Friday, August 19, 2016

Tax Crime: White Collar Crime and Behaviours

As the world now knows well, the Panamanian law firm Mossack Fonseca was the subject of a stunning breach of approximately 11.5 million financial and legal documents in April 2016. These leaked documents, the so-called "Panama Papers," have been publicized through an international consortium of journalists and allegedly reveal a global system of undisclosed offshore accounts, money laundering and other illegal activity. The effect of the Panama Papers has been explosive; the documents allegedly implicate world leaders, financiers, celebrities and other prominent individuals from across the world in the use of shell companies to conceal assets from their respective home country governments. The Office of the U.S. Attorney for the Southern District of New York has announced that it is launching an investigation into these matters, as have enforcement agencies in many other countries.
~ via avid blogger and reader Jack Townsend

A former public servant who embezzled more than half a million dollars from the Australian Taxation Office has avoided time behind bars. Rishi Khandelwal, 33, will serve his four-year jail term in the community under an intensive corrections order after a magistrate found he had been motivated purely by greed when he used hundreds of fake tax returns to claim $521,719.
Megan Gorrey: 'Greedy' public servant who embezzled $500,000 from the tax office avoids jail

I offer these two articles of interest to Tax Crimes fans.  The authors are all prominent players in the tax and white collar crime practice, so I link their bios as well.  They are sorted by first author's last name:

  • Peter D. Hardy, here, Scott D. Michel, here, and Fred Murray, here, Is the United States Still a Tax Haven? The Government Acts on Tax Compliance and Money Laundering Risks, J. Tax Prac. & Proc. 33  (June-July 2016), here.  
Articles of Interest to Tax Crimes Fans

Michael D'Ascenzo "recalls the days after he began as a graduate in the Tax Office’s tax avoidance branch in 1977 chasing the “mass-marketed paper schemes", the most notorious of which were the bottom of the harbour schemes that were “attacking the system on all fronts".In 1988, the ATO raided the Sydney premises of Citibank, seizing hundreds of documents relating to a suspected tax-avoidance scheme. One of the officers was Michael O'Neill, a 23-year-old still finishing his law degree who, a decade later, would join the taskforce formed to investigate tax scheme promoters" Tax Haven Saga in Australia

Effecting behavior change in a world of automated financial advisors 

The aim of this article is to investigate the relationship between values and white-collar crime. The analyses draw on pooled survey data covering 14 European countries. The value constructs are derived on the basis of the theory of basic human values and seven value constructs are tested in relation to three types of white-collar crime: tax evasion, insurance fraud and bribery

Giles Hembrough, from Bristol, was sent the notice for a 16-digit sum after his tax code changed.
My £14 trillion tax demand from HMRC   

Book: The Money Laundering & Financing of Terrorism Eco-System 

Criminal evidence: examining what works in cutting crime
Global Government Forum, 10/8/16. The explosion in data and evidence about crime should have transformed how governments handle policing and criminal justice, says Tom Gash – but instead, we keep on building policies around myths, stereotypes and preconceptions.

Everyone makes mistakes. We make mistakes in life, and in business too. But one of the key reasons that people don’t start their own company is that they are wary of making perfectly legitimate mistakes. Sometimes projections can turn out wrong; cash flow can dry up. With so many potential bumps in the road, running a small business can be one of the most stressful things you can do. That’s why entrepreneurs need to feel they have government support. Their businesses are vital drivers of growth and transform the lives of their employees and customers, not to mention the impact of the tax revenue they contribute. They don’t need to be made to feel like criminals.  UK: The taxman should stop treating start-ups like criminals  

Kay Bell, Tax ID thieves are hard at work this summer. “It’s the largest tax scam ever and it shows no indication of abating.”

Gibson, Transparency Takes a Holiday in Panama (Tax Analysts Blog)

Caleb Newquist, Report: Former Deloitte UK CEO Planning a New Big 4 Firm (Going Concern). “Ever since Andersen went down for the dirt nap (and probably before that), observers of the accounting profession have worried about the shrinking number of large accounting firms.”

Kay Bell, States line up to be domestic tax havens for U.S. rich

Jack Townsend, The Vanishing Federal Criminal Jury Trial. ” But, the system from overcriminalization and the resulting smorgasbord of choices given to prosecutors virtually compels a plea agreement in the overwhelming number of cases that are charged.”

This Tax & Super Australia article looks at the Inspector-General of Taxation's reviews of the relationship between the ATO and tax practitioners in general.

A tech talk with the Australian Taxation Office

Exchange of Information Presentation

Switzerland losing lustre? Now, rich heading to Dubai, Qatar and Singapore The Economic Times
Australia OECD on Twitter

Andrew Mitchel, IRS International Practice Units By Category. “IPUs provide IRS staff with explanations of general international tax concepts, as well as information about specific types of transactions.  These IPUs discuss many U.S. international tax issues that are applicable to businesses.”

Shearing the flock. Priest Pleads Guilty to Tax Evasion (Department of Justice Press release):
Father Hien Minh Nguyen, 56, admitted that over a period of four years, he stole money his parishioners donated to the Diocese and willfully evaded paying income taxes on the money he misappropriated each year from 2008 through 2011.  He admitted that he deposited this money into his personal bank account, did not disclose this income to his return preparer, did not keep records of the donations he stole, and filed false income tax returns which did not report this money. 

And he lied to his return preparer. For shame.

Does scarcity make you dumb? A behavioral understanding of how scarcity diminishes our decision making and control
Deloitte University Press, 19/7/16. When people lack the tools and resources needed to operate effectively, they fall prey to the scarcity mind-set. If left unchecked, scarcity can have deleterious effects on performance.

Super information 'incomplete' and 'confusing'
Investor Daily, 3/8/16. Information about superannuation funds is often poor or incomplete, making it difficult for even financially literate Australians to choose between funds, according to the Productivity Commission.
*Report:  How to Assess the Competitiveness and Efficiency of the Superannuation System - Draft report
Small but not too beautiful: Europe’s micro-countries may be places where people are up to no good, but so are bigger ones The Economist
"Most of the micro-territories that are either sovereign states or depend on one have been cajoled into passing legislation and creating institutions that clamp down on offshore jiggery-pokery. ... But some of the smaller jurisdictions are right to point out that, while they have gone a long way towards cleaning up their acts, many of the bigger countries continue to do as they like."

Tax Evasion, Tax Avoidance and The Influence of Special Interest Groups: Taxation in Iceland from 1930 to the Present Nordic Tax Journal 

U.S. officials went looking into high end real estate, they found a lot of question marks The Financial Transparency Coalition 

Private law firms will be hired by police to pursue criminal suspects for profit, under a radical new scheme to target cyber criminals and fraudsters. In a pilot project by the City of London police, the lead force on fraud in England and Wales, officers will pass details of suspects and cases to law firms, which will use civil courts to seize the money. The force says the scheme is a way of more effectively tackling fraud – which is now the biggest type of crime, estimated to cost £193bn a year. It is overwhelming police and the criminal justice system. The experiment, which is backed by the government and being closely watched by other law enforcement agencies, is expected to lead to cases reaching civil courts this year or early next year. Officers will use the private law firms to attempt to seize suspects’ assets. If unsuccessful, police could decide to leave it at that or pursue the case themselves through the criminal courts…” 

Edward D. Kleinbard (USC), The Trojan Horse of Corporate Integration, 152 Tax Notes 957 (Aug. 15, 2016):
The U.S. Senate Finance Committee has invested significant resources, including hearings and staff reports, to make the case for an unusual form of corporate dividend integration – a corporate dividends-paid deduction, combined with a universal shareholder dividend withholding tax collected from the firm. This proposal would not reduce the cash tax outlays of U.S. corporations in respect of distributed or retained earnings. It would not reduce the aggregate tax burdens imposed on most shareholders, and in many plausible circumstances would raise those tax costs. It is a poorly targeted response to design weaknesses in the U.S. international corporate tax system. Its efficiency gains are undeveloped and largely overstated 

Freedom of Information via  

The Big Four accountancy firms: Are they in fact more like the ‘Big One’? And should they be broken up? Also: the Duke of Westminster’s 9 billion tax free inheritance and how his family history forms the legal basis for the justification of tax avoidance around the world; why are the world’s biggest banks now officially endorsing transparency measures? And…so much for Panama cleaning up its act post-Panama Papers scandal: we discuss the demise of Panama’s not-so-transparent Transparency Commission.
“The Big Four…just seem to be getting away with being the guardians of commerce when they are basically a bunch of tax cheating facilitators…they have infiltrated governments at every level all around the world”Michael West
“What they’re doing is really taking over the operation of companies by stealth…4 organisations dominating 98% of global commerce as auditors is well past its used by date, I don’t think any industry has come even close to this…”George Rozvany
Featuring: John Christensen of the Tax Justice Network, tax ethicist George Rozvany (with 32 years of experience at senior levels of Big 4 Accounting Firms and major corporations) and award winning economics and finance journalist Michael West

Lurking in the shadows of Pankaj and his “wifey” Radhika Oswal’s extravagant case against ANZ is the head of the Australian Taxation Office, Chris Jordan. He is the elephant — or perhaps Ganesh, the elephant-shaped God of Fortune — in the room as Shayne Elliott’s legal team try to talk the Oswals’ team into a settlement
ATO joins Oswal and ANZ circus