Targeting tax crimeA whole-of-government approach

issue nine DECEMBER 2013

Top storiesn The ‘name and shame’

campaign

n Assistant Treasurer’s message

n Second Commissioner Bruce Quigley reflects

n Dissecting organised crime

CONTENTS

Contents

Contents

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ForewordThe impacts of tax system abuse can be far reaching, both in Australia and globally.

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The growth of technology and global connectedness has seen large amounts of our personal information stored online by companies and organisations around the world. Many of us also use online networking sites for professional and social purposes. This connectedness has made life easier for us in many ways. It also means that more people than ever have ready access to personal information about us.

Our feature article in this edition, ‘Making it personal’, focuses on a growing trend in which identity crime is facilitated by tax professionals, lodging tax returns containing false payment summaries and other information. Identity fraud has been a growing concern in recent years, and we also tell you about some things we are doing to make life more difficult for identity thieves and some simple but effective ways you can protect your personal information.

In recent times, we have seen increasing community interest and awareness in tax crime and its impacts on individuals and the community. It may sound obvious to say that we all bear the burden of additional costs to the community when some people and businesses refuse to pay their fair share of taxes, but the impacts of abusing the tax system can be far reaching, both in Australia and globally.

PREVIEW

Preview

In a recent report, the International Bar Associations Human Rights Institute’s Taskforce on Illicit Financial Flows, Poverty and Human Rights associated tax abuses with negative impacts on human rights and emphasised the importance of international cooperation and transparency in combating tax abuse. In this edition, we look at some of the innovative strategies that are being used by foreign tax authorities. In particular, we speak to Her Majesty’s Revenue and Customs about their ‘Name and Shame’ campaign.

This edition, we are trialling some new approaches to presenting our stories and I trust you will enjoy the case studies in the articles on our Trusts Taskforce and Phoenix Risk Model. We also take a fresh look at the latest developments in Project Wickenby.

We welcome Robert Bromwich to the ‘Spotlight’ section and I read with interest his views on the future of the Commonwealth Department of Public Prosecutions (CDDP), its role in helping to fight tax crime and the impacts of Project Wickenby. The CDPP is one of a number of agencies involved in close collaborative efforts to target tax crime.

In early December I conclude my term as Second Commissioner of Taxation and will retire from the ATO after almost 42 years of service. I would like to take this opportunity to acknowledge and thank the many dedicated and professional officers in the ATO, other revenue authorities and law enforcement agencies, in Australia and overseas, who are committed to identifying and stopping tax crime. The effort of these officers goes a long way to ensuring we detect and deal with those who don’t want to pay their fair share, making the system fairer for the vast majority of taxpayers who do the right thing.

Bruce Quigley Second Commisioner Compliance

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When we can say with confidence “everyone pays their taxes because that’s the right thing to do,” we don’t mind paying them. When we can say with confidence “my taxes are being put to good use,” we pay them without question.

But when a small minority cheat the system and evade their obligations, it can erode our faith in what is fundamentally a fair system. Perceptions of a level

playing field encourage willing participation. When there is doubt that we are all playing by the same rules, we can lose our confidence.

Any attempt to undermine the tax system not only means potentially less money for essential services like hospitals, schools and roads, but it also makes everyone who is doing the right thing question the fairness and effectiveness of the system.

Assistant Treasurer’s message

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When Australians have confidence, we can achieve great things. We succeed against the odds in the field of sport, we can rise above the impact of natural disasters, we invest in the small and big businesses that make up the fabric of our community, and we pay our taxes.

PREVIEW

The key to a robust economy and a strong tax system is community confidence. Tax crime, in all its guises, undermines that confidence.

In my new role as Assistant Treasurer I look forward to working with the ATO and the various law enforcement agencies in the fight against tax crime. I see how we are improving the detection of criminal behaviour both within our borders and beyond, and with some recent prosecutions, we are starting to get the penalties for evading tax closer to matching the severity of the crime. There has also been widespread concern about the tax planning behaviour of some multinationals.

I’m confident that by working with our partner countries at the G20, we can get the balance right so that everyone pays a fair amount of tax and Australia remains an attractive place for multinationals to do business.

There is a lot for us to feel confident about here in Australia, and our tax system is just one of those things. We are a robust, resilient people with a tax system to match. I know that with the help of the Australian community we can take the right path to building an increasingly effective system that Australians can trust.

Senator the Hon Arthur Sinodinos AO

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PROTECTION

At a glance■n $1,852.40 million in tax liabilities raised in tax, penalties and interest charges

■n $768.33 million recouped (to 30 September 2013)

■n $507.7 million in Government funding (to June 30 2015)

Read about the latest Wickenby sentencing

Read more information about Project Wickenby

Wickenby updateProject Wickenby is a cross-agency taskforce established in 2006.

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$1.85B $507M INVESTMENT

IN LIABILITIES RAISED

Wickenby combines the efforts of eight government agencies with unprecedented international cooperation and increasingly sophisticated technologies, to play a key role in the Australian Government’s fight against tax evasion, avoidance and crime, particularly through the use of offshore secrecy jurisdictions.

Protection

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PROTECTION

The courts are sending a strong message to those who use secrecy jurisdictions to get away with tax evasion, with a major sentencing taking place in Brisbane District Court in September.

Accountant sentenced to six years jail

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Ewan Stoddart, 48, was sentenced by the Brisbane District Court to 6 years jail on 20 September this year.

Stoddart was found guilty of 13 counts of aiding and abetting the commission of fraud against the Commonwealth. Accordingly, Stoddart was sentenced to 6 years imprisonment to be released after serving 2 years upon entering into a recognizance, with security in the sum of $2000, to be of good behaviour for a period of 4 years.

In sentencing Mr Stoddart, Judge Long S.C. commented:

“These offences are of a kind that are serious in nature, as they affect the integrity of Australian taxation system, thus directly impact on the Australian community. This is particularly so given your position of responsibility and trust in the community…”

Mr Stoddart, who was working as an accountant at the time the crimes were committed, promoted tax schemes to a number of clients of his accounting practice.

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Four of his clients, business partners Ian Cameron and Christopher Cornell, businessman Tatsuo Jo and IT consultant Harry Starr have already been convicted of obtaining financial advantages by deception in connection with the tax schemes that were promoted to them by Mr Stoddart.

“Today’s sentencing is a clear warning to those who market tax schemes,” ATO Second Commissioner Bruce Quigley said. “If you engage in illegal behaviour, you will be caught, and the penalties will be harsh.”

Promoters of tax schemes could also face risks to their reputation and may face sanctions under the promoter penalty laws, which provide for civil penalties, injunctions and enforceable undertakings if they promote or market tax exploitation schemes.

“While the vast majority of tax advisers act ethically and within legal boundaries, those who choose to avoid the rules risk being caught and sentenced.” Mr Quigley said.

This sentencing is the 39th to be handed down under Project Wickenby’s comprehensive focus on international tax evasion.

What is Promoter Penalty Legislation?The main objective of the promoter penalty laws is to deter the promotion of tax avoidance and tax evasion schemes. An additional objective is to enhance the integrity of the product ruling system by deterring implementation of a scheme in a materially different manner to that described in its product ruling, where doing so may have potential tax consequences for investors.

Under the promoter penalty laws, an entity must not engage in conduct that results in:

■n it or another entity being a promoter of a tax exploitation scheme■n a scheme that has been promoted on the basis of conformity with a product ruling being implemented in a way that is materially different from that described in the product ruling.

Subscribe to future editions of Targeting tax crime to keep up to date with the latest developments on Promoter Penalty Legislation.

PROTECTION

ATO clears the air on tax investigations

Wickenby has focused the spotlight on prosecutions of tax evaders and fraudulent tax scheme promoters. However, there continues to be some common misconceptions around key characteristics of the law.

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One example is the distinction between a criminal prosecution and a civil action.

‘Media reporting of some cases makes it clear there is a level of misconception and confusion about criminal and civil prosecutions out there,’ Greg Williams, ATO Deputy Commissioner Serious Non Compliance said.

Given the complexity of tax law, this is not surprising. The law that prevents the ATO from commenting on individual cases can also contribute to confusion because the details of the case are not made public.

‘For the community to have faith in the ATO and trust us as the administrators of their tax system, they need to understand how our actions are in accordance with Australian law, and in keeping with the interests of the community,’ Mr Williams said.

Criminal prosecutions are only initiated where the Commonwealth Director of Public Prosecutions considers that there is sufficient admissible evidence and it is in the public interest for the matter to be prosecuted. Civil tax audits, by comparison, are conducted by the ATO independently of any concurrent criminal investigation or prosecution.

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One of the primary differences between a civil case and a criminal investigation rests in the intent of the accused. Another difference is around the burden of proof; civil cases need only be proved on the ‘balance of probability’, whereas criminal cases require the much higher standard of ‘beyond all reasonable doubt’.

In a criminal trial the prosecution must prove its case by establishing all elements of the offence ‘beyond all reasonable doubt’. For tax fraud cases, this includes establishing the intention to defraud on the part of the accused.

In contrast, in a civil case, the burden of proof is on the taxpayer who must prove that the assessment is excessive.

This explains why the same facts may support a civil case but not a criminal prosecution.

‘The ATO has a duty to find those who are attempting to undertake tax crime that undermines the country’s tax system, so when we suspect there is mischief we will respond with an investigation,’ Mr Williams explained.

Although a criminal investigation may be dropped because there is insufficient evidence to establish criminal intent beyond a reasonable doubt, it doesn’t mean civil actions will not proceed and there is no wrongdoing. In fact, a civil case may proceed in place of a criminal investigation because it only needs to show, that on the balance of probabilities, an unlawful act occurred.

‘Whilst those involved may avoid a prosecution and thus a jail term, it does not necessarily mean they will avoid the consequences of engaging in behaviour which disadvantages the whole community,’ Mr Williams said.

In Wickenby cases the investigative process is even more complex, often due to evidence locked in secrecy havens, making it very difficult and time consuming to access.

Despite the challenges, with the growing capability of Project Wickenby and increasing partnerships with overseas tax jurisdictions, the ATO is expanding its ability to track down criminals.

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Tax professionals can knowingly or unknowingly facilitate identity crime, so being vigilant about client identity is more important than ever.

Making it personal: good professional practices help prevent identity crime

An investigation by the Tax Practitioners Board (TPB) has found that a number of tax agents have lodged income tax returns containing false payment summaries and other information. The income tax returns were lodged in the names of genuine taxpayers whose identities had been stolen.

In these instances, third parties had approached registered tax agents claiming they were acting on the authority of a number of other taxpayers. The third parties then provided false payment summaries and other false details in organised attempts to defraud the tax system.

The TPB investigation found that in many instances the tax agents involved had failed to carry out basic checks required before lodging the income tax returns. For example, in nearly all cases the tax agents had not made contact with the taxpayers,

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Find out more■n Read the Australian Crime Commission’s Identity crime factsheet

■n Read the Tax Practitioners Board media release ‘Beware when approached to lodge income tax returns on behalf of others’

■n If someone believes they are a victim of identity crime, they should immediately report it to the police. Further information about what to do is available in the Attorney‑General’s Department’s Protecting your identity booklet.

or verified any of the information in the returns. Ultimately, the consequences of a situation like this can mean termination or suspension of tax agent registration and potential civil penalties.

Taking up the fight against identity crime is the ATO’s newly established Client Identity Unit, which is working to prevent and close down cases of identity theft related to the tax system. Heading up the unit is ATO Assistant Commissioner John Becker, who provides some practical advice for individuals and professionals alike.

“There are some basic checks we should all undertake regularly which can uncover personal signs of identity crime. For example, in some cases of identify theft an Australian Business Number was created and false activity statements lodged – so it’s worth checking the Australian Business Register for any registrations in your name.”

Identity theft or identity crime is considered a key ‘enabler’ for serious and organised crime groups in Australia, with Commonwealth Government agencies recognising the importance of tackling

this issue as a priority within the National Organised Crime Response Plan. The potential impact of identity crime on national security, law enforcement and the community is significant.

The personal and professional implications of identity crime can be enormous. For individuals whose identities are stolen, considerable time and effort is required to restore their identity, amend credit profiles and sort out financial arrangements. The process may be time consuming, expensive and emotionally distressing.

To protect against identity theft, it’s a good idea to regularly:■n check ABN Lookup for registrations in your name

■n check your credit report, as there have been instances of bank loans applied for in victim’s names

■n search the Australian Securities and Investments Commission’s registers of organisations and businesses by your name

■n if you have a business, regularly check the AUSkeys provided to the business.

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The taskforce deals with promoters, individuals and businesses that seek to misuse trusts to avoid paying their fair share of tax.

This includes a variety of profit extraction schemes where participants conceal income, mischaracterise transactions, artificially reduce trust income amounts and underpay tax.

‘Our new taskforce will tackle those who manipulate the use of trusts to gain an unfair advantage,’ ATO Assistant Commissioner Tony Poulakis said.

‘The taskforce dramatically improves our capability to detect this behaviour and means anyone engaging in this kind of illegal activity – or even considering it – should think twice.’

The Government is providing $67.9 million over four years to enable the ATO to audit taxpayers involved in tax avoidance and evasion using trust structures. The Trusts Taskforce is expected to result in a net gain to revenue of $311.1 million over the budget forward estimates.

Why the new taskforce?

The new taskforce, announced in May, was set up in response to emerging evidence, including substantial ATO data from two recent law enforcement operations, which shows a significant increase in the level of trust-based non-compliance.

Most of the 700,000 trusts now registered in the Australian tax system are discretionary trusts used for a wide variety of legitimate business and investment activity. However, an emerging type of scheme involves trustees artificially reducing trust income in an attempt to direct tax liabilities to certain beneficiaries (who have little or no capacity to pay the debt) while actually using the income for their own benefit.

‘Our new taskforce will focus on these and other tax avoidance and evasion schemes, and will work with other agencies to ensure that the full force of the law is used against those involved in the most egregious schemes,’ Mr Poulakis said.

Two men are already before the courts on serious criminal charges in relation to Trusts Task Force connected matters.

Making connections

Complementing the work of the Trusts Taskforce is the Domestic Promoter Initiative. Also commencing this year, the initiative received $37.4 million over four years to address the promotion of boutique tax avoidance and evasion schemes within Australia. These schemes are sometimes known to involve the use of trusts, and the most abusive schemes are often highly complex and operate across geographical borders.

ATO taskforce tackles trustsPeople who misuse trusts to minimise tax should heed a strong warning from the Government, with a new ATO taskforce now in operation to shut down this potentially criminal behaviour.

PROTECTION

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Ordinary income of $20,000 and net capital gain of $5,000,000

Discretionary TrustTaxable income of $5,020,000Trust income $20,000

Beneficiary 1: New company■■ Made presently entitled to 100% of trust income of $20,000

■■ Taxed on $5,020,000■■ Is unable to pay tax■■ Winding up proceedings are commenced

Beneficiary 2: Individual■■ Receives large trust corpus distribution of $5,000,000

■■ Treats the entire distribution as tax free

Case study

Note: Taxpayer Alert 2013/1 provides more information on such schemes.

Our focus areas

When appropriate, the Trusts Taskforce will coordinate with other Commonwealth and overseas agencies via Project Wickenby. ‘The nature of current day schemes means a cross-agency effort is required if we are to tackle this head-on and collect undeclared income,’ Mr Poulakis said.

As a result of intelligence discoveries from existing operations and data from new labels in the trust return, we now have data holdings on a number of known trust-related tax schemes, facilitators and participants. This information is being used to develop risk indicators which will enhance our ability to identify tax schemes which misuse trust structures.

To read more about the factors that will attract our attention visit the Trusts Taskforce information page.

Here is an example of an arrangement designed to avoid paying tax on a large capital gain.

The arrangement exploits mismatches between trust and taxable income, creating a new company to pay the tax on the capital gain and then winding up that company when it is deliberately left with no money to pay the debt. The second beneficiary receives the capital distribution tax free, and thus the tax is avoided.

In this situation:■■ the trust has a taxable income comprised of ordinary income and a net capital gain

■■ the trust distributions are made in such a way that one beneficiary receives the funds generated from the capital gain tax free, while the other beneficiary (a new incorporated company) receives the tax liability attached to that capital gain

■■ the newly incorporated company receives no funds from the capital gain to pay this tax liability, meaning the company cannot pay the tax and is forced to liquidate. The tax is therefore avoided. The other beneficiary enjoys the funds tax-free.

Innovative approaches: The stop-and-goThe world is a large place, with many innovative approaches to tax administration.

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PREVENTION

Take Slovakia for example, which recently followed the lead of Taiwan and Malta, instituting a ‘receipt lottery’ to encourage shop keepers to print receipts and pay value-added taxes.

Drive half a day northwest, to the Netherlands, and you might be pulled over as part of a new program known as the ‘stop-and-pay’.

Working closely with other government agencies, Dutch tax authorities have been using automatic number plate recognition software to help identify and stop tax evaders.

Those identified and pulled over can have the option of either settling the amount of tax due, or having their car confiscated. The measure has collected over EUR4 million since 1 August, as well as resulting in the confiscation of approximately 6,000 cars.

For an innovative perspective of the impacts of tax evasion, take a look at the new video from the European Commission campaign – The missing part.

Prevention

PREVENTION

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ATO sets sights on fraudulent phoenix activity

Cracking down on fraudulent phoenix activity is a key focus area for the ATO in 2013–14, as outlined in the ATO’s annual Compliance in Focus publication.

‘The ATO is paying particular attention to tax crime such as fraudulent phoenix activity, misuse of trusts to avoid tax, and those who shift profits offshore to avoid their tax obligations,’ said Bruce Quigley, ATO Second Commissioner.

The annual publication, Compliance in Focus (previously the Compliance Program), highlights the ATO’s latest plans to tackle those who are not paying their fair share of tax, and details a number of case studies highlighting where the ATO plans to concentrate its efforts.

‘Thanks to a sophisticated, newly developed tool called the ‘Phoenix Risk Model’, this year will see the ATO identify and deal with phoenix activity sooner and more effectively than before,’ Mr Quigley said.

The tool gathers and analyses data from a range of sources including the ATO’s own systems, other government agencies and intelligence received from the community.

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PREVENTION

The Phoenix Risk Model in actionUsing the model, a company with 510 employees was identified with an associated outstanding liability of more than $2.7 million relating to Pay-As-You-Go (PAYG) withheld from gross wages of $9.4 million, but never remitted to the ATO. There was also a Superannuation Guarantee liability relating to these unreported amounts, and individuals associated with the company had a previous history of phoenix activity.

The information that the model revealed allowed the ATO to fast-track the case to audit before the directors could begin another round of liquidations. In this case, a ‘straw’ director (acting as a front for those actually in control of the company) had been appointed, however the model enabled the ATO to look behind the corporate structure and identify those actually controlling the affairs of the entities.

For more information on how the ATO is addressing fraudulent phoenix activity visit:■n Strengthening director obligations■n Stop phoenix rising

Entities and individuals suspected of being involved in dubious behaviour are matched against the data, a risk rating is determined and an appropriate strategy developed, according to the severity of the rating.

This work complements our focus on property developers who liquidate entities to evade collection of GST and other tax liabilities, which we discussed in our September issue.

‘Fraudulent phoenix activity poses a significant threat to community confidence in the tax and super systems and reduces tax revenue. With this tool, we can really crack down on phoenix activity, helping to protect the system for everyone.’

Through a coordinated strategy involving audits, prosecutions and strategic debt collection, the ATO is able to reduce the risk posed by fraudulent phoenix operators by making people who participate in this behaviour personally accountable for their actions. This can lead to company directors being assessed personally for funds withdrawn

from their company. In more serious cases, confiscation of personal assets may occur if liabilities remain unpaid.

The expanded director penalty regime now makes directors personally liable for their company’s outstanding PAYG withholding and superannuation guarantee. If a liability remains unreported for more than three months, then the ATO can recover that debt from the director. Placing the company into liquidation will not extinguish the debt; the only option is to pay the amount owed.

See the full Compliance in Focus, for the broader list of highlights including the results from last year’s compliance activities, the planned activities for the year, and a range of case studies.

PARTNERING

Spotlight: Robert Bromwich S.C., Commonwealth Director of Public Prosecutions

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The Office of the Commonwealth Director of Public Prosecutions (CDPP) is an independent prosecution service established by the Parliament of Australia to prosecute alleged offences against Commonwealth law, and to provide other related services, such as advice to referring agencies. Robert Bromwich S.C. was appointed as Commonwealth Director of Public Prosecutions in December 2012, for a 5 year term.

What is your vision for the CDPP?The Office of the CDPP was set up in 1984 as a federal, but decentralised, regionally based organisation. This structure reflected the way in which nearly all federal offences have been (and continue to be) prosecuted, namely in State and Territory courts exercising federal jurisdiction. The very high level of CDPP expertise in the eight separate State and Territory legal jurisdictions, and the important (and sometimes surprising) differences between them, is as important as ever for federal law enforcement.

The CDPP’s regional management structure is no longer consistent with the way in which most federal referring or investigating agencies operate. There has also been an expansion in federal criminal law, an increased emphasis on national consistency in prosecution approaches and outcomes, and rapid improvements in technology which enhance our ability to work collaboratively nation-wide.

A key challenge and priority for my term as Director is to evolve the Office into a more national organisation, while still

maintaining an effective and efficient regional prosecution service in the State and Territory courts in which we prosecute. A critical part of this challenge is strengthening our links with referring agencies. This includes earlier engagement with agencies by the provision of strategic pre‑brief advice and other pre‑brief assistance. It also includes working with agencies to help them to develop the prosecution aspect of their compliance and enforcement strategies in a consistent, cost‑effective and timely way.

Partnering

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PARTNERING

A further priority is to build a greater awareness of the CDPP’s work with its partners within the community at large so as to improve the public’s understanding of Commonwealth criminal law and maximise the deterrent effect of prosecutions.

How does the CDPP contribute to the fight against tax crime?The CDPP prosecutes tax-related offences and provides advice and assistance to the ATO and other partner agencies about federal (and sometimes State) offences and the sufficiency of evidence. Well-targeted prosecutions, especially those which carry the real possibility of imprisonment for the offender, have been shown to be a very powerful deterrent to many would-be offenders.

Prosecutions also contribute to a sense of fairness and integrity and thereby help to maintain public confidence in the tax system. Countries that fail to gain public support in this way end up with ineffective tax systems and ineffective governments without adequate means to provide essential government services to their people.

How is tax fraud regarded by Australian Courts?Tax fraud is treated increasingly seriously by Australian Courts. Judges repeatedly emphasise that tax fraud is not a victimless crime and that those who commit serious tax fraud can expect to receive full-time custodial sentences. Last year approximately 50% of all persons prosecuted by the CDPP and sentenced for GST-related offending received sentences of imprisonment. Where large-scale and complex tax frauds are committed, such as those prosecuted under Project Wickenby, lengthy – indeed record – prison sentences have been imposed.

What difference has Project Wickenby made to the tax landscape in Australia?A defining feature of Project Wickenby has been the way in which it has brought together policy, regulatory and law enforcement agencies in a strategic, coordinated and collaborative way, with very significant funding for investigations and prosecutions.

More broadly, Project Wickenby has sent an important message to the Australian community that everyone must pay their fair share of tax or face very real and very serious consequences. It has boosted the integrity of the entire tax system and more than paid for itself in the process.

What priorities do you see for tax-related prosecutions over the next five years?The priority is to build upon the successes of Project Wickenby and to improve continuously the investigation and prosecution of tax-related offences, as an integral part of the ATO’s compliance strategies by creating real and serious risks for non-compliance. A related priority is to work with the ATO and other partner agencies to ensure that tax investigations and prosecutions are as timely, efficient and effective as possible. This ranges from relatively small or simple frauds to large, sophisticated frauds, often with offshore, money-laundering or phoenix elements. In this sense, our priorities should and do reflect the priorities and enforcement strategies of our partners. This area has always been core business for the CDPP and will remain so into the future.

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PARTNERING

Organised crime in Australia costing billions

Organised crime makes more than $870,000 billion worldwide every year. If organized crime was a country, this amount of GDP would be large enough to be included in the G20.

This figure can be found in a new Australian Crime Commission (ACC) report that shows organised crime is now more pervasive, more powerful and more complex than ever before.

According to the ACC, organised crime is costing Australia $15 billion annually; a figure it says is conservative.

Organised Crime in Australia 2013 – released in July this year by former Minister for Home Affairs and Justice, the Hon Jason Clare, and now recently retired ACC Chief Executive Officer John Lawler – shows an increasing trend towards cyber crime activities, including fraud, identity theft and hacking.

It also shows that organised crime is now infiltrating people’s everyday lives, with Australia’s high levels of superannuation and retirement savings a major lure. The Australian economy is also known to have been less affected by the global financial crisis than other nations, making Australians an attractive target of criminals worldwide.

“The theme of the report is the pervasiveness of serious and organised crime, and the now very real impact on the ‘everyday’ Australian,” Mr Lawler said.

“In recent years many Australians have found themselves victim to investment fraud, credit card fraud or identity fraud/theft, with many losing their entire life‑savings to these fraudsters.”

Mr Lawler said incidence of Australian investors defrauded by investment scams, news stories regarding the discovery of dangerous clandestine drug laboratories, and violence between ‘gangs’ in public places are among the more obvious impacts of organised crime.

However, he said the less obvious impacts, such as increased expenditure of health services and a distorted share market are often just as devastating.

“What we don’t tend to see, or associate with organised crime, is the increase in public expenditure to support health services for drug‑related illness, small businesses struggling to stay competitive because other businesses are running

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PARTNERING

Case study

Romanian crime syndicate A$30 million card fraudIn November last year, 16 members of a Romanian crime syndicate were arrested in a joint Australian Federal Police and Romanian National Police operation (in Romania). The syndicate exploited weaknesses in the security systems of 100 Australian small businesses, which were hacked to steal the credit card details of up to 500,000 Australians who had used their cards at the businesses to buy goods or services.

Though investigators have not been able to establish exactly how many card details were stolen from the businesses, 30,000 of them had, at that time, already been used to illegally buy goods worth more than $30 million.

The stolen credit card data was allegedly used to create fake credit cards, enabling thousands of counterfeit transactions to be carried out around the world, including in Europe, Hong Kong, Australia and the United States.

at a loss in order to launder money, or once financially independent families and individuals becoming dependant on social welfare because they have nothing left (financially).”

Organised Crime in Australia 2013 is the most comprehensive contemporary profile of serious and organised crime in Australia. It is an unclassified version of the ACC’s Organised Crime Threat Assessment, and provides the context in which organised crime in Australia operates. It gives an overview of each of the key illicit markets in Australia, and of the activities that fundamentally enable organised crime.

A copy of the report is available at crimecommission.gov.au

What can Australians do to protect themselves from financial‑type frauds?

Australians should:■■ think twice before disclosing personal information online, or through lifestyle and other surveys

■■ be immediately wary if they are called at random by someone offering an investment opportunity.

To prevent Australians from becoming victims of crime:■■ Alert your family and friends to this fraud, especially anyone who may have savings to invest.

■■ Report suspected fraud to the Australian Securities and Investments Commission, via www.moneysmart.gov.au or 1300 300 630, or your local police. Any information that can be provided such as company name, location and contact details will assist with subsequent investigations and enquiries.

■■ Hang up on unsolicited telephone calls offering overseas investments.

■■ Check any company you are discussing investments with has a valid Australian Financial Services Licence at www.moneysmart.gov.au

■■ Always seek independent financial advice before making an investment.

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PERSPECTIVE

HMRC ups the ante on tax evasion by naming and shaming

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Public identification of tax evaders remains controversial, and not all countries have been quick to embrace such a measure. What is clear, however, is the community’s appetite for information regarding the perpetrators of tax evasion, and the key role played by tax authorities’ use of social media.

Leading the way is the United Kingdom, where the government has introduced a number of new measures, such as: ■n allowing Her Majesty’s Revenue & Customs (HMRC) to publish the details of people or companies caught deliberately evading more than £25,000 in tax

■n publicising an annual list of the ‘Top Tax Criminals’ and ‘Most Wanted’ tax criminals.

Similar campaigns are in place around the world. For example, in California the Franchise Tax Board publishes a list of the top 500 delinquent taxpayers who owe over $100,000.

Last year the program was expanded so that a taxpayer’s inclusion on the list could also cause the loss or denial of professional licences, including the taxpayer’s driver’s licence, and preclude these people from entering into contracts for the acquisition of goods and services with California state agencies.

In this article, we look at a new tactic being used in the fight against crime – the public identification of tax evaders. The tactic has been adopted by countries worldwide, and it is a measure of its success that you will probably be familiar with at least one of them: the ‘name and shame’ campaign.

Perspective

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PERSPECTIVE

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Key facts about PDDD legislationLegislation enabling HMRC to publish the details of deliberate defaulters is known as the Publishing the Details of Deliberate Defaulters (the ‘PDDD legislation’) and was included in Finance Act 2009.

Deliberate defaulters can be named when the following conditions are met:■n during a compliance check it is established that the person has incurred a penalty for a deliberate default

■n the amount of the tax lost is more than £25,000

■n the person failed to disclose fully to HMRC at the outset of the investigation, so they did not receive the maximum possible reduction in penalties for full and early disclosure and assistance.

These statutory criteria are intended to ensure that the measure targets the most egregious tax evaders.

We asked a representative from HMRC about their experience in naming and shaming tax evaders.

Why did you decide to go down this path?

Publishing the names of deliberate tax defaulters is part of HMRC’s approach to combating tax evasion and non‑compliance. We wanted to show the community we are serious about tackling evasion, while deterring those who may be considering not complying with their legal obligations.

HMRC’s current Most Wanted list comprises people wanted for crimes including VAT fraud, evasion and money laundering who have absconded after being charged or during a trial. One of the reasons for publishing the list is to seek help from the public in finding these people so that their crimes do not go unpunished. 

What has been the public’s reaction?

I think it’s fair to say that this approach has received widespread attention – which is exactly what we were after.

Clearly the public is very interested in what the HMRC is doing to tackle evasion, and who is manipulating the system to their advantage.

How effective has this approach been?

To date HMRC has published the details of 39 deliberate defaulters on its website: ■n nine were published on 21 February 2013

■n 15 on 14 May 2013■n 15 on 14 August 2013.

First published in 2012, the Most Wanted list generated strong intelligence on 17 out of the original 20 names and was viewed over 1.5 million times. The most recent list received 4.5 million views in just under a week.

The overall impact on compliance however, will take longer to resonate. HMRC measures attitudes to compliance in a number of ways, and will look to see how best to evaluate the impact of the policy in due course.

To find out more:■n visit the HMRC website to see the current list of deliberate defaulters

■n visit the Flickr page for photos of the ‘Most Wanted’.

PostscriptDon’t get ripped off by tax cheatsEvery year, tens of thousands of Australians report people who they think might not be paying their fair share. Our new video, Don’t get ripped off by tax cheats, shows the effects of tax evasion on everyday people and the wider community.

How to report a tax crimeHelp us ensure everyone pays their fair share of tax. Report information on suspected tax crime to the Tax Evasion Reporting Centre on 1800 060 062 or if you are a tax practitioner use Fast Key Code 3 4.

You can also report online anytime at ato.gov.au/reportevasion

Making a voluntary disclosureWe encourage taxpayers who have made a mistake in relation to their tax affairs to make a voluntary disclosure. This can lead to reductions in shortfall penalties and interest, particularly if the voluntary disclosure is made before the notification of an audit.

Voluntary disclosures can be made in writing, electronically, by phone, or other methods available in specific circumstances.

Read full details about how to make a voluntary disclosure.

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POSTSCRIPT

Speeches■n 17 October 2013: Reinventing the ATO – ready, willing and underway (Neil Olesen)

■n 17 July 2013: In search of speed (Mark Konza)

■n 25 July 2013: It’s about time (Chris Jordan)

■n 13 August 2013: Transforming the taxation experience: insights and opportunities (Geoff Leeper)

Media releases ■n 15 July 2013: Compliance in focus

■n 12 August 2013: Early warning from the ATO for taxpayers with trust funds

Letter to the Editor■n 09 August 2013: Letter to the Editor: Small business windups from Geoff Leeper

Find a full list of speeches and media releases on our website.

FeedbackFeedback is always welcome. Email us at targetingtaxcrime@ato.gov.au with any comments or suggestions.

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