The Australian Taxation Office (ATO) receives and acts on intelligence from a range of sources, which may include data leaks such as the well-known Panama Papers and Paradise Papers.
A data leak occurs when digital files are made public with the intent of exposing confidential information. Typically, the party leaking the data intends to expose individuals, groups, or businesses linked to potential criminal activity.
The ATO outlines how it uses data leaks to detect and take action against offshore tax evasion.
How data leaks inform the work of the ATO
Data leaks can contain millions of files, and not every file contained in a leak is relevant to tax fraud or tax evasion. The ATO and its partner agencies therefore cannot simply commence investigations or legal action following a data leak – a significant number of man-hours and technical sophistication is required to process the data.
After the data has been assessed, the ATO can determine whether specific individuals and entities contained in the leaks have evaded their tax obligations. The ATO can then take further action, as demonstrated in several case examples.
Panama Papers
In 2015, an anonymous source leaked 11.5 million financial and legal documents from international law firm Mossack Fonseca, with the intention of exposing alleged criminal complicity of the firm. Following investigation by the International Consortium of Investigative Journalists (ICIJ), stories were published in April 2016 about the information contained in the data. The stories revealed a number of linkages to high profile individuals from around the world.
The ATO drew on these stories and the leaked data, collaborating with the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) to identify taxpayers using offshore institutions to evade tax. Six months after the ICIJ published its first report about the Panama Papers, the ATO:
- Made 15 unannounced access visits throughout Australia.
- Took compliance actions against more than 100 taxpayers and advisers linked to tax evasion, illicit fund flows, and corruption.
Swiss bank tax evasion involvement
In 2017, the ATO received information from its European partners about a group of managers working with a prominent Swiss Bank who appeared to be facilitating tax evasion for their clients. These partners supplied the ATO with intelligence connecting 346 Australians with the facilitators of these bank accounts.
As soon as the ATO received the data leak it commenced an investigation into the information contained in the data, identifying 106 taxpayers where a range of immediate compliance action was needed.
Paradise Papers
In 2017, media outlets around the world published stories about the largest data leak in history known as the Paradise Papers which contained personal details of high-profile individuals and corporations from around the world who had used tax structures to divert profits away from their country of origin.
The ATO is still working with its domestic and international partners to process the vast amount of data contained in the leak, however it has used the Paradise Papers to develop a better understanding of the business models used by promoters of tax evasion, which will assist with disrupting these business models in the future.
Key takeaways
Data leaks can provide an important source of information for the ATO that complements other intelligence sources such as information exchange with international and domestic partners. The ATO has successfully used information contained in data leaks to take compliance action against individuals and businesses involved in tax evasion and corruption.
