As thousands of Australians wonder how they'll put food on the table this Christmas, the Australian Tax Office (ATO) has released figures which (again) show that many large companies have avoided paying tax in recent years.
Despite many individuals being given a tax reprieve this year, the majority of Australian small businesses have been subjected to greater scrutiny from the ATO with new compliance systems, checks and balances, and threats that late returns could result in the denial of deductions, as well as hefty fines.
More powers and resources
The ATO has also warned it has accrued increasing powers to cross-match data, and is already using the powers to crack down on the multi-billion dollar black economy.
In recent years, the Federal Government has provided an extra $1 billion of funding to the ATO to enable it to pursue those who it believes may be avoiding tax.
A special ATO taskforce has been charged with scrutinising the top 1000 corporations in Australia, along with 320 private groups and wealthy individuals.
And yet, the ATO's corporate transparency tax data continues to reveal that hundreds of companies have been using clever accounting and financial strategizing to reduce their tax liability to zero.
Of 2,214 entities covered by the Australian Taxation Office (ATO) data for 2017-18, 710 did not pay any tax at all.
It has been reported that of the 2,214 corporate entities covered in the data, 1,197 are foreign-owned companies with an income of $100 million or more.
Of the 1,017 Australian public or private entities, 594 have an income of $100 million or more, and 423 have an income of $200 million or more.
Companies need to be more transparent
While the ATO claims to have its eyes peeled for tax avoidance, the problem is that company financial information does not always give the full picture of tax positions.
This problem is compounded by the fact that Australia has one of the most complicated tax systems in the world.
The ATO introduced new multinational anti-avoidance laws in late 2016, taking a much tougher stance on wealthy individuals and multi-national companies, but still many companies manage to avoid paying tax.
Some multi-nationals attempt to shift profits out of Australia to reduce their local income, and therefore their taxable income.
When this occurs, the ATO's Tax Avoidance Taskforce steps in to conduct an audit. But this does not always result in a definitive outcome for either party, with allegations that some companies create endless delays by hiding behind 'legal client privilege' rather than disclose important documents, where documents were provided to the lawyer for the dominant purpose of obtaining legal advice.
ATO pushed for changes to client legal privilege
As a result, earlier this year the Australian Taxation Office (ATO) began working with the Law Council on Australia to create exceptions to client legal privilege to make it easier for them to prosecute those it suspects of tax evasion. These laws would essentially force lawyers to disclose financial information about their clients.
Client legal privilege is a cornerstone of the democratic system. It protects confidential communications between clients and their lawyers, the dominant purpose of which is to obtain legal advice or seek legal representation, and is based on the premise that clients must feel free to provide all relevant information to their lawyers, in any given situation, in order for the lawyer to provide sufficient advice, without fearing that information will be disclosed to any one else.
Given that it can be a long and arduous process putting a case together, it's probably no surprise that even though the ATO may serve a company a tax bill, it has a history of settling out of court with more companies than it litigates.
Tax evasion is considered a serious criminal offence in Australia.
The payment of taxes in our nation is primarily regulated by the Excise Act 1901, Taxation Administration Act 1953 and Criminal Code Act 1995 – all of which are Commonwealth laws which apply across Australia.
The main offences for prosecuting tax fraud, also known as tax evasion, are contained in sections 134.1(1), 134.2(1) and 135.4(3) of the Criminal Code Act (the Act), all of which carry maximum penalties of 10 years in prison.
Section 134.1(1) is headed 'Obtaining property by deception' and stipulates that a person is guilty of this offence if he or she, by a deception, dishonestly obtained property belonging to a Commonwealth entity with the intention of permanently depriving the other of the property, and the property belonged to a Commonwealth entity.
To establish the offence, the prosecution is therefore required to prove each of the following 'elements' beyond a reasonable doubt:
- The defendant acted dishonestly,
- He or she engaged in a deceptive act,
- By doing so, he or she obtained property, and
- That property belonged to a Commonwealth entity.
Section 134.2(1) of the Act is titled 'Obtaining financial advantage by deception' and provides that a person is guilty of this offence if:
- the person, by a deception, dishonestly obtained a financial advantage from another person, and
- the other person was a Commonwealth entity.
Section 135.4(3) is headed 'Conspiracy to defraud' and states that a person is guilty of this offence if:
- the person conspired with another person with the intention of dishonestly causing a loss to a third person, and
- the third person was a Commonwealth entity.
Subsection 135.4(4) makes clear that to be convicted of the offence, it is not necessary for the prosecution to prove that the defendant knew the third person was a Commonwealth entity.
Suspected of tax evasion?
If you have been accused of evading tax, call Sydney Criminal Lawyers anytime on (02) 9261 8881 to arrange a conference with an experienced defence lawyer who will be able to advise you about how the law applies to your particular situation, your options and the best way forward.
A good criminal defence lawyer may be able to persuade the Australian Taxation Office or the Commonwealth Office of the Director of Public Prosecutions not to commence proceedings in the first place, or have them withdrawn for insufficient evidence or downgraded if charges are brought, or dismissed if the case proceeds to a court hearing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.