The Government intends to introduce measures, including a new civil penalty regime, to deter the promotion of tax avoidance and tax evasion schemes, Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, announced today.
“These measures are aimed at providing enhanced investor protection and will improve the fairness of the tax system,” Senator Coonan said.
“At the same time, they will provide a strong deterrent to promotion of tax avoidance and tax evasion schemes that exploit self assessment and undermine community confidence in the tax system.”
There are presently no civil or administrative sanctions in the tax law that apply to promoters in their capacity of designing, marketing, selling or implementing tax avoidance and tax evasion schemes.
“Despite a number of initiatives by the ATO to address community concerns about such schemes, the present system of penalising scheme participants and not the unscrupulous scheme promoters does little to deter the on-going development of new schemes,” Senator Coonan said.
“Under the new civil penalty regime, the courts will be able to impose a penalty on the lead promoters of tax avoidance and tax evasion schemes.”
The maximum penalty that the courts may impose will be the greater of 5,000 penalty units (currently $550,000) or twice the total consideration received by the lead promoter directly, or indirectly, from the scheme.
Financial planners, tax agents, accounting and legal practitioners who merely provide advice on arrangements or prepare tax returns based on information provided by other advisers will not be caught under the new measures as their advice will not constitute scheme promotion.
“The introduction of civil penalties will place a significant and direct financial burden on the lead promoters of tax avoidance and tax evasion schemes,” Senator Coonan said.
“The creation of such schemes will be discouraged and the chance of investors being unwittingly enticed to enter into schemes which avoid or evade tax will be reduced.
“The measures will also encourage greater confidence and certainty in our community and encourage more efficient, productive and legitimate investment in the business sector.”
The new civil penalty may also apply to a person who implements a tax avoidance or tax evasion scheme that has misleadingly been promoted as conforming with a taxation product ruling provided by the ATO.
“This will further promote and encourage the use of product rulings as a means of investor protection,” Senator Coonan said.
A number of real time measures are also proposed that will improve investor protection. The taxation laws will be amended to allow the Commissioner of Taxation to seek injunctive relief to stop the promotion of a tax avoidance or tax evasion scheme and to enter into voluntary undertakings with promoters.
These measures will apply to tax schemes that are first offered to investors on or after 1 July 2004 and exposure draft legislation will be released for public consultation.
“These measures represent an important initiative in ensuring our tax system is fair and efficient,” Senator Coonan said.
“They will provide a better balance in distributing responsibility for tax avoidance and tax evasion schemes and improved taxpayer confidence because of the enhanced fairness and integrity of the tax system.”