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Tax avoidance, evasion, and the Pandora Papers

<p>What’s the difference between tax avoidance and tax evasion?</p> <p>The difference used to matter. Evasion was illegal. It meant not paying tax that was due. Avoidance meant arranging your affairs so tax wasn’t due.</p> <p>Australian media mogul Kerry Packer used the distinction as a complete defence when he told a <a rel="noopener" href="https://youtu.be/LnwYoOeWZGA?t=312" target="_blank">parliamentary committee</a> in 1991 he was "not evading tax in any way, shape or form. Of course, I am minimising my tax. Anybody in this country who does not minimise his tax wants his head read".</p> <p>The Pandora Papers — the biggest-ever leak of records showing how the rich and powerful use the financial system to maximise their wealth — shows the distinction has lost its meaning.</p> <p>The dump of almost <a rel="noopener" href="https://www.icij.org/investigations/pandora-papers/" target="_blank">12 million documents</a> lays bare the ways in which 35 current or former leaders and 300 high-level public officials in more than 90 countries have used offshore companies and accounts to protect their wealth.</p> <p>Only in some of the cases could their activities be categorically declared illegal.</p> <p><strong>Tax havens are legal</strong></p> <p>Here’s how tax havens are used. Trusts and companies are set up in places with low tax rates and secrecy laws such as the Bahamas, Cayman Islands, Hong Kong, Singapore, Switzerland, the US state of Delaware and the Republic or Ireland.</p> <p>If, for example, a wealthy celebrity or a politician wants to buy a new yacht or a luxury villa but doesn’t want to pay tax or stamp duty or expose their wealth to scrutiny they can get their lawyer or accountant to do it through such a trust.</p> <p>For somewhere between <a rel="noopener" href="https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore/" target="_blank">US$2,000 and US$20,000</a> to set up the trust, the name of the real owner or beneficiary can be hidden.</p> <p>It isn’t illegal for the celebrity or a politician to move their money (so long as it is theirs to begin with). Assets within the trust are subject to local tax laws (sometimes zero tax) and local secrecy laws (sometimes complete secrecy).</p> <p><strong>Legal, but used by criminals</strong></p> <p>These legal means of using complex networks of secret entities to move around money are the same as those used by criminals.</p> <p>Alongside the likes of India’s cricket superstar Sachin Tendulkar, Colombian pop singer Shakira and Elton John in the Panama Papers are Italian crime boss <a rel="noopener" href="https://www.icij.org/investigations/pandora-papers/global-investigation-tax-havens-offshore/" target="_blank">Raffaele Amato</a>, serving a 20-year jail sentence for weapons and drugs trafficking, and the deceased British art dealer <a rel="noopener" href="https://www.theguardian.com/news/2021/oct/05/offshore-trusts-used-pass-on-looted-khmer-treasures-leak-shows-douglas-latchford" target="_blank">Douglas Latchford</a>, suspected of smuggling looted treasures and money laundering.</p> <p><img src="https://images.theconversation.com/files/425189/original/file-20211007-13-1cp8an9.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt="Colombian singer Shakira is one of the celebrities named in the Pandora Papers as using offshore companies. Others are Elton John, Ringo Starr, Julio Iglesias and Claudia Schiffer." /></p> <p><em> <span class="caption">Colombian singer Shakira is one of the celebrities named in the Pandora Papers as using offshore companies. Others are Elton John, Ringo Starr, Julio Iglesias and Claudia Schiffer.</span> <span class="attribution"><span class="source">Gregory Payan/AP</span></span></em></p> <p><strong>It’s far from clear these arrangements should be legal</strong></p> <p>The big question raised by the Pandora Papers is why any hiding of private wealth from tax authorities ought to be legal.</p> <p>The International Monetary Fund estimated in 2019 that tax haven deprived governments globally of <a rel="noopener" href="https://www.imf.org/external/pubs/ft/fandd/2019/09/tackling-global-tax-havens-shaxon.htm" target="_blank">US$500 billion to US$600 billion</a> per year.</p> <p>To put that into perspective, the estimated cost of vaccinating the world against COVID-19 is <a rel="noopener" href="https://www.nytimes.com/2021/06/11/briefing/biden-g7-vaccine-donations.html" target="_blank">US$50-70 billion</a>.</p> <p><a href="https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/425571/original/file-20211009-23-13m746j.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt="" /></a></p> <p><em> <span class="caption">OECD chief Mathias Cormann has brokered a deal for a global minimum corporate tax rate.</span> <span class="attribution"><span class="source">OECD (CC BY-NC 3.0 IGO)</span></span></em></p> <p>Some of what’s been uncovered in the Pandora Papers is illegal (“evasion”) but much might not be (“avoidance”, aided by anonimity).</p> <p>The effect is the same. Dollars that ought to have been paid in tax are withheld and used for the benefit of people who aren’t keen to admit to owning them.</p> <p>Over the weekend the Organisation for Economic Co-operation and Development, now led by Australian Mathias Cormann, brokered a deal under which 136 countries agreed to charge multinational corporations a tax rate of at least <a rel="noopener" href="https://www.oecd.org/tax/international-community-strikes-a-ground-breaking-tax-deal-for-the-digital-age.htm" target="_blank">15%</a>, making tax havens harder to find.</p> <p>Ireland, previously used as tax haven, signed up.</p> <p>The nations concerned did this because because, even where legal, the use of tax havens costs billions.</p> <p>We’ll soon have to consider removing a distinction in law that vanished in practice some time ago.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;" src="https://counter.theconversation.com/content/169353/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><em><a rel="noopener" href="https://theconversation.com/profiles/alex-simpson-225991" target="_blank">Alex Simpson</a>, Senior Lecturer in Criminology, <a rel="noopener" href="https://theconversation.com/institutions/macquarie-university-1174" target="_blank">Macquarie University</a></em></p> <p><em>This article is republished from <a rel="noopener" href="https://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a rel="noopener" href="https://theconversation.com/the-pandora-papers-show-the-line-between-tax-avoidance-and-tax-evasion-has-become-so-blurred-we-need-to-act-against-both-169353" target="_blank">original article</a>.</em></p> <p><em> Image: <span class="attribution"><span class="source">Aekawit Rammaket/Shutterstock</span></span></em></p>

Money & Banking

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Former Channel 7 newsreader goes from mansion to prison

<p>Former socialite and Channel 7 newsreader Simone Semmens who has livedn in some of Melbourne’s most expensive suburbs, will spend the next nine months in the Dame Phyllis Frost Centre after being charged for evading taxes of up to $1.73 million.</p> <p>The newsreader turned property developer, was given a 34-month sentence on Thursday after County Court judge Scott Johns said 58-year-old Semmens ignored advice from accountants and bank staff who repeatedly told her that GST was owed on the transfer of 10 properties between 2005 and 2011.</p> <p>"You have your dishonesty but also your stubbornness and intransigence to blame," Judge Johns began.</p> <p>"There were many stages over the past 15 plus years where you could have taken advice, acted reasonably, acted honestly, listened and negotiated your way through the issue of liability for taxation.</p> <p>“The evidence in the trial revealed you to be stubborn and steadfast in your insistence that you did know owe GST or any other form of tax."</p> <p>He further elaborated on Semmens’ “dramatic” fall from grace.</p> <p>"You've scaled heights you probably only dreamed of as a 16 or 17-year-old trying to make your way in the world.</p> <p>“No doubt the way down has not been easy. It's in no small part to your resilience and resourcefulness that I consider your prospects for rehabilitation to be excellent."</p> <p>Semmens will be released in August 2020 on a $1000 good behaviour bond since she has already served time and a non-parole period of 14 months.</p> <p>The former newsreader bought a Toorak, Melbourne home for $1.1 million.</p> <p>She also purchased the Portsea mansion Noorah for $7.5 million and paid $7.8 million for the historic Rosecraddock estate in Caulfield North.</p> <p>It was the house that had seen the horrific murder of former owner and eccentric millionaire Peter Shellard by his former girlfriend and two drug-addled accomplices.</p> <p>She had Rosecraddock subdivided into seven single properties, demolished the Toorak residence and built two apartments, and had two additional homes built on the Portsea cliff top.</p> <p>All 10 of the properties were sold for a combined profit of over $4 million, however no GST was paid by Semmens.</p> <p>She also reneged on payments to tradesmen, suppliers, solicitors and lenders.</p> <p>Australian Tax Office assistant commissioner Ian Read explained that the sentence handed to Semmens sent a clear message to anyone who try to cheat the system adding tax evasion is not a victimless crime.</p> <p>“This wasn’t a one-off property sale; this is a case of someone deliberately carrying on an enterprise without meeting their tax obligations.</p> <p>“There are many TV shows that make flipping properties look like a fun and lucrative thing todo. People also need to be aware of their tax obligations.”</p> <p>Semmens’ tax misconduct was first revealed in 2011 during an ATO audit.</p> <p>The Tax Office and Federal Police raided Semmens' Toorak home in 2013.</p> <p>She was arrested while trying to board a flight to the US in 2015.</p>

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