Australia's Anti-Tax Evasion Strategy Producing Dividends

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

22 October 2009

Australia’s Assistant Treasurer, Nick Sherry, has announced that the government’s two-pronged strategy against tax evasion, of incentivizing voluntary disclosures on the one hand and cracking down hard on the other, was delivering real results.

"The Offshore Voluntary Disclosure Initiative and Project Wickenby are respectively examples of each approach,” he said.

It was stated that the Offshore Voluntary Disclosure Initiative (OVDI), a program run by the Tax Office to encourage high-wealth individuals to declare undisclosed income from offshore activities, has resulted in 3,028 disclosures since it was launched in 2007 and more than AUD50m (USD46m) being raised in new tax liabilities.

The OVDI provides for taxpayers who contact the Tax Office, before they are the subject of an audit and who make a full and true disclosure, to be given reduced tax shortfall penalties. If their additional taxable income is AUD20,000 or less for a year, they do not have to pay a shortfall penalty for that year. If the additional income exceeds AUD20,000, the taxpayer is entitled to a reduced shortfall penalty of 5% of the additional tax liability.

"The offshore disclosure program has been so successful, the Tax Office is now considering options to make it more attractive for those who are still reluctant to come forward," said Sherry.

In addition to highlighting OVDI as an important option for voluntary disclosure, Sherry also announced the latest results of Project Wickenby, the multi-agency compliance program that actively targets a range of tax avoidance schemes.

He said that, up to August 31, 2009, Project Wickenby had resulted in 23 ongoing criminal investigations, 46 people being charged with serious offences, AUD440.47m in liabilities being raised, and AUD365.78m in collections, including AUD136.71m in cash and AUD223.15m in tax collected in subsequent years from people subject to Wickenby action.

The total expenditure of Project Wickenby up to June 30 this year was AUD210.8m. "This means for every AUD1 spent on the strategy, we have brought in AUD2 in tax liabilities or AUD1.50 in tax collections," Sherry added.

"It is clear the carrot-and-stick approach to combating tax avoidance is working well," he concluded. "However, with Australians sending AUD16bn to offshore tax havens in 2008 alone, the government will be keeping up our efforts against tax evasion as the global economy moves towards recovery."

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