Wickenby renders havens high-risk

AUSTRALIA's controversial tax sting, Project Wickenby, and serious non-compliance prosecutions were cranked up this year, with the Australian Tax Office completing 280 audits, 600 reviews and raising $360 million in liabilities.

By InvestSMART · 30 Jun 2011

By InvestSMART ·
30 Jun 2011

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In all, Project Wickenby has raised $1 billion in liabilities from secret tax havens, tax fraud and money laundering since its introduction in 2006.

During its five years of operation, it has raised another $832 million from a burst of voluntary offshore disclosures. Results from the Australian Transaction Reports and Analysis Centre show a considerable decline in annual flows to havens, according to the Tax Office's latest compliance program.

The Tax Office's spruiking of Project Wickenby, which was allocated a total of $431 million between 2006 and 2013, comes as the government assesses the success of the cross-agency task force. Government funding of the project ends in 2013 and there has been debate over how successful it has been. The music entrepreneur Glenn Wheatley was the first tax offender convicted under Project Wickenby, in 2007.

Since 2006, Wickenby has achieved 18 custodial convictions and has collected $1 billion in liabilities. Authorities predict there will be more prosecutions resulting from Wickenby in the next 12 months.

The Tax Office's second commissioner for compliance, Bruce Quigley, says the use of tax havens will continue to face scrutiny this year.

He said businesses participating in the cash economy to evade tax, phoenix arrangements, incorrect superannuation guarantee contributions, promoters of illegal early-release super schemes and some high-wealth individual groups were among the focuses this year.

There are concerns the global financial crisis has increased pressure on small firms, causing some to seek an advantage by hiding their incomes. The Tax Office completed 2100 reviews and audits in the past year, raising about $111 million.

Over the past four years the Tax Office has reviewed the affairs of a high-risk group of more than 2000 highly paid people. During that time it corrected 60 per cent of tax returns.

By the end of 2010-11 the Tax Office expects to have raised more than $1.2 billion in liabilities and $1.3 billion in notional tax adjustments.

A Clayton Utz partner, Niv Tadmore, said there was increasing tax pressure on large business. "This is driven by sophisticated data acquisition, mining and mapping systems, and earlier, pro-active and more demanding [Tax Office] scrutiny."

$360m

in liabilities raised this year by Project Wickenby.

$1 billion

raised since Wickenby's introduction in 2006.

$832m

extra raised from a sudden burst of voluntary offshore disclosures.

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Frequently Asked Questions about this Article…

What is Project Wickenby and why is it important for investors to know about?

Project Wickenby is a high-profile Australian Tax Office (ATO) compliance taskforce, launched in 2006 to target tax fraud, money laundering and secret tax havens. It’s important for investors because the ATO has ramped up audits, reviews and prosecutions under the program, generating significant liabilities and legal activity that can affect companies and individual taxpayers.

How much tax liability and enforcement has Project Wickenby generated so far?

According to the article, Project Wickenby has raised about $1 billion in liabilities since 2006. In the most recent year cited the program raised $360 million, and a burst of voluntary offshore disclosures added about $832 million over five years. The ATO also expected to have raised more than $1.2 billion in liabilities and $1.3 billion in notional tax adjustments by the end of 2010–11.

How many prosecutions or convictions has Project Wickenby produced?

The article reports that since 2006 Wickenby has achieved 18 custodial convictions. Music entrepreneur Glenn Wheatley was the first person convicted under the program in 2007, and authorities predicted more prosecutions in the following 12 months.

What enforcement activity did the ATO carry out this year under Project Wickenby?

This year the ATO completed 280 audits and 600 reviews specifically linked to the Project Wickenby effort, raising $360 million in liabilities. Separately, across the Tax Office more broadly the ATO completed about 2,100 reviews and audits in the past year and raised around $111 million.

Which types of tax risks is the ATO prioritising that investors should be aware of?

The ATO said it will focus on use of tax havens, businesses operating in the cash economy to evade tax, phoenix arrangements, incorrect superannuation guarantee contributions, promoters of illegal early-release super schemes, and some high-wealth individual groups.

Is government funding for Project Wickenby ongoing?

Project Wickenby was allocated $431 million between 2006 and 2013. The article notes government funding for the project ends in 2013 and there has been public debate about how successful the cross-agency taskforce has been.

What tools or methods are driving the ATO’s increased tax scrutiny?

A tax law partner quoted in the article said the ATO’s increased pressure on large business is driven by sophisticated data acquisition, data mining and mapping systems, combined with earlier, more proactive and demanding scrutiny from the Tax Office.

What should everyday investors monitor in company reporting related to tax investigations and Wickenby activity?

Investors should watch company announcements and financial reports for disclosures about ATO audits or reviews, reported tax liabilities, use of offshore structures or tax havens, and any legal proceedings. The article highlights rising ATO activity and prosecutions, so timely tax-related disclosures can be material for investment decisions.