Asking the question and getting them to focus their mind on where everything is

Asking the question and getting them to focus their

This preview shows page 216 - 218 out of 311 pages.

Asking the question and getting them to focus their mind on where everything is had an impact. (HWI advisers quoted in Braithwaite, 2001, p. 10.) Another adviser suggested that ‘the more information he’s [the Commissioner] got, the less aggressive they will be in their tax planning’. What was meant by this comment was that through notifying the Commissioner of ‘X’ in 1998, taxpayers reduced their degrees of freedom to re-configure their 1999 affairs in such a way that not-X appeared to be the case in 1999. Changes from year to year will be noticed, so HWIs must keep their affairs consistent with the underlying truths of earlier declarations. Also the more holistic approach of HWI program surveillance means there is a need to work harder at keeping the story about one HWI entity’s tax affairs consistent with that of another (Braithwaite, 2001, p. 11). The Risk Ratings The data in this report are based on risk ratings of 207 potential risk issues identified from 1997 and/or 1998 tax returns for 235 individual HWIs and the entities they control. ATO analysts might examine as many as 100 expanded returns from all the entities controlled by a HWI, and then in theory rate each of the 207 potential risk issues from 0 to 10. These ratings are estimates of indications of risk; that is, there is no guarantee that there really is a high risk. Usually an audit would be needed, sometimes even litigation, to establish if the risk was a reality. As with all risk ratings, the rating estimates used as the basis for this report were checked by a supervisor who may have revised them. For the highest risks, senior taskforce staff would also meet to discuss the analyst’s assessment. Most of the potential risk issues were not recorded or rated for each HWI. In fact more than half the HWIs in the database had less than ten rated issues. The maximum was fifty-one, and the minimum was one. This report is concerned with high risk ratings. A rating of 1-3 was defined by the taskforce as a low risk, 4-7 as medium, and 8-10 as high. The defining features of a score of more than 7 in the instructions to analysts are indications of aggressive tax planning ‘like significant loss creation’, followed by a list of other types of aggressive tax planning or ‘further information desirable and would suggest audit action’. Judgments about what is aggressive tax planning are controversial and subjective 2 and there are many reasons to suspect risk ratings as
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Tax Compliance by the Very Wealthy 207 unreliable. 3 In the first part of this report we accept these subjective judgments at face value and use them to predict several criteria of overall risk of the HWI and the entities they control. We then test if the ‘objective’ criterion of dollars at risk adds any additional information to the more ‘subjective’ assessment of risk. The list of 207 potential risk issues used in this analysis has been until now highly protected. While not all issues are identified specifically, it is now possible to release results that reveal at least the issues that turned out to be important in these analyses. The collection of risk ratings, which are the basis of these analyses,
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  • Fall '16
  • tax authority, Australian Taxation Office, Tax Office, Compliance Model

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