Paradise Papers reveals crackdown on tax cheats still needed

Countries implicated in the Paradise Papers.

Countries implicated in the Paradise Papers. Image credit: JayCoop/Wikimedia Commons

Friday Forum

The Paradise Papers have lifted the lid on the on-going tax cheating activities by the obscenely rich and multinational corporations.

This is not a marginal activity, but a systemic, global issue. We all pay the price if tax cheats get away with paying less than they should, as governments will lack the money for things such as schools, hospitals, aged care and mental health services.

Our government has taken worthwhile actions to address tax cheating. But this latest leak of the activities of prestigious offshore law firm Appleby and a smaller, family-owned trust company Asiaciti, shows that greater transparency is still required.

The government needs to land a number of reforms it has been talking about. It will not be enough to simply let the ATO look into Australians and Australian companies implicated in the leaks. Serious game-changing reforms are needed.

First, we need to follow the lead of the UK and have a proper register of companies that reveals who the real owners and controllers of companies are. It also needs to be a crime to act as a dummy director of a front company and not reveal whom you are acting for.

Given this latest leak includes the role of trusts, we should add to any public register of companies the real owners, controllers and beneficiaries of trusts. Increasingly criminals are using trusts because of the greater secrecy they provide over companies.

The government needs to press ahead with its announcement of having a Director Identification Number so that people cannot use false names, fake dates of birth and fake addresses to register companies in Australia. A Director Identification Number would mean anyone acting as a director for a company would need to provide the same sort of ID as required to open a bank account.

The Treasury’s own paper on options to deal with companies that ‘phoenix’ revealed that law enforcement has encountered companies where dead people are falsely registered as company directors.

We need the government to deliver on comprehensive protection, compensation and reward for whistleblowers who expose tax evasion, tax avoidance and other serious corporate criminal activity. This has been recommended by a cross-party Parliamentary Committee.

All the recent major exposures of the tax cheating by multinational corporations and the obscenely rich – from the Luxembourg Leaks, to the Panama Papers and now the Paradise Papers – have been due to whistleblowers.

Unfortunately the Commonwealth government has put forward a package for whistleblower protection and compensation that only will do half the job and leave many whistleblowers in the private sector to have to find lawyers and fend for themselves.

Providing proper support and encouragement for whistleblowers acts as a major source of information for law enforcement based on the experience of other countries. It can also deter corporate crimes, as those carrying out criminal activity need to worry that anyone on the inside might expose them.

More needs to be done to address the role that unethical lawyers and accountants play in facilitating tax cheating, fraud and money laundering. To start with, these people should not be able to look the other way when they see suspicious activity by their clients. The government needs to press ahead with its proposed reforms that lawyers and accountants must take steps to know who they are dealing with and report to authorities any suspicious matters.

Further, the government needs to implement its promise that tax advisers have to report to the ATO any aggressive tax schemes they are promoting. This measure has been used in the UK to identify and close hundreds of loopholes in the tax law.

‘Getting away with it’ is not the same as something being legal. We need to provide tools to law enforcement agencies, the media and ethical businesses to make sure tax cheats and corporate criminals can no longer get away with it from behind a veil of tax haven secrecy.

Mark Zirnsak
Director, Justice & International Mission

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