The recent public pursuit of Paul Hogan and other high-profile
individuals is a reminder of the Australian Tax Office's
willingness to pursue the often uphill battle of recovering tax
from offshore. The ATO recently signed the Organisation for
Economic Co-operation and Development (OECD) Multilateral
Convention on tax collection assistance, joining over 20 other
powerful countries including Belgium, Denmark, Finland, United
Kingdom and the United States. The Convention enables the ATO to
ask countries that are a party to the Convention to help recover
Australian tax debts.
Over recent years, Project Wickenby and a number of information
exchange agreements with low tax countries have been the ATO's
primary mechanisms for fighting those who evade tax through
offshore tax havens. Adopting the OECD Multilateral Convention adds
a powerful weapon to the ATO's already wide arsenal.
Here, special counsel Justin Byrne explains how the Convention
works and how the ATO will use it to recover tax debts.
The OECD Convention provides a solid legal framework to
facilitate international cooperation through inter-country
exchanges of tax information and assistance. The Convention helps
parties better exchange information, undertake examinations, serve
documents, recover tax claims, implement measures of conservancy
and undertake joint audits.
All forms of compulsory payments to the Federal Government are
covered by the Convention, except for custom duties.
Why Australia has become a party to the Convention
The OECD Convention allows each party to combat international
tax evasion and better enforce its national tax laws, while at the
same time respecting the rights of taxpayers.
The recovery of Australian tax debts from those residing outside
Australia has always been problematic. The Convention provides the
ATO with an effective and efficient framework to get much-needed
information about tax owed by international residents through
co-operation from other countries. However, the Commissioner of
Taxation, Michael D'Ascenzo, has commented that the ATO will
not ask other countries to investigate small debts that impose an
unfair burden on them.
Under the Convention, Australia will also help other countries
to recover debts that are linked to residents offshore who also
have assets offshore.
Automatic exchange of information
The Convention allows for automatic exchange of information
between the parties. This can be established through an
administrative agreement, whereby, for example, dividend and
interest information is passed on by the source country to the
The effect on existing bilateral agreements
The Convention covers a much wider range of taxes than bilateral
treaties and provides a single legal basis for multilateral country
co-operation in tax matters. It also means that an established body
(namely the OECD) can, at the request of a party, furnish opinions
on the interpretation and application of the Convention.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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