Paul McIntyre: Tax office puts wind up big end of town

An unnamed Australian entertainer and his now Swiss-based tax adviser may have some angry and wealthy business identities on their tail.

More than 100 of Australia's wealthiest individuals, and a handful of law firms and accountants, are frantically figuring out how to deal with the Australian Tax Office's (ATO) biggest-ever crackdown on tax evasion.

Nearly 300 Australian Federal Police, ATO and Crime Commission officials took part in raids late last week on 85 law firms, accountants and homes in up-market suburbs of Sydney, Melbourne and Brisbane as the ATO looks to claw back what it figures is at least A$300 million ($325 million) in lost revenue via "blind trusts" in tax havens such as the Virgin Islands, Vanuatu and Switzerland.

If the ATO thinks it's down A$300 million in revenue then at least A$1 billion has been parked in these offshore structures where tax authorities allege wealthy individuals have allowed tax promoters to falsify deductions made in Australia for fake overseas services or expenses. Others have simply concealed income to evade paying Australian tax or, as the federal Justice Minister, Chris Ellison, signalled, taxable income earned overseas has been secretly funnelled back into Australia disguised as fake loans and inheritances or through debit and credit cards.

Ellison said he expected prominent and wealthy people would be brought to account and described the offshore operations as "a massive attempt to evade tax. This is the big end of town that we have targeted here and, of course, it sends a clear message that all people in Australia are subject to paying tax."

Charges from the investigation could include falsifying documents and transactions and, if found guilty, individuals could be jailed for 20 years. After the raids, ATO deputy commissioner Michael Monaghan, of the serious non-compliance unit, said on Tuesday the number of fraud participants was likely to grow.

"We certainly think it's on a large scale," he told ABC Radio. "The arrangements are provided by a number of offshore promoters and assisted, in many cases, by intermediaries in Australia. We do think that it may involve hundreds of participants."

There have been some suggestions that by keeping individual money transfers from tax havens beneath the A$10,000 cap for financial monitoring reports, those caught up in the present ATO investigation thought they could wheel their money back into Australia unnoticed.

The ATO, however, had different thoughts. By rejigging the analysis criteria at the Australian Transaction Reports and Analysis Centre, transfer patterns started emerging with transactions under the A$10,000 threshold.

And it all apparently started with the seizure by Federal Police of a laptop held by a Channel Islands accountant at Sydney airport nearly 12 months ago, just before he was to board a plane. Authorities copied its contents and let him go and now hundreds of wealthy individuals might find themselves in trouble.

Four national law firms have so far been named - Gadens, Abbott Tout, Dibbs Barker Gosling and Deacons - and most have already claimed no knowledge.

"The Australian Crime Commission and Federal Police executed a search warrant at the offices of Gadens in Sydney last week," the company said. "The investigation relates only to ... individuals who ... left the firm some time ago."

Abbott Tout held a similar line, which said the ATO raid was related to one of its lawyer's involvement with clients and matters at a previous firm. "We are co-operating fully with authorities and will continue to do so throughout the course of the investigation."

Then this statement from Abbott Tout partner Ross Seller, formerly at Gadens, who confirmed he had been served with a warrant, but said that he had not been involved in any scheme promotion.

"Along with a number of other professional advisers, I received a search warrant last week," he said. "I have fully co-operated and provided all the information required. I have not advised nor have I been involved in any way with the schemes which have been reported in the media and the recent ATO press release."

So, the lawyers, at least, are clean. But the ATO is certainly on a road to somewhere. After last week's raids, Tax Commissioner Michael Carmody told the Sydney Morning Herald new leads had been found and more warrants to seize information would be issued in coming weeks.

"We will now be taking the further step of using formal powers to investigate about 20 people in the next couple of weeks," he said. "That won't be the end of it. It's hard to say at this stage, but it could be up to 100 people who will progressively receive these notices."

The games have begun.