The Panamanian law firm responsible for setting up the complex labyrinth of foreign entities for the world’s elite has been named as having set up 214,000 entities with links to 200 countries. Time will tell how many have links to Australia.
The illustrious names associated with the revelations certainly show that these Australians were/are able to be part of the “big league” but, if it all unravels, that won’t be much comfort.
The interesting fact is that in August 2015, the Parliamentary Inquiry into corporate tax avoidance quoted Australian Tax Office (ATO) statistics showing the use of trusts and companies by High Wealth Individuals (their term) to control the ultimate destination of income.
The statistics also showed that the richer the group was the more entities were involved which is not surprising – they can afford to pay someone to look after it all!
Now, I am not suggesting that the vast majority of these arrangements are not perfectly legal but, following this week’s revelations, it would not be surprising if a few have strayed to the dark side. I hope those who have strayed are named quickly to remove the question mark hanging over everyone in that group.
It will be interesting to see the Government’s response. Probably a Royal Commission which seems to be the standard approach to any big question followed by a mountain of legislation to make the tax laws even more complex and unworkable.
Those of us who work in the tax industry are used to the “overkill” response to problems (real and perceived) with the system when it affects smaller taxpayers. The political tut-tutting and lengthy submissions regarding any changes in this multinational arena are sure to keep the politicians and lawyers occupied for years.
In the meantime, regular Australians who don’t have to worry about Controlled Foreign Corporations, blind trusts, Private Interest Foundations and so on can focus on trying to save tax in Australia. May be this is not on the grand scale the High Wealth Individuals are used to but then regular Australians don’t need to worry about the fallout from Panama either.
And right now is an excellent time to prepare for reducing the tax burden for the current financial year. J&T Accountants & Advisors have been helping clients manage their tax liabilities for many years now. Why not call to discuss the possibilities?
In the meantime, most Australians can just sit on the sidelines and watch as the ATO and the lawyers (with their very wealthy clients) do battle over the next few years and watch as the politicians try to keep everyone onside.