Tax office did not go to police over fears wealthy would be kidnapped – inquiry

Coalition bill to scrap taxation transparency requirements for privately held companies with incomes of $100m or more examined in Senate hearing

The Australian federal police had not been approached by the tax office over fears that publishing the tax details of wealthy individuals would lead to an increased risk of kidnapping.

A Senate inquiry on Tuesday examined a proposed bill put forward by the government that would scrap transparency requirements for privately held companies with an income of $100m or more.

The Coalition had wanted to reverse the publication requirements, initially brought in by Labor in 2013, in part because it argued the laws would put wealthy business owners such as Gina Rhinehart under increased threat of kidnapping.

The national manager of the organised crime and cyber division of the AFP, Ian McCartney, said the agency had not been approached by the Australian Tax Office or other stakeholders to explore the kidnapping threat.

The deputy commissioner of the ATO, Jeremy Hirschhorn, said the agency had not contacted the law enforcement agency about the risks, either.

The ATO revealed that one in five privately held companies with a revenue greater than $100m did not pay any tax in 2014.

It’s just over 20% in one year – 2014 – that didn’t pay tax,” the ATO’s deputy commissioner, Michael Cranston, told the inquiry.

The reasons were varied, including companies having different profit cycles and investment initiatives that resulted in them making no profit and therefore being ineligible for paying tax.

But he did not rule out deliberate tax minimisation measures.

“Other times we have seen that there is aggressive tax planning, and we have dealt with that,” Cranston said.

The transparency requirements were brought in by the Labor government in 2013, and applied for the 2013-14 financial year. Those statistics have not yet been published.

“Of this bill [removing the transparency requirements] is not passed by mid-December, you will be publishing the data,” Labor senator Sam Dastyari asked.

“Yes,” said Hirschhorn.

About one-third of individuals who own companies with a turnover of $100m or more are at risk of tax non-compliance, Cranston said.

“I wouldn’t say that the whole group is at risk, but there are about 30% we want to investigate,” Cranston said, adding that more ATO resources are allotted to high-wealth individuals.

Proponents of greater tax transparency say that the reporting requirements will lead to behavioural change.

“Transparency will promote voluntary compliance. That’s the end goal here,” the senior global strategist from Tax Justice Network Australia, Jason Ward, told the inquiry.

But Daniel Appleby, from the Law Council of Australia, said the new laws would be “highly prejudicial” and would effectively “name and shame” large private companies.

He warned that companies who fall under the transparency requirements would simply use legal mechanisms to take their earnings offshore to tax havens.

“I personally know a number of companies who are already doing that,” he said.

Coalition senators Sean Edwards and David Bushby both argued that the ATO already had the information it needed to pursue tax cheats, and that publishing the information online put companies at a commercial disadvantage.

Bushby said reporting tax details would not lead to more companies being caught by the ATO, because the tax office already had all the information it needed to pursue non-compliers.

The reporting requirements aimed to “shame” companies into paying more tax because of public backlash.

“These companies are being demonised,” he said.

Dastyari said the laws were not aimed at small companies.

“This isn’t mum and dad corner stores,” he said. “These are some of Australia’s biggest companies we’re talking about.”

The ATO has admitted that the transparency measures would not have an effect on the budget bottom line in the short term, but that it was possible behavioural change on the part of big companies could lead to more tax being recouped in the future.