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Thou shall not (by)pass the tax man

As the saying goes, the only certain things in life are death and taxes. Although attempts to evade taxes through complex offshore structures have been around for decades, they are increasingly becoming part of mainstream news.

Insights Thou shall not (by)pass the tax man
Thursday, 30 May 2013

 Recent reports suggest that documents obtained by the International Consortium of Investigative Journalists (ICIJ) are believed to contain secret documentations of covert companies and private trusts in various tax havens which may help governments recover this lost revenue. 

Currently, the Australian, British and U.S. governments are working together on what is estimated to be 400GB of data (as indicated by British authorities1) containing more than two million documents which may lead to one of the largest taxation investigations in history. In a statement, the U.S. Internal Revenue Service (IRS) said:

The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands.2  


According to ATO deputy commissioner of serious non-compliance Greg Williams, two Australians are under criminal investigation while 65 others have been flagged as “high-risk” due to evidence of $1 million or more worth of offshore transactions without declarations on their tax returns3. More than thirty audits are being conducted by the ATO with more cases to arise as investigations continue. 

Although there is nothing illegitimate per se about holding assets offshore, some of these arrangements have suggested that it may involve tax avoidance and criminal activity. Furthermore, the ATO has indicated that as the data not only identifies the individuals who own the assets, but also their accountants, lawyers and other professional advisors, the ATO will place advisors that “promote, design, implement and maintain the offshore structures on behalf of others” under very close scrutiny4. 

As IRS Acting Commissioner Steven T. Miller stated, this “reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes”5. 

These circumstances outline the importance of capturing and analysing electronic data when it comes to the battle against tax evasion and the benefits forensic expertise can bring to investigations. The use of electronic discovery to find the right documents and data analytical skills to understand the vast and rich information will be of great importance on these investigations.

So the only question left is: will the tax men always get their taxes?

1. http://www.icij.org/offshore/tax-authorities-move-leaked-offshore-documents
2. http://www.irs.gov/uac/Newsroom/IRS,-Australia-and-United-Kingdom-Engaged-in-Cooperative-Effort-to-Combat-Offshore-Tax-Evasion
3. http://www.smh.com.au/business/australia-joins-us-uk-in-tax-haven-probe-20130510-2jcny.html
4. http://www.ato.gov.au/corporate/content.aspx?doc=/content/00352761.htm
5. http://www.irs.gov/uac/Newsroom/IRS,-Australia-and-United-Kingdom-Engaged-in-Cooperative-Effort-to-Combat-Offshore-Tax-Evasion