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.