granted almost 86,000 payment arrangements worth AUD1.88bn and over 1,500 deferrals of activity statement payment due dates.”

The ATO, he added, “received further endorsement of the program last month when the International Monetary Fund highlighted our Small Business Assistance Programme as a shining example of the provision of targeted and proactive assistance to taxpayers during an economic crisis.”

He said that the ATO is concentrating on businesses that may be tempted to cut corners to stay afloat or prop up their cash flow, particularly with regard to employer obligations. “ATO’s strategy for tackling non-compliance in this area focuses on businesses that do not withhold from payments to workers as required and fail to make superannuation guarantee contributions.”

This year, Quigley continued, the ATO is expanding its checking of executives and directors who receive remuneration from overseas, and is seeing issues with the under-reporting of income, in particular by executives of multinational companies who participate in global incentive schemes or have previously worked overseas and recently returned to Australia but are still receiving benefits from long-term incentives relating to that overseas work. This income, he said, is often directly paid from an overseas entity, sometimes from a tax haven.

Along a similar line, the ATO is also identifying capital gains being made, and not declared, when some Australian resident executives are selling shares in their employer company on an overseas stock exchange.

Preventing the abuse of tax havens continues to be a high priority for the ATO. “In the 2008 income year,” Quigley disclosed, “AUD16bn was sent directly from Australia to havens and AUD29bn was sent from these jurisdictions to Australia. While these fund flows can relate to legitimate trade and tourism, our intelligence suggests that this haven risk in Australia is in the order of hundreds of millions of dollars.”

The ATO’s mitigation strategies include working in partnership with international revenue authorities and through international tax bodies, including the OECD. This includes Australia's support for G20 initiatives to shift secret havens towards reform, transparency and cooperation. Bilaterally, Quigley said, Australia has signed seven tax information exchange agreements (with Bermuda, Antigua and Barbuda, the Netherlands Antilles, the British Virgin Islands, the Isle of Man, Jersey, and Gibraltar) to assist in the collection of information. "At the rate we’re progressing," he continued, "we’re hoping to have hit the 20 mark for international agreements by 30 June next year."

He disclosed that the ATO’s “active compliance work involves over 600 audits and reviews and 23 criminal investigations. Our audits continue to deliver results, including over AUD407m in Wickenby liabilities and one recent case, involving a high wealth individual, where we raised AUD242m in liabilities.”

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