Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.
A meeting of 30 tax administrators to share information on the Panama Papers tax evasion scandal shows taxpayers can no longer expect to keep their tax planning secret, according to a former delegate to the alliance of tax agencies.
Commenting Jan. 24 on a Paris meeting of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), Paul McCartin, a former Australian Taxation Office JITSIC delegate, said the exchange of information between revenue authorities had “shifted to the next level” in terms of both scale and coordination.
“This new environment means that taxpayers should never assume their tax planning methods will never been seen by a tax administrator,” McCartin told Bloomberg BNA in Jan. 24 e-mailed comments.
“Those days are long gone and usually, with tax evasion, countries have an unlimited period of review,” he said. “This means voluntary disclosures should be actively considered where taxpayers have entered into arrangements to hide transactions from a tax administrator.”
A JITSIC statement on the Jan. 16 meeting, at which tax administrators shared the findings of their investigations into the Panama Papers, described it as “historic.”
Significant achievements included developing a uniform approach for tax agencies to request information from each other, reaching a clearer understanding of the evasion tactics adapted by intermediaries, and establishing new techniques for collating intelligence, the statement said.
“Important progress has also been made in domestic compliance activity, with more than 1,700 reviews and audits initiated on taxpayers, more than 2,550 requests of information, and the identification of a target list of 100 intermediaries,” it said.
“We have also seen a large number of taxpayers coming forward to disclose their offshore operations.”
McCartin, now a Melbourne-based PwC tax controversy and dispute resolution partner, said that tax administrators potentially have access to considerable amounts of data, “either through e-mail or system hacking"—alleged to have occurred in the Mossack Fonseca situation—"or other means.”
Some 11.5 million documents, leaked from Panamanian law firm Mossack Fonseca to a German newspaper, were given to at least one tax administration and subsequently shared with other revenue authorities under exchange of information provisions. The documents revealed more than 200,000 offshore entities held by wealthy individuals and companies from around the world. The whistleblower who leaked the Panama Papers remains unidentified.
McCartin added that tax administrators were becoming “far more public about their activities, perhaps because tax has captured the public’s attention.”
It was increasingly likely, he added, that revenue authorities would “follow the trail” when investigating tax evasion.
“For instance, if they identify one advisory firm that has contributed to a tax evasion activity, it’s certainly possible that they have provided similar advice to other clients and involved another firm with a similarly aggressive mindset.
“Tax authorities conduct a lot of interviews and this can result in more leads,” he said.
McCartin said the JITSIC meeting’s focus on intermediaries reflected long-standing practice, noting that the Organization for Economic Cooperation and Development had highlighted their role in aggressive tax planning in a 2008 report.
“In Australia, the ATO frequently adopted an approach of targeting intermediaries to influence behavior and this was an effective means of ensuring compliance,” he noted.
McCartin added that the ATO’s data analytics were extremely sophisticated.
“The sources of data the ATO is now able to call upon is extraordinary. The challenge for the ATO and no doubt other revenue authorities, is to effectively utilize these vast amounts of data. Not surprisingly, the ATO are investing heavily in ways to interpret ‘big data’ to allocate their compliance resources.”
Irish Tax and Customs described the latest JITSIC meeting as “the largest ever simultaneous exchange of information, based on legal instruments under the OECD and Council of Europe Multilateral Convention and tax treaties,” in a Jan. 19 statement.
“The sharing of this information within a group of this size is unique, and sets the basis for greater cooperation among tax administrations,” it said.
Meanwhile, New Zealand’s head of international tax said JITSIC had been a very useful mechanism for sharing information and strategies.
“New Zealand has been actively participating in the JITSIC Network, leading to greater sharing of know-how and experience in tackling common international problems, enabling us to consider alternative approaches and all possible angles, as well as expanding our exchanges of information with treaty partners,” said John Nash, Inland Revenue New Zealand’s manager of international revenue strategy.
“These features are exemplified in the collective work being carried out on the Panama Papers, where intermediaries operating across many jurisdictions are particularly in focus,” he said in comments e-mailed Jan. 24.
In a Jan. 20 statement, India’s Ministry of Finance commented on the “significant achievements” that have been made since the last JITSIC meeting in April 2016, which included development of uniform approaches to requesting information between treaty partners, clearer understanding of the evasion typologies adapted by intermediaries, and new techniques for collating intelligence.
“JITSIC will continue to draw on the best intelligence capabilities from tax authorities around the world and share best practices for data analysis and collaboration on intelligence,” the Ministry of Finance said in its statement.
To contact the reporter on this story: Murray Griffin in Melbourne at firstname.lastname@example.org
To contact the editor responsible for this story: Penny Sukhraj at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)