Operation Flutter, a coordinated global crackdown by the Joint Chiefs of Global Tax Enforcement (J5), has swooped into action in a national crackdown on businesses suspected of supplying and using illegal electronic sales suppression tools (ESST) or software to avoid paying tax.
Demonstrating the global reach of the J5, the local activity was timed to coordinate with search and seizure action undertaken by J5 partners in the United Kingdom and United States of America.
The raids in Australia were undertaken by the Australian Taxation Office (ATO) supported by the Australian Federal Police (AFP) in Victoria, New South Wales, Queensland, Western Australia, and Tasmania. Officers conducted raids at 35 separate premises suspected of supplying and using ESST.
ATO officers worked closely with counterparts in His Majesty’s Revenue and Customs (HMRC) in the United Kingdom and the Internal Revenue Service (IRS) in the United States, as part of a lengthy and comprehensive investigation into the use of the tax avoidance technology.
Globally, the coordinated action by the ATO, IRS and HMRC involved the collection of evidence, intelligence gathering, search warrants, notices to produce, interviews, taxation assessments, and subpoenas.
Speaking at a meeting of the J5 Chiefs, ATO Deputy Commissioner and J5 Chief John Ford said “These dodgy sales suppression tools allow retailers to keep a separate set of books and launder the money in one transaction. They conceal and transfer this income anonymously, sometimes offshore.”
It has been illegal to produce, supply, possess, use or promote ESS tools (ESST) or software in Australia since October 2018.
Mr Ford clarified that a point-of-sale system with ESST enabled may permanently delete transactions, re-sequence transactions, reduce sales values, misrepresent transactions, and consequently, produce fake records.
“So what might happen is that the customer orders a $60 steak and a $100 bottle of wine and the ESS tool then puts it through the point-of-sale system as a $10 bowl of chips and a $4 bottle of soft drink.”
“Adding ESST to your point-of-sale system is a deliberate and underhanded act designed purely to under-report income and avoid tax obligations. It’s illegal and it will not be tolerated here in Australia. Businesses using or promoting this technology are effectively stealing from the Australian community, and that’s simply not on.”
A significant cache of information has been gathered by ATO investigators, with investigations ongoing; however no charges have been laid.
“Through the international collaboration, we have access to a global network of intelligence analysts and investigators – it’s only a matter of time before you’re caught by us, or one of our partners,” Mr Ford said.
“We’ve seen ESSTs appear in hardware connected to the point of sales system, cloud-based software, and capability built directly into the software.”
Mr Ford clarified that the vast majority of businesses do the right thing and do not use ESS tools or software.
The ATO strongly encouraged businesses using ESST to come forward voluntarily rather than hope they won’t be discovered by ATO investigators.
Businesses that come forward voluntarily may be provided with an opportunity to receive a reduction in penalties. Information about how to do this is on the ATO website.
Businesses that have used ESS tools or software will need to review their past tax returns and activity statements to amend or correct them. They may also wish to discuss next steps with their registered tax professional.
Members of the community that suspect a person or business is involved in producing, supplying, possessing, using or promoting ESS tools or software are encouraged to, report this to the ATO at ato.gov.au/tipoff or by calling 1800 060 062.
Notes to journalists
- ATO file footage and a videoExternal Link is available for use in news bulletins from our media centre.
- The Serious Financial Crime Taskforce Indentikit includes imagery and descriptions of money laundering, enablers, offshore tax evaders.