09/11/21

INTERNATIONAL TAX: Tax avoidance operations collect an extra $5 billion.

As published on afr.com, Tuesday 9 November, 2021.

As COVID-19 disruption drains government budgets around the world, a major international tax avoidance operation has collected nearly $US300 million ($405 million) in otherwise lost revenue across Asia.

The latest anti-evasion results from Tax Inspectors Without Borders, a joint program run by the Organisation for Economic Co-operation and Development and the United Nations, collected about $US3.9 billion ($5.2 billion) around the world, including nearly $US1 billion ($1.35 billion) in revenue in Africa.

Chasing funds linked to tax evasion and avoidance, the program deploys qualified tax experts to developing countries in Africa, Asia, Eastern Europe, Latin America and the Caribbean. Funds are raised through co-ordinated audit activities, criminal tax investigations and sophisticated data transfer systems.

Criminal tax investigations included those targeting high net worth individuals with offshore accounts and major corporations evading tax liabilities. Experts are tasked with following the money across international borders, including through complex webs of legal structures and opaque ownership patterns.

“Tax administrations are playing a crucial role in delivering pandemic responses and maintaining revenue collections,” the report said.

“For developing countries that have limited fiscal space to begin with, including many that are already heavily indebted, this has been extremely challenging.”

Former federal finance minister Mathias Cormann chairs the organisation’s governing board, as secretary-general of the OECD.

Labor promised to contribute $5 million in annual funding for Asia-Pacific efforts by the Tax Inspectors Without Borders program at the last federal election.

Primarily funded by European countries, the Paris-based program is expanding into the Asia-Pacific region, with Papua New Guinea and Vietnam acting as host administrations for specialist audit assistance services.

Recently retired and current tax audit experts work overseas, alongside public servants given secondments from donor jurisdiction governments.

This month Treasurer Josh Frydenberg welcomed progress on long-running OECD negotiations designed to crack down on international tax havens eating away at government revenues, stopping a race to the bottom on corporate tax rates.

A potentially historic rewrite of international tax rules, the plan agreed to by more than 130 countries includes the introduction of a 15 per cent minimum rate for corporations.

The minimum tax rate would apply to companies with revenue of more than €750 million euros ($1.18 billion) and is expected to raise global tax revenues by $US150 billion ($205 billion) a year.

Australia could stand to gain as much as $3 billion in extra tax revenue per year, and the report said the need for assistance for developing countries could change through the reforms.

Here, the ATO’s tax avoidance taskforce raised $3.03 billion in tax liabilities and almost $1.3 billion in cash collections last financial year.

Another $121 million in liabilities and $145 million in cash was raised by the serious financial crime taskforce. The black economy program collected $736.2 million in liabilities and an estimated $534.7 million in cash.

The latest tax gap analysis from the Australian Taxation Office showed nearly $34 billion in tax liabilities went unpaid domestically in the 2018-19 year, representing a 7.3 per cent gap before the pandemic.

About $2.6 billion of the total was attributed to large corporates, with about $12.5 billion coming from small business and $8.4 billion from individuals.

Tax gap analysis for the period covering the height of the COVID-19 disruption will be included in future releases. ATO compliance activity, including audits, boosted tax revenue by $11.5 billion last financial year.

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