Letter from... Australia

Janine Mace reports on the Project Wikenby investigation

When high-profile music and sports entrepreneur Glenn Wheatley received a two-and-a-half year prison sentence in the Victorian County Court recently, government ministers and the regulatory agencies behind Australia's controversial and ongoing tax fraud investigation must have breathed a sigh of relief.

While Wheatley has since won the right to appeal on technical grounds relating to the sentence imposed on him for three offences, including defrauding the Commonwealth, having at least one scalp to show for the A$305m Project Wickenby investigation may silence some of its critics.

Project Wickenby has been controversial ever since it was first announced amid a flurry of media speculation about the involvement of high-profile Australians from the music and sporting fields.

It was launched with great fanfare three years ago with claims there were more than 500 taxpayers in its sights. However, despite being funded to the tune of over A$300m over seven years, there had been little tangible progress until the conviction of Wheatley.

According to the Australian Government, Project Wickenby is 'a multi-agency taskforce investigating and prosecuting internationally promoted schemes to avoid Australian taxes and launder money'.

Much of the criticism relates to its slow progress and the secrecy surrounding the activities of its partner agencies. These include the Australian Taxation Office (ATO), Australian Federal Police, Australian Securities and Investments Commission (ASIC), Commonwealth Director of Public Prosecutions and the Australian Crime Commission (ACC).

In August the Treasurer, Peter Costello, and Minister for Justice and Customs, David Johnston, felt compelled to publicly support the progress made by Project Wickenby.

They pointed to 'early evidence of a significant improvement (nearly 70%) in the net tax payable by individuals and companies identified in Project Wickenby'. They also claimed the ATO had raised more than A$50m in liabilities from finalising tax assessments, penalties and interest, and taxpayers making voluntary disclosures.

The ministers said 100 additional civil and criminal inquiries were still in progress, with civil-based action relating to A$12m in property being brought in matters under the Proceeds of Crime Act.

Reinforcements may also be arriving for the Project Wickenby investigators from both the regulators and new legislative powers.

The ATO has announced its compliance programme for 2007/08 will focus on big business, high net worth individuals and a 'get tough' approach to promoters of tax schemes.

In announcing its compliance programme, the ATO made it clear it is undertaking ongoing investigations into the use of tax havens and countries, with bank secrecy, to identify attempts to avoid Australian tax obligations. This includes payments involving entities in tax havens and transactions involving related parties and restructures using tax haven entities.

Complementing the ATO's review into the use of tax havens is the signing of a new memorandum of understanding (MOU) between the ATO and ASIC, which will 'guide collaboration, co-operation and mutual assistance in respect of the statutory functions of each agency'.

Recent legislative amendments to facilitate information sharing between agencies involved in Project Wickenby have also highlighted the new 'get tough' attitude.

This includes a passage of the Tax Laws Amendment (2007 Measures No. 1) Act 2007, which is designed to facilitate 'enhanced sharing of information between the Project Wickenby agencies… in the pursuit of those allegedly involved in tax avoidance or evasion'.

Traditionally, the Income Tax Assessment Act significantly limited the flow of information between the ATO and ASIC, but the new legislation allows disclosure of information between agencies for a permitted purpose, such as Project Wickenby.

As a result, ASIC will be able to provide information to the ATO on a pro-active basis without any request having been made by the ATO 'if the information would be likely to assist [the ATO] in administering or enforcing the particular laws for which that agency is responsible'.

The revised MOU and new legislation highlight the statutory and administrative steps being taken to increase information exchange and the growing convergence between the regulatory and revenue authorities in Australia.

While the scalps of tax cheats may be few and far between so far, the long-term legacy of Project Wickenby for Australia may yet prove to be a system where defrauding the Commonwealth becomes a lot harder to get away with.

Janine Mace is an Australian freelance finance and business journalist.