Australia cracks down on Tax Havens again

Updated April 19, 2010 17:09:09

The Australian Tax Office has announced another crackdown down on high-wealth individuals and companies and using tax havens, some of them in Pacific Island nations. The Tax Office has asked banks to report taxpayers who have undisclosed offshore income or who have over-claimed deductions involving international transactions, any time in the past 4 years. This latest announcement follows an intensive effort which has seen the Tax Office spend an additional $550 million dollars over the last 2 years to catch wealthy tax cheats. For Pacific countries operating tax havens, more pressure on their clients means less business. Jemima Garrett asked the Pacific Legal Network's, tax specialist, Anthony McFarlane, just how wide is the information being sought from banks.

Presenter: Jemima Garrett
Speaker: Pacific Legal Network's, tax specialist, Anthony McFarlane

MCFARLANE: Potentially, very wide indeed, some might call it a fishing expedition, but they have the power to request information about bank accounts, general financial information, but also information regarding ownership structures of companies, partnerships and trusts.

GARRETT: Is there any idea of how many companies and individuals may be affected by the crackdown and how many of those might have money in Pacific Island tax havens?

MCFARLANE: Haven't got any specific numbers, but there is indeed a lot of Australian taxpayers out there that may have at sometime between 2005-2009 had, for example, bank accounts in a number of these Pacific countries that will come up on this information request. So in terms of actual numbers, it's hard to say, but there is definitely going to be a number of customers affected.

GARRETT: Which Pacific countries are likely to be most vulnerable to this crackdown by the Australian Taxation Office?

MCFARLANE: Well particularly, Project Wickenby has looked at Vanuatu, the Cook Islands and Samoa. I think Vanuatu is going to be continued to be probed by the tax office, especially with this information request, but a number of financial institutions do operate in the Cook Islands as well, so I would expect especially those three countries will be affected.

GARRETT: Now the list of Australian banks are being asked for information is quite long, isn't it, just how many banks are being asked?

MCFARLANE: Well, it's not just banks, it's also other financial institutions, but the big four have definitely been asked, and other banks like the Bank of Cyprus, the Macquarie Group are also being asked and also companies that facilitate credit card transactions throughout the Pacific will also be affected.

GARRETT: So just how much of a deterrent do you think this sort of action will be for people wanting to use Pacific Island tax havens?

MCFARLANE: Well, I think this just adds to measures the ATO have already put in place. I think generally Australian taxpayers are aware of the ATO's actions to date under Project Wickenby. So I think this will further reinforce the ATO's intention that they won't be giving up the search for those taxpayers that do have undisclosed offshore income or have over claimed deductions in these countries.

GARRETT: Barack Obama in the United States is also cracking down on tax havens. How does Australia's campaign compare with the one that is happening in the United States?

MCFARLANE: Well, I think they are probably seen as the US lead and seen how successful the UBS case last year was. I think they are most definitely using that as encouragement to implement similar information requests.

GARRETT: Is there anything Pacific Island countries can do to protect their tax haven business?

MCFARLANE: The Cook Islands has moved to legitimise their offshore financial stand with a number of measures introduced by the Finance Ministry last year. I think cooperating with the OECD global forum and the tax office is probably the best way forward, given that so many other countries are falling into line and if we take the example of tax information exchange agreements, last year alone saw the signing of over 200 of such agreements to cooperate on tax matters, so the tide has definitely turned and countries should cooperate.