Australian Tax Chief Warns Against Hiding Income Offshore

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

14 March 2008

Australian Tax Commissioner Michael D’Ascenzo has issued a taxpayer warning people against hiding income or assets offshore.

This alert followed the Commissioner’s February 26th announcement that the Tax Office is investigating tax evasion and avoidance involving legal structures in Liechtenstein.

“The message is simple – people should be cautious when considering whether to use offshore structures or tax havens, including Liechtenstein, for abusive purposes,” Mr D’Ascenzo explained.

He reminded taxpayers that Australian residents are required to declare income generated in tax havens – or any other country – to the Tax Office.

“Australians have tax obligations for their worldwide income, including Australian and overseas sources like profits from tax haven entities and bank accounts,” Mr D’Ascenzo continued, adding, however, that:

“There are exceptions so I encourage taxpayers to read our Tax havens and tax administration booklet for more information or seek independent advice."

“People who use offshore structures to deliberately hide assets or income in tax havens, such as Liechtenstein, can face serious penalties including criminal prosecutions."

“We are also concerned about circumstances where documentation supporting transactions with offshore legal structures is absent, incomplete or falsified,” he further stated.

Australia is working with tax administrations in Canada, France, Italy, New Zealand, Sweden, United Kingdom, the United States of America and others – all member countries of the OECD's Forum on Tax Administration – on examining the use of Liechtenstein accounts for tax avoidance and evasion.

“We have increased our scrutiny of the misuse of tax havens, with increased information sharing with tax administrations in other countries and the use of more sophisticated analytical tools – meaning there is no safe place to hide undisclosed income," the Australian tax chief revealed.

“However, taxpayers who contact us before they are the subject of an audit may be entitled to substantial reductions in shortfall penalties under our offshore voluntary disclosure initiative," D'Ascenzo concluded.

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