I didn't get any panicked phone calls from my clients yesterday - I didn't expect any either! Mid-size businesses typically look for a sustainable tax position rather than the latest aggressive tax scheme.
The release of more than 11 million documents apparently sourced by the International Consortium of Investigative Journalists from the records of Panamanian law firm, Mossack Fonseca, has created a media frenzy all over the world: it came to us pre-branded - hashtag & all: #PanamaPapers - less than 18 months ago, the same body gave us another scandal relating to information apparently sourced from PricewaterhouseCoopers Luxembourg firm: that time branded #LuxLeaks (of course).
So what should be made of all of this? I think that there are four certainties:
- the Australian Taxation Office is smart. It conducted an Offshore Income Voluntary Disclosure Initiative during 2014. As I commented at the time (& numerous times since), only a fool would think that the ATO would conduct such a programme without planned follow up activities using some great intelligence that it had already gathered! So you should carefully think about that
- this will not be the last we hear of the ICIJ and similar organisations: #HongKongHacks? Or #CaymansCatch? They have a business imperative to create content that sells and these matters are big news and keep them relevant
- there is nothing wrong whatsoever in having an offshore entity. There are many legitimate reasons for doing so. But, if you have one, be very careful how you use it. You could be creating immediate or downstream tax problems by using it the wrong way, even if it is totally legitimate. Get your tax advice updated now
- do not expect any sympathy from the ATO during an audit arising from these matters - and, as a result, irrespective of how legitimate the arrangement is, the professional costs to defend you will be astounding!
And of course if you have an entity or assets parked offshore, ask your tax adviser what to do about it - and if you have any concerns, get a second opinion!
Convicted fraudsters, directors banned by the corporate regulator and former Australian Tax Office (ATO) officials are among hundreds of Australians linked to companies incorporated by Panamanian law firm Mossack Fonseca.They appear in the largest data leak ever analysed by journalists, with more than 11 million documents including emails, company registers and client files revealing the inner workings of Mossack Fonseca.