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United States: United States, United Kingdom And Australian Tax Administrators Announce Data Sharing

Thursday, 06 June 2013   (0 Comments)
Posted by: Author: Jerald D. August
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Author: Jerald D. August

 In press releases issued last week from the HM Revenue & Customs (HMRC) as well as the U.S. Internal Revenue Service (IRS) and Australian Tax Office (ATO), the tax administrators announced that have been and will continue to share over 400 gigabytes of data on the use of companies, foundations and trusts in a number of territories around the world, including the British Virgin Islands, the Cayman Islands, the Cook Islands and Singapore.  It was not revealed how the information was compiled although the size of the data  is enormous. The collected data includes the identities of owners of such entities and the advisers who helped establish such trusts, foundations and companies. The data may also be shared with other tax administrations, particularly among the G-20 counties, as part of a worldwide effort to fight against tax evasion.

Under the HMRC press release, it announced that it has identified over 100 individuals who benefited, presumably in an improper manner, from the use of such structures and a number of those individuals who had already been identified and are under criminal investigation for offshore tax evasion. The HMRC has identified more than 200 UK accountants, lawyers and other professional advisors who advise on setting up such structures, including foundations, trusts and companies and announced such professionals will be scrutinized and investigated.  The HMRC has announced a voluntary compliance initiative and encourages early disclosure of potential acts of tax evasion or other tax compliance failures. Failure to come forward may result in criminal prosecution or significant fines and penalties.  While both the Chancellor of the Exchequer and the HMRC Commissioner and Director General for Enforcement and Compliance acknowledged that there is nothing inherently illegal about adopting an international structure, especially in light of the global economy, when they involve tax evasion or other serious offenses, including money laundering, then such structures will lead to prosecution of the individuals involved, including the professional lawyers and accountants.

Similarly, the Internal Revenue Service announced in IR-2013-48 issued on May 9, 2013,  that the three counties have been working together already on the gathered data. Again, the Service warned that taxpayers who are non-compliant should participate in the IRS Offshore Voluntary Disclosure Program if and when appropriate or risk possible criminal prosecution. Ultimate authority whether to prosecute for tax evasion and FBAR failures as well as other U.S. Title 18 offenses, will lie with the Department of Justice.

On May 10, 2013, the Australian Tax Office (ATO) also announced the agreement among the three countries and acknowledged that more than 100 Australian taxpayers have been identified as being involved in suspicious offshore arrangements. The ATO is looking at cases involving "tens of millions of dollars" in suspected tax avoidance through the use of "shell companies" and "trusts" around the world including Singapore, the BVI, the Cayman Islands and the Cook Islands.  The ATO acknowledged that two cases have been referred for criminal investigation and 30 more cases are underway. 

In one case currently under investigation, the ATO described the conduct as involving a company based in Sydney which has extensive offshore loans (exceeding $20 million) which has alleged claimed millions of dollars in false interest expense. The loans appear to be shams since the offshore lender is controlled by the Australian taxpayers.

In another case under investigation, a Melbourne based individual has been involved in dealing extensively in Australian schemes. The taxpayer stated that he has transacted in securities on behalf of offshore entities or clients. But, the information mined under the data indicates that he is the real owner of such shares, which have a value in excess of $25,000,000. 

As with the U.K. and the U.S., Australia has also entered into numerous tax information exchange agreements with foreign countries, including non-treaty countries.











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