Australian Tax Office has plenty of form when it comes to administering
the voluminous tax act “without fear or favour.” So it should come as
no surprise that they helpfully provide a DIY manual of sorts on the
use of tax havens that advises what can’t be done and, er, where and
how it can’t be done, and why it can’t be done and what they will do if
it is done.
Where better to start than with a definition: “What is a tax haven?”
Rather than come up with their own definition and thereby indicate a
level of enthusiasm, they rely on the good ol’ OECD which has
identified “three key factors in considering whether a jurisdiction is
a tax haven”: no or only nominal taxes; lack of effective exchange of
information; lack of transparency.
So where are they? “The OECD initially recognised a total of 38 tax havens. They are listed in the appendix.”
Once armed with what to look for and where, it’s useful to know how, and here too they willingly oblige: “Legitimate use of tax havens”
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havens can provide genuine finance, insurance, broking, holding company
and head office services that are facilitated by modern communications.
For example, tax havens are particularly attractive to international
businesses involved in portfolio management, such as insurance
companies, self-insurers, hedge and mutual funds, and offshore
investment funds. These international businesses require access to the
huge international foreign exchange markets and 24-hour management.”
of this, we see large monetary flows between Australia and tax havens
in relation to currency trading. As one of the world’s top 10 traded
currencies, the Australian dollar is an important part of world
Mmm, insurance might be the go, and, er, some
currency trading given that “access to the huge international foreign
exchange markets and 24-hour management”.
Almost there, now just exactly how is the best way to go about it? Any hints, ATO?
All is revealed in “Types of arrangements” which
outlines a concept it calls the “circular flow of funds” aka “round
robin financing” whereby “an Australian business makes payments to a
company based in a tax haven, purportedly for services provided. The
tax haven company, in turn, makes a payment to an Australian individual
taxpayer in the form of a loan or exempt foreign employment income. In
some cases, analysis reveals that the individual is associated with the
Anything to worry about? “We are
analysing these arrangements” the ATO concludes. But take your time,
because this particular lil sham’s only been around for nearly thirty
years, wouldn’t want to blow it.