Closer collaboration between tax authorities around the world is closing the net on tax evaders and the intermediaries who enable their activities, the World Congress of Accountants (WCOA) heard on 6 November.
Australian Tax Commissioner Chris Jordan told the World Congress of Accountants that while the Paradise Papers and Panama Papers data leaks had grabbed attention, the Australian Taxation Office (ATO) was working on more than 10 other major data sets that did not have the same profile.
The Joint International Task Force on Shared Information and Collaboration (JITSIC) had 37 member countries that had authorised key tax officers from each to talk to each other, pool information and collaborate on projects.
The resulting benefit had been “incredible” he said.
“We are getting information all the time from other jurisdictions.”
Corporate tax evasion
The ATO was also focusing on the advisers and intermediaries promoting tax avoidance. While it was important to get individuals “it is more important to disrupt intermediaries and their business models,” Jordan said.
He said corporates were also responding, and intermediaries who could devise a scheme that “looked smart on a white board” were encountering clients worried about reputational risk and the public interest in tax issues.
The conference heard that corporate attitudes on paying tax are changing, fuelled by increased public focus that was driving political interest.
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Jordan said boards realised they could not continue funnelling billions of dollars of profits through tax havens.
"That in itself is a step,” he said. “If all the profit does not land there [in tax havens], where should they allocate profit?”
Tax authorities exchanging information
Head of the OECD tax policy and statistics division, David Bradbury, a former Australian assistant federal treasurer, said more countries were introducing voluntary disclosure programs, warning citizens that their tax authorities would find out about evasion and it was better to come forward early and “come clean”.
Bradbury said more than 100 countries were exchanging information under the Base Erosion and Profit Sharing (BEPS) project being driven by the OECD and G20 group of 20 nations.
Prior to this the opportunities for individuals to have wealth hidden offshore was “something that people were willing to take a risk on” because they knew tax authorities did not talk to each other, he said.
Early results from voluntary disclosure programs had brought in 93 billion euros globally as taxpayers came forward, he said.
Introducing a digital tax
The OECD is working on plans for consensus on digital taxation by 2020. There are 122 nations involved in the project but some nations are already moving on taxing the digital economy.
The Australian Treasury has released a discussion paper on a digital tax, the UK announced earlier this year plans to tax sales by large social media organisations such as Facebook and Google and there is speculation that New Zealand will follow. The Malaysian government in its recent budget in November 2018 announced that it intends to introduce a digital tax on foreign online service providers.
Bradbury called for global co-operation on tax policies, saying there was a risk of double taxation occuring if nations decided “to go off and do their own thing” to earn revenues from the digital economy.
He warned of flights of capital in response, “so it is important to coordinate globally”.
Jordan said the mobility of capital in world moving to a wholly different model of business transaction reinforced the need for reform of taxation systems.
Countries moving beforehand should reinforce their GST/VAT regimes and respect the principles set out by the OECD, including that their digital taxes be temporary, and would removed once there is global agreement, Bradbury told INTHEBLACK on the sidelines of the congress.
“Our position is that we don’t recommend implementation of these measures but if countries are inclined to go down that path they should be mindful of these issues and try to respect them.”
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