Thursday, 3 December 2015
Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015; Second Reading
That this bill be now read a second time.
I am pleased to introduce this bill to implement the Common Reporting Standard for the automatic exchange of financial account information.
This bill is a key part of the international fight against tax avoidance; and a key component of this government's commitment to ensure Australians pay their fair share of tax.
The Common Reporting Standard is an international framework developed by the Organisation for Economic Co-operation and Development (OECD), working with non-OECD G20 countries, to tackle and deter cross-border tax evasion.
Cross-border tax evasion is a problem faced by jurisdictions all over the world. International cooperation and sharing of information between tax authorities is essential to tackling it.
By participating in this international effort, we are enabling the Australian tax office to gather information on Australians who may choose to dishonestly hide foreign income offshore.
Globalisation and other technological advances have made it easier for individuals to hold investments in offshore financial institutions, which increases the opportunity for tax evasion.
The standard will help ensure all taxpayers pay their fair share of tax by providing tax authorities with information on individuals with offshore accounts, regardless of where their financial accounts are located.
When the standard is implemented certain financial institutions in Australia will collect information on foreign residents' accounts and report it to the ATO. The Australian tax office will provide the information to the foreign resident's tax authority.
In return, the Australian tax office will receive information on Australian residents' offshore accounts. It will use this information to verify if the offshore income has been declared.
The standard is comprehensive in the different types of investment income to be reported, such as interest, dividends, and income from certain insurance contracts. In addition, financial institutions will also report account balances and sales proceeds from financial assets.
The standard is also comprehensive in the different types of account holders covered, such as individuals and the controlling persons of companies, partnerships and trusts.
The standard will build on the Australian Taxation Office's current information exchanges. In 2014-15, total tax liabilities raised as a direct result of exchange of information with Australia's treaty partners was approximately $255 million.
G20 leaders endorsed the standard under Australia's presidency and committed to begin to exchange information by 2017 or the end of 2018.
To date, over 95 jurisdictions have committed to implement the standard, including former tax secrecy jurisdictions, such as Luxembourg, Switzerland, the British Virgin Islands, the Cayman Islands, the Isle of Man, Guernsey and Jersey.
People that do not comply with their Australian tax obligations undermine the integrity of the tax system. The standard will improve the integrity of the tax system by engendering confidence in the community that taxes are not being evaded.
The standard will also encourage greater voluntary compliance as taxpayers will now be safe in the knowledge that it has just got a whole lot harder to hide funds offshore without the tax office tracking you down.
I commend the bill to the House.