Tax evasion by super rich hurts every Australian

We will probably never know their names, but one thing we do know – one in 20 of the richest people in Australia tried to evade paying their fair share of tax in recent years.

By what authority do we know this? By none other than the Australian Taxation Office.

On December 19 the ATO ended its amnesty offering a special deal to taxpayers who disclosed previously hidden offshore income and assets.

At the close, more than 5000 taxpayers owned up, either making a disclosure or saying they would in the future.

The ATO has processed 1750 of these reports, revealing income totalling $240 million and $1.7 billion in disclosed assets. It estimates that when all disclosures are processed it will have uncovered more than $600 million in income and more than $4 billion in assets.

But what is most striking is that of the 1750 individuals already processed, 110 are on the ATO’s list of the 2800 wealthiest people in Australia. This is 4 per cent of the rich-list of taxpayers with wealth in excess of $30 million.

In addition, the ATO found more than 300 wealthy Australians with assets of between $5 million and $30 million.

As less than half the disclosures have been processed, when the ATO finishes assessing all disclosures, we could well find that more than 10 per cent of our very richest citizens have been evading tax over the years.

And let’s be quite clear here – we’re talking about these individuals engaging in the illegal activity of tax evasion, not tax avoidance which is minimising tax by legal means.

Taxpayers who have come forward under the amnesty will only be assessed for the past four years of income. They will only be liable for a maximum shortfall penalty of 10 per cent and they will not be referred for criminal investigation.

But the generous one-off offer may not be the only reason why some individuals have decided to come clean at last.

During the amnesty which began in March 2014, the ATO revealed that it had an informant who had provided details on a number of Australians with Swiss bank accounts.

“If you have an undisclosed bank account in Switzerland and you don’t make a disclosure under Project DO IT, there is a good chance we will be requesting information about your account. If we find out about your account through our information exchanges, you will not be eligible for the terms on offer,” Deputy Commissioner Michael Cranston warned shortly before the amnesty closed.

The ATO said it would be seeking information from Switzerland about the taxpayers on the informant’s list, including complete bank statements.

There is every reason to believe that the revelation of an informant prompted the sharp late rush to disclose accounts.

Other recent media leaks about dubious tax operations and a growing international commitment to co-operate to stamp out tax minimisation might also have helped encourage the disclosures.

Australia and Switzerland recently ratified a new tax treaty which will enable better exchanges of information between their tax authorities.  World leaders at the Brisbane G20 meeting also endorsed a plan to tackle tax evasion by automatically exchanging tax information on a reciprocal basis by the end of 2018.

The ATO also recently received more than 2000 records of Australians who have bank accounts in Vanuatu and is analysing this data to identify previously undisclosed bank accounts.

While international co-operation should help reduce the problem, only an extreme optimist could believe that it will end tax evasion.

The rich are not inclined to be morally upright. They are more likely than the poor to steal candies from a baby (there are studies to show this).

Nevertheless they have few inhibitions about telling the masses what is wrong with society. This was best illustrated in 2012 when Australia’s wealthiest woman, Gina Rinehart, famously told Australians that they needed to work harder to compete with Africans who would labour for less than $2 a day.

The economic commentators who lecture us most frequently in the media come from the consultancies, banks and accounting firms that arrange the affairs of the rich to maximise profits and minimise tax.  Repeatedly they tell us that we must raise productivity and grow the economic cake, but rarely do they raise the issue of wealth distribution, never mind the ethics of tax evasion and avoidance.

Nor do they ask when enough is enough.

A few wealthy individuals – most notably Bill Gates and Warren Buffett – have committed to give up most of their wealth. But they are the exception.

More often the wealthy rally round campaigns to stop wealth or inheritance taxes and argue for lower taxes on corporate profits. The sums the amnesty has revealed being held secretly are not small, but they’re not enough to have a significant impact on the budget deficit. The biggest individual disclosure was $30 million in income and $120 million in assets held in Liechtenstein and Switzerland.

Five taxpayers came forward to each disclose more than $10 million in income and more than 30 each disclosed additional income of more than $1 million.  Not only will the government get an immediate boost to tax revenue from the disclosures, which could amount to $300 million, but there will be on-going benefits, as future income will be subject to tax in later years.

According to Credit Suisse’s Global Wealth report, almost half of the world’s wealth is held by only 1 percent of the world’s population. These are people who hold net assets of more than $US798,000 or $A975,000 – a sum that many people who see themselves as middle class in Australia would hold.

A small rise in income can dramatically changes the lives of the poorest one billion on our planet – people who live on less than $1 a day.  Nevertheless the government has seen fit to cut Australia’s foreign aid to its lowest level since records began in 1954.

Given our overall wealth, this shames us all.