In recent years, eliminating abusive tax schemes has risen to the top of the agenda for revenue authorities, both locally and internationally. Until now individual tax administrations have worked within their own borders to combat revenue evaders but with many tax minimization schemes operating offshore and electronically it is increasingly difficult to track offenders.
In a bid to stem the flow of cross-border revenue losses, Australia, the UK, the US and Canada have joined forces to establish an international taskforce. The Joint International Tax Shelter Information Centre (JITSIC) taskforce, to be based in Washington DC, has its eye firmly fixed on targeting abusive tax schemes.
JITSIC will focus on sharing information between the revenue authorities from each country to identify abusive products, arrangements and those marketing them. It is hoped that as a result of this greater clarity, it will emerge as to exactly what is a so-called abusive scheme and what is merely taking advantage of inconsistent approaches by the tax administrations in different countries when interpreting the same transaction. The taskforce follows hot on the heels of US and UK activity to curb tax avoidance schemes. The US has taken aggressive measures to stamp these out and the UK announced new disclosure rules in this year's Budget to identify potential schemes.
It is hoped that the economic and trade implications of removing some of these tax incentives are not overlooked. Otherwise businesses located in JITSIC countries may be inadvertently disadvantaged in a global trade context.
While there is an element of international super-cop to the taskforce, the initiative is more about information sharing than overzealous tax administration. However it does signal the desire of the Australian Tax Office to combat cross border tax minimization practices.
The taskforce has outlined that multinationals will be a primary target however multinational companies are already on the Australian Tax Office's radar and that will not change with the taskforce. The primary point to note is that packaged solutions are under attack. This should not, however, deter valid tax planning, which companies should be doing. Businesses should continue to pursue tax-planning opportunities which minimize risk and maximize value to their operations in the context of real transactions.
Paul Koenig (paul.koenig@au.pwc.com), Sydney
