On 21 September 2018, the Shadow Assistant Treasurer: Mr Andrew Leigh, announced that a Labor Government would clamp down on unsubstantiated allowances for travel to tax havens and target ‘passport shopping’ through measures raising more than $9 million over the forward estimates”.

  • Travel Allowances to Tax Havens: Mr Leigh said that under Australian tax law, a company executive can receive tax-free allowances related to travel to Bermuda, Panama and similar jurisdictions.
    • Mr Leigh said (slightly hysterically):”Tax havens are used by drug-runners, extortionists and money-launderers. They are used to hide the proceeds of fraud, corruption and tax evasion.”
    • And in a similar way, he said: “According to one estimate, around four-fifths of money in offshore bank accounts is there in breach of other countries’ tax laws.”
    • And using this as justification, he said: “As such travel is unlikely to be for purposes of creating assessable income in Australia, claims for unsubstantiated tax-deductible allowances in tax havens would be automatically denied under a Labor Government”.
    • And: “Exceptions would require a detailed application to the Commissioner of Taxation.”
    • Quite what this means, is not entirely clear to me. It is probably a measure denying the employer a tax deduction for “unsubstantiated tax-deductible allowances in tax havens” (subject to some tight exemptions, worked out with the Commissioner). Perhaps it would also attack the ‘tax free’ nature of the allowance, in the recipient’s hands.
    • It seems that this would require legislation.
  • Shop for Citizenship in Tax Havens – Mr Leigh also announced an ‘integrity measure’ that would target people who ‘shop for citizenship’ in tax havens to avoid the automatic reporting and exchange of tax and financial account information on foreign tax residents.
    • ‘Passports for sale’ or ‘citizenship for sale’ by tax havens are deliberately structured to undermine the OECD’s BEPS program, particularly the Common Reporting Standard, he said.
    • Under this measure, all individual Australian taxpayers would need to notify and declare, to the ATO, if they have residency or citizenship of any other jurisdiction and the name of that jurisdiction. False declarations to the ATO would attract penalties.
    • I would have thought that the Commissioner could have required that, under his power to set the approved form for tax returns – without needing legislation to create the requirement. Still, if they want legislation, why not (except bogging the legislation down with detail).

These seem like measures the current Government could embrace, now, and work with Labor to implement them forthwith (ahead of the forthcoming Federal election).

FJM 25.9.18

[Shadow Assistant Treasurer’s website: Media Release; LTN 183, 21.9.18; Tax Month – September 2018]

 

CPD questions (answers available)

  1. Are both measures aimed at those who deal with ‘Tax Havens’?
  2. Is the first to deny deductibility of employer paid travel allowances, subject to some tight exceptions, set in consultation with the ATO?
  3. Does the Assistant Treasurer see this as interfering with the general objective of allowing deductions for ‘gaining or producing assessable income’?
  4. Is the other measure, to require taxpayers to Notify the ATO of foreign citizenship in Tax Havens?

[Answers:1.yes;2.yes;3.no(InvestmentFreeOfAustralianTaxIsByDefinitionNotForThatPurpose);4.yes]

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