House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello MP)

Chapter 1 Project Wickenby taskforce

Outline of chapter

1.1 Schedule 1 to this Bill amends the secrecy and disclosure provisions in the Taxation Administration Act 1953 (TAA 1953) to allow the Commissioner of Taxation (Commissioner) to disclose taxpayer information to Project Wickenby taskforce officers and officers in other taskforces that may be established in the future to protect the public finances of Australia. Project Wickenby is a multi-agency taskforce addressing alleged tax avoidance and evasion involving the use of offshore entities.

1.2 These amendments allow the Commissioner to share information with other government agencies in limited circumstances, in order to facilitate concerted enforcement of Australia's laws.

Context of amendments

1.3 In order to maintain taxpayer privacy, the secrecy provisions in Australia's tax legislation impose strict obligations on tax officers and others who have access to taxation information.

1.4 The taxation secrecy and disclosure provisions seek to balance two important but competing interests. On one side is the interest of taxpayers in having their personal information protected. This must be weighed against the information requirements of government agencies in delivering entitlements and ensuring proper law enforcement.

1.5 The secrecy provisions in the tax law protect taxpayer privacy through general prohibitions against the Commissioner disclosing information about the affairs of a person to a third person.

1.6 However, the Commissioner can make disclosures of information to others under specific exceptions to the secrecy provisions. For instance, information can be disclosed in the '...performance of the person's duties as an officer...' (paragraph 3C(2A)(b) of the TAA 1953, subsection 16(2A) of the Income Tax Assessment Act 1936 (ITAA 1936)), or to law enforcement agencies to establish whether a serious offence has been committed, or for the making or possible making of a proceeds of crime order (section 3E of the TAA 1953).

1.7 The law also limits the ability of recipients of taxpayer information to further disclose information disclosed to them by the Commissioner. Moreover, the information may only be made available to a court in proceeds of crime cases and in prosecutions for tax-related offences.

1.8 Project Wickenby was established in 2004 after information became available that international tax schemes were operating in Australia and that some Australians had participated in them.

1.9 The Project Wickenby taskforce is a multi-agency taskforce investigating internationally promoted arrangements allegedly involving tax avoidance or evasion, which may also entail other features such as large-scale money-laundering, fraud, or breaches of the law relating to the regulation of financial markets or corporations.

1.10 Current tax secrecy and disclosure legislation impedes the ability of the taskforce to function effectively. These amendments will help agencies involved in the Project Wickenby taskforce to better share information to foster concerted law enforcement and to promote the integrity of the Australian taxation system. Individuals and other entities who seek to avoid or evade tax using international arrangements commonly commit offences against laws other than taxation laws. Where the facts that form the basis of a prosecution unrelated to tax also constitute essential steps in the implementation of a tax avoidance or evasion scheme, prosecution of the non-tax offences can be seen to discourage the tax scheme.

1.11 These amendments therefore allow the Commissioner to disclose information to Project Wickenby officers for purposes related to the Project Wickenby taskforce. Project Wickenby officers can use that information pursuant to those purposes, including for the prosecution of offences unrelated to tax and for other criminal, civil and administrative actions.

1.12 Furthermore, should the Government establish future taskforces with a major purpose of protecting the public finances of Australia, these provisions will also permit similar disclosures of information to officers of those taskforces.

Summary of new law

1.13 The new law allows the Commissioner to disclose information acquired under a taxation law to officers of Project Wickenby taskforce agencies for any purpose relevant to the taskforce, including investigating possible contraventions of the law and determining appropriate actions and remedies.

1.14 The new law also allows the Commissioner to disclose information to officers of the agencies of any future prescribed taskforce if that disclosure is relevant to a purpose of the taskforce.

1.15 Under the new law, an officer of a taskforce agency who receives information from the Commissioner may only disclose information to another taskforce officer or for an actual, proposed or possible taskforce-related court or tribunal proceeding, or in the exercise of an administrative power, or the performance of an administrative function.

Comparison of key features of new law and current law

Detailed explanation of new law

Disclosure of taxation information to Project Wickenby officers

1.16 The Commissioner may disclose information acquired under a taxation law to Project Wickenby officers where the Commissioner is satisfied that the information is relevant to a purpose of the Project Wickenby taskforce. [Schedule 1, item 4, subsection 3G(1)]

1.17 A 'taxation law' is defined in subsection 2(1) of the TAA 1953 and includes any Act of which the Commissioner has the general administration and any regulation made under such an Act.

1.18 The word 'acquired' in subsection 3G(1) takes its ordinary meaning. The phrase 'acquired under a taxation law' is intended to have broad application to include information obtained or given under or for the purposes of a taxation law. Information acquired under a taxation law includes information that comes to the Commissioner without his taking any action, and is not limited to information obtained in performing particular functions specified in the law or exercising specific statutory powers. [Schedule 1, item 4, subsection 3G(1)]

1.19 The Commissioner may disclose information to officers of all the agencies in the Project Wickenby taskforce as a collective team, even though not all of the agencies may need or use that information for their specific tasks.

1.20 A sunset clause restricts the Commissioner from disclosing relevant information to the agencies of the Project Wickenby taskforce after 30 June 2012. This is consistent with the Government's decision to allocate funding for the Project Wickenby taskforce until the 2011-12 financial year. However, should the Project Wickenby taskforce be extended beyond that date, the period of disclosure may be extended by regulation. [Schedule 1, item 4, paragraph 3G(1)(b)]

1.21 Project Wickenby officers are people holding an office in, employed by, or performing services for, a Project Wickenby taskforce agency, or a Project Wickenby taskforce supporting agency, whose duties relate to a purpose of the Project Wickenby taskforce. Both of these conditions must be met for a person to be a Project Wickenby officer - they must be part of a taskforce agency or supporting agency and they must also be undertaking work related to the Project Wickenby taskforce. It is not, however, necessary that a Project Wickenby officer's duties relate solely or mainly to the purposes of Project Wickenby. It is sufficient that their role includes duties relating to Project Wickenby. [Schedule 1, item 4, subsection 3G(2)]

1.22 These amendments set out the agencies in the Project Wickenby taskforce and the agencies supporting the taskforce, and allow additional agencies and supporting agencies to be added to the taskforce by regulation. The inclusion of supporting agencies ensures that agencies providing a supporting function in relation to Project Wickenby can also receive information in relation to the taskforce. [Schedule 1, item 4, subsections 3H(3) and (4)]

1.23 The Australian Government Solicitor's inclusion as a supporting agency is to provide for those situations in which the Australian Government Solicitor may attend a cross-agency meeting in a role other than as a legal advisor to the Commissioner. Project Wickenby agencies are not limited to using the legal services of the Australian Government Solicitor in pursuing the purposes of the Project Wickenby taskforce. Alternative sources of legal advice can be utilised.

1.24 Subsection 3G(5) sets out the purposes of the Project Wickenby taskforce. A disclosure by the Commissioner to a Project Wickenby officer under subsection 3G(1) only requires one of these purposes to be met. For example, a disclosure of information might be allowed as being relevant to the purpose of deterring participation in an international arrangement relating to money laundering. [Schedule 1, item 4, subsection 3G(5)]

1.25 The use of the word 'purported' in subsection 3G(5) means that should the offshore aspects of an arrangement be revealed as a sham, so that in effect there is no international transaction, disclosures would still be lawful.

Example 1.1

Mr and Mrs X are directors of an Australian company which apparently receives services from an offshore company and makes payment for the services. The invoices are inflated and the difference between the actual amount and the inflated amount is deposited by the service company into a Swiss bank account. Credit cards in the names of Mr and Mrs X are linked to the Swiss bank account. The purported business arrangement has 20 steps, the first and last steps are onshore but the remaining 18 steps are offshore. The offshore steps are a sham leaving only the onshore or domestic arrangement in place. This is an arrangement of a purported international character relating to concealing income or assets. The Commissioner may disclose information to a Project Wickenby officer if it is relevant to detecting, deterring or investigating the promotion of, or participation in, such an arrangement, or if it is relevant to enforcing the law relating to the promotion of, or participation in, such an arrangement despite the offshore steps being a nullity.

1.26 The expression 'enforce the law' in paragraph 3G(5)(d) includes prosecutions, civil proceedings, administrative action and proceeds of crime action taken under relevant laws.

Disclosure of taxation information to officers in prescribed taskforces

1.27 The Commissioner may also disclose information acquired under a taxation law to taskforce officers in other prescribed taskforces where the Commissioner is satisfied that the information is relevant to a purpose of that prescribed taskforce. [Schedule 1, item 4, subsection 3H(1)]

1.28 The Commissioner may disclose information to officers of all the agencies in a taskforce as a collective team, even though not all of the agencies may need or use that information for their specific tasks.

1.29 Taskforce officers must be part of a prescribed taskforce agency, and their duties must relate to a purpose of the prescribed taskforce. A link is required between the information, the purpose of the taskforce and the duties of the taskforce officer. An officer of a prescribed taskforce cannot receive information related to any other prescribed taskforce; the duties of the taskforce officer must be related to a purpose of that particular taskforce. [Schedule 1, item 4, subsection 3H(2)]

1.30 A taskforce may be prescribed in the Taxation Administration Regulations 1976 if a major purpose of the taskforce is protecting the public finances of Australia. A taskforce may have other purposes besides protecting the public finances and protecting the public finances need not be the most important purpose of the taskforce. [Schedule 1, item 4, subsection 3H(3)]

1.31 Public finances include public revenues (Australian and state government taxes and similar charges) as well as public assistance and payment programmes.

1.32 Regulations prescribing any future taskforce for the purpose of section 3H would be expected to state the purposes of the taskforce, list the agencies in the taskforce (including supporting agencies if required) and indicate the timeframe of the taskforce. [Schedule 1, item 4, subsection 3H(4)]

On-disclosure by Project Wickenby officers

1.33 Subsection 3G(6) contains a general prohibition against a 'Project Wickenby officer' (or former Project Wickenby officer) recording or disclosing information received from the Commissioner or from another taskforce officer under section 3G. A person is guilty of an offence punishable by a maximum of two years imprisonment for making a record of, or disclosing, information received from the Commissioner in relation to the taskforce. [Schedule 1, item 4, subsection 3G(6)]

1.34 The offence in subsection 3G(6) only applies to disclosures of information obtained by a person under section 3G. If a person obtains information under another taxation disclosure provision (eg, section 3E of the TAA 1953 or section 16 of the ITAA 1936), penalty provisions under those laws may apply. [Schedule 1, item 4, paragraph 3G(6)(c)]

1.35 Section 4B of the Crimes Act 1914 allows a custodial sentence to be commuted into a pecuniary penalty.

1.36 Project Wickenby officers may record information or communicate it to other Project Wickenby officers for a purpose of the Project Wickenby taskforce. [Schedule 1, item 4, subsection 3G(7)]

1.37 When a Project Wickenby officer records or discloses information to a person and relies on the exceptions contained in subsection 3G(7), (8) or (10), the evidential burden of proof (explained in subsection 13.3(s) of the Criminal Code Act 1995 ) lies with the officer to point to evidence suggesting a reasonable possibility that the record or disclosure was for a purpose of the Project Wickenby taskforce. This approach is consistent with existing provisions relating to on-disclosure of taxation information by law enforcement agencies.

On-disclosure by officers in prescribed taskforces

1.38 Subsection 3H(5) contains a general prohibition against a taskforce officer (or former taskforce officer) recording or disclosing information received from the Commissioner or from another taskforce officer. A person is guilty of an offence punishable by a maximum of two years imprisonment for making a record of, or disclosing, information received from the Commissioner in relation to the taskforce. [Schedule 1, item 4, subsection 3H(5)]

1.39 However, taskforce officers may record or disclose information to another person for a purpose of a prescribed taskforce. [Schedule 1, item 4, subsections 3H(6) and (7)]

1.40 Taskforce officers of one prescribed taskforce may only communicate information to other taskforce officers of that prescribed taskforce or other specified persons for a purpose of that taskforce. Taskforce officers of different prescribed taskforces are not permitted to exchange information under these provisions.

1.41 When a taskforce officer records or discloses information to a person and relies on the exceptions contained in subsection 3H(6), (7) or (9), the evidential burden of proof (explained in subsection 13.3(s) of the Criminal Code Act 1995 ) lies with the officer to point to evidence suggesting a reasonable possibility that the record or communication was for a purpose of the relevant taskforce. This approach is consistent with existing provisions relating to on-disclosure of taxation information by law enforcement agencies.

Disclosures in relation to criminal, civil or administrative proceedings by Project Wickenby officers

1.42 Project Wickenby officers may record or disclose information to a person for the purposes of, or in connection with, an actual, proposed or possible criminal, civil or administrative proceeding or the exercise of an administrative power, or the performance of an administrative function relating to a purpose of the Project Wickenby taskforce. [Schedule 1, item 4, paragraph 3G(8)(a)]

1.43 The provision also allows disclosures such as briefings to legal counsel or disclosure to a bank in order to obtain information in relation to actual, proposed or possible criminal, civil or administrative proceedings, or disclosures for the purposes of, or connected with, the exercise of administrative powers, or the performance of administrative functions. Legal counsel could include legal representatives external to the public service.

1.44 Disclosures for the exercise of an administrative power could include disclosures to a delegate empowered to make decisions such as disqualifying a person from managing corporations, or banning a person from providing financial services, provided the exercise of the administrative power is related to a purpose of the Project Wickenby taskforce.

1.45 Where a person receives information from a Project Wickenby officer in these circumstances, they may not record or disclose that information to another person, except for the purposes of, or in connection with, the same criminal, civil or administrative proceeding, the exercise of an administrative power, or the performance of an administrative function. [Schedule 1, item 4, subsections 3G(9) and (10)]

1.46 This allows members of a legal team to make records and consult internally in relation to a particular proceeding relating to a purpose of the Project Wickenby taskforce.

1.47 Generally, Project Wickenby officers are allowed, but not compelled, to provide information to a court or tribunal in the course of a criminal, civil or administrative proceeding relating to a purpose of the Project Wickenby taskforce. However, Project Wickenby taskforce officers may be required to disclose information to a court or tribunal for the purposes of a taxation law (eg, the review of a tax assessment). This reflects the existing taxation secrecy and disclosure provisions in subsection 16(3) of the ITAA 1936 and subsection 355-5(6) of Schedule 1 to the TAA 1953. [Schedule 1, item 4, paragraph 3G(8)(b) and subsection 3G(11)]

Disclosures in relation to criminal, civil or administrative proceedings by officers in prescribed taskforces

1.48 Taskforce officers may record or disclose information to a person for the purposes of, or in connection with, an actual, proposed or possible criminal, civil or administrative proceeding, the exercise of an administrative power, or the performance of an administrative function relating to a purpose of the relevant taskforce. [Schedule 1, item 4, paragraph 3H(7)(a)]

1.49 Taskforce officers of one prescribed taskforce may not disclose information for proceedings relating to a purpose of another taskforce.

1.50 Where a person receives information from a taskforce officer under subsection 3H(7), they may not record or disclose that information to another person, except for the purposes of, or in connection with, the same actual, proposed or possible criminal, civil or administrative proceedings, the exercise of administrative powers, or the performance of administrative functions. [Schedule 1, item 4, subsections 3H(8) and (9)]

1.51 Generally, taskforce officers are allowed, but not compelled, to provide information to a court or tribunal in the course of a criminal, civil or administrative proceeding relating to a purpose of the prescribed taskforce. However, taskforce officers may be required to disclose information to a court or tribunal for the purposes of a tax-related proceeding. This reflects the existing taxation secrecy and disclosure provisions in subsection 16(3) of the ITAA 1936 and subsection 355-5(6) of Schedule 1 to the TAA 1953. [Schedule 1, item 4, paragraph 3H(7)(b) and subsection 3H(10)]

Interaction with other secrecy and disclosure provisions

1.52 Existing tax secrecy provisions do not limit the effect of this new provision. Disclosures may be made under the new sections 3G and 3H despite any other tax secrecy provisions. [Schedule 1, item 4, paragraphs 3G(12)(a) and 3H(11)(a)]

1.53 These disclosure provisions are in addition to existing disclosure provisions in the taxation law. No other disclosure provision is affected by sections 3G and 3H. For example, disclosures allowed under section 16 of the ITAA 1936 are not affected by this provision. [Schedule 1, item 4, paragraphs 3G(12)(b) and 3H(11)(b)]

Application and transitional provisions

1.54 These amendments apply to disclosures of information made on or after the date of Royal Assent, regardless of when the information was obtained. Information obtained by the Commissioner before the date of Royal Assent can be disclosed under these provisions. [Schedule 1, item 5 ]

Consequential amendments

Annual report

1.55 Section 3B of the TAA 1953 currently requires the Commissioner to furnish an annual report to the Minister detailing, amongst other things, the number of occasions the Commissioner made disclosures of information to law enforcement agencies. This amendment requires the Commissioner to also include in the annual report the number of requests for, and lawful disclosures of, documents made to an officer of an agency in the Project Wickenby taskforce and other prescribed taskforces. [Schedule 1, item 3 ]

1.56 The Project Wickenby taskforce and other prescribed taskforces are required to report disclosures of documents rather than all information disclosed. This reflects the nature of taskforce work, where discussions between officers from different agencies may be frequent and on-going, making it difficult to record and report each specific oral disclosure of information.

Minor consequential amendments

1.57 A consequential amendment to the Administrative Decisions (Judicial Review) Act 1977 ensures that the Commissioner's decisions on whether or not to disclose information to Project Wickenby officers or taskforce officers are not decisions to which the above Act applies. Decisions made under subsections 3G(1) and 3H(1) are added to Schedule 1 ('Classes of decisions that are not decisions to which this Act applies') to the Administrative Decisions (Judicial Review) Act 1977 . This approach is consistent with existing laws relating to disclosures of information to law enforcement agencies. [Schedule 1, item 1 ]

1.58 A consequential amendment to the Freedom of Information Act 1982 ensures that where disclosure of a document, or information contained in a document, is prohibited under this Bill, that document is exempt under the Freedom of Information Act 1982 . This amendment ensures consistency with other taxation laws listed in Schedule 3 to the Freedom of Information Act 1982 . [Schedule 1, item 2 ]