The Australian Taxation Office is considering offering wealthy people with secret offshore income or assets a tax break if they reveal the details voluntarily.
It is part of an ongoing crackdown by the ATO on offshore tax avoidance schemes. If the move goes ahead, it has the potential to recover billions of dollars for the Tax Office.
In good news for individuals living in fear of the ATO, the Tax Office is considering capping back taxes to four years, in an attempt to encourage people with offshore assets to come forward, according to The Australian Financial Review.
An ATO spokesperson told SmartCompany an amnesty is being considered.
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“As the Commissioner announced last year at the National Tax Liaison Group, the ATO is strongly considering an offshore disclosure initiative,” the spokesperson said.
“We are currently working through the detail of such an initiative with the relevant Reference Group. We will announce the initiative once it has been signed off.”
The deal on the cards is the ATO’s most generous amnesty for people with offshore assets, compared to previous amnesties offered in late 2009 and 2007.
In December 2009, the Tax Office announced it would allow individuals and companies with undeclared offshore income to go to the ATO anonymously and ask for an indication of whether or not they were likely to be pursued by the Tax Office for a breach of criminal law. The offer lasted for six months.
Thomson Reuters tax expert Terry Hayes told SmartCompany amnesty initiatives like this one have been successful in other countries.
“By and large they have been effective. They have been tried in other countries and the rationale is to get people on the books,” he says.
“People come forward and declare their hidden accounts and then the tax authority gives them a concession. They’re then back on the books and the Tax Office can keep tabs on them going forward. They don’t catch everyone, they never do, but it does give people a chance to own up.”
Hayes says these initiatives have been used in the United States, Italy, the United Kingdom and various other countries across Europe.
“Over time their success is quantifiable. It will bring in extra revenue and get people back on the system, although it’s never guaranteed,” he says.
“For the ATO it’s a matter of cost-benefit analysis. The cost of chasing these offshore assets is really high, both in time and cost of having investigators and lawyers chasing these people.”
Hayes says people end up with offshore accounts after receiving bad advice or being willing to take the risk.
“Some people will come forward for peace of mind. They may have thought what they were doing was okay, but by coming forward it removes the doubt,” he says.
In the 2012-13 financial year, the ATO raised $223.6 million through people and businesses making voluntary disclosures.
The Tax Office’s crackdown on offshore tax havens is part of a worldwide push to catch tax evaders using these schemes.
Last week Beanie Babies founder Ty Warner narrowly avoided jail time for keeping $US24 million in undeclared Swiss bank accounts.
The judge ordered Warner to complete 500 hours of community service and the entrepreneur paid a record civil penalty of $53 million and at least $16 million in back taxes.