ATO Warns Over Internet Marketing Tax Scheme

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

04 February 2002

As part of its new Taxpayer Alert scheme, launched in December to crack down on bogus tax minimisation schemes, the Australian Tax Office has issued a warning regarding an internet marketing scam.

According to the ATO, the scheme allows investors to claim large tax deductions for funds paid to a company based in an offshore jurisdiction. Typically, the investor will pre-pay a fee of $100,000, but the majority of the funds will be borrowed from another tax haven company in order to purportedly establish an internet marketing company.

The investor is never chased for the borrowed amount, and the deal guarantees around $20,000 per year (usually the amount actually put up by the investor himself) in advertising revenue. Strangely enough, the agreement entered into by the promoter and the investor lasts exactly one year...

'These arrangements have come under Tax Office scrutiny because they seem artificial and lacking any real commercial viability or underlying business activity,' explained ATO Commissioner, Michael Carmody. 'Like many so-called tax effective schemes, the benefits seem far too good to be true.'

However, the Tax Office has yet to reach a final decision on the scheme.

Recommended