The global trend for greater co-operation between revenue authorities and regulators has taken another step forward in Australia, with the announcement of a new memorandum of understanding (MOU) between the Australian Tax Office (ATO) and the Australian Securities & Investments Commission (ASIC) on 11 May 2007. Commissioner of Taxation, Michael D’Ascenzo describes the move as a "fresh acknowledgement of our two agencies’ ongoing commitment” particularly to protect and promote greater public confidence in the integrity of the both the Australian tax system and financial systems.
It is proposed that the new MOU will "guide collaboration, co-operation and mutual assistance in respect of the statutory functions of each agency” (at paragraph 1.2).
The new MOU, which replaces a MOU entered into in 2003, is still subject to existing secrecy laws.
What is especially significant is that statutory and administrative steps are being taken to increase the levels of information exchange, progressively transitioning business into a world of convergence between revenue and regulatory authorities and away from traditional silo behaviour within Government.
Background
A critical starting point for the move to greater convergence was the announcement by the Federal Treasurer on 17 August 2006 of the "release of a Treasury discussion paper on the Review of Taxation Secrecy and Disclosure Provisions.”
In his announcement, the Treasurer stated that "this paper looks across all the existing tax secrecy and disclosure provisions from around 30 tax Acts, and proposes to standardise the provisions into a new framework in a single piece of legislation. This will provide increased certainty for taxpayers, tax officials and users of tax information, such as government departments and agencies.”
The Treasurer at the same time announced legislative amendments to facilitate information sharing between the agencies involved in Project Wickenby, including the ATO, law enforcement agencies and ASIC (see Tax Laws Amendment (2007 Measures No 1) Act 2007 discussed below). The aim of the new legislation was stated to be to facilitate "enhanced sharing of information between Project Wickenby agencies … in the pursuit of those allegedly involved in tax avoidance or evasion”.
Project Wickenby is a multi-agency taskforce established in 2004 to combat internationally promoted tax arrangements designed to avoid or evade tax and/or launder money. Wickenby has involved agencies such as the ATO, ASIC, the Commonwealth Director of Public Prosecutions, amongst others, collaborating to uncover and prosecute taxpayers and promoters of these illegal activities.
Tax Laws Amendment (2007 Measures No 1) Act 2007 (TLAA 1)
TLAA 1, which received Royal Assent on 12 April 2007, was introduced with the underlying purpose of broadening the information gathering powers of the ATO. Generally, the legislation is directed to information gathering and sharing to achieve compliance and law enforcement outcomes in relation to tax evasion, financial fraud, criminal deception of investors and creditors, money laundering and concealing income or assets. Specifically, it broadens the scope for information gathering and sharing for agencies which constitute the Project Wickenby taskforce, which includes the ATO and ASIC.
In summary, the measures introduced as part of TLAA 1 are as follows:
- the Commissioner may disclose information acquired under a taxation law to Project Wickenby taskforce officers (which by definition includes officers of ASIC), and officers from other agencies involved in other prescribed taskforces that may be established in the future, for a taskforce related purpose
- Project Wickenby officers, and officers in other prescribed taskforces, may share information with each other for a taskforce related purpose, and use the information for taskforce related court proceedings, tribunal proceedings and administrative purposes, and
- Project Wickenby agencies are extended beyond information gathering agencies to law enforcement and advisory agencies including the Attorney General and the Australian Government Solicitor.
The above changes, which were predominately incorporated in the Taxation Administration Act 1953 (TAA 1953), apply to disclosures of information made on or after the date of Royal Assent, regardless of when the information was obtained.
Key points to note about the new MOU
Together with the legislative provisions of TLAA 1, the new MOU formalises and therefore enhances the sharing of information between the ATO and ASIC in the following ways:
- formal recognition of a commitment to fully collaborate and cooperate "at all levels to discharge their respective functions and to achieve their statutory purposes, to the extent permitted by the law” (at paragraph 2.3).
- acknowledgment by both agencies of the need for timeliness in information sharing between agencies so as to "strengthen the effective discharge of their respective roles and responsibilities” (at paragraph 2.3).
- establishing a formal and regular framework for liaison arrangements (see below) between both agencies (at paragraph 2.4).
- holding quarterly "National Level” meetings dealing with "operational and organisation issues, expected workloads and systematic issues that may warrant law reform” involving both the Deputy Commissioner, Serious Non-Compliance of the ATO and the Executive Director of Enforcement at ASIC (and others) (at paragraph 5.2). In particular, the involvement of the "Deputy Commissioner of Serious Non-Compliance” points to the sharing of information to effect the disclosure of information acquired under a "taxation law” to Project Wickenby taskforce officers (including ASIC officers) for "taskforce related purposes” under the provisions of the TLAA 1.
- in relation to "specific areas for liaison”, the MOU notes that the ATO and ASIC will liaise on "current matters of common interest [such as Wickenby], to improve the sharing of information, to attempt to identify opportunities for joint enforcement or other activities where appropriate, and to resolve problems that may arise either in the audit, investigation or prosecution of particular matters or other relationships between the two agencies” (at paragraph 5.4).
Date of effect
The new MOU took effect from 9 May 2007 and replaces an earlier MOU issued by both agencies on 18 December 2003.
Limitations of the MOU
Information sharing between agencies such as the ATO and ASIC under the old and new MOU continues to be regulated by Commonwealth secrecy laws. These are:
- Section 16 of the Income Tax Assessment Act 1936 (ITAA 1936) and s3E of the TAA 1953 which significantly limit the flow of information from the ATO to ASIC, and tax information cannot be used as evidence in the prosecution of non-tax offences as defined in the TAA 1953 and the Crimes Act 1900. These provisions limit ATO disclosure to tax related frauds on the Commonwealth or taxation offences. As a result, under these provisions, information cannot be disclosed in relation to serious but non-indictable crimes such as non-indictable social security fraud or civil penalties for breach of directors’ duties, or insolvent trading under the Corporations Act 2001.
- The Australian Securities and Investments Commission Act 2001 requires ASIC to notify persons prior to information sharing, so that they have an opportunity to lodge submissions objecting to the anticipated provision of information by ASIC to the ATO.
However, the enactment of the Wickenby provisions in TLAA 1 (described above) allows disclosure of information between agencies for a permitted purpose, such as Project Wickenby. As a result, ASIC can provide information to the ATO on a pro-active basis without any request having been made by the ATO "if the information would be likely to assist [the ATO] in administering or enforcing the particular laws for which that agency is responsible”.
The next wave of convergence?
The Federal Government has yet to announce its plans following release of the Treasury Paper in August 2006. It is a matter of speculation whether the Government will progress or defer consideration of the issues raised in the Paper given the Federal election later this year.
Certainly the mood amongst regulators and revenue authorities is to move towards greater information transparency at the national level and internationally.
We should all see recent events as putting business on notice that increased convergence of revenue and regulatory agency efforts is a reality.
