The COVID-19 crisis that has damaged many businesses from around the world and the impact of the coronavirus is being felt by all businesses around the world. Leaders are attempting to navigate a broad range of interconnected issues that range from keeping their employees to customer safe, conserving cash and financial resources, reorienting operations, and navigating complicated government support programs. These support programs introduced by our respective governments, both in Australia and in Greece cost billions of dollars: well someone must pay. Nothing comes for free, and there is a cost and that will be met by each taxpayer of our respective countries at some point in the future when the next Federal Budget is announced.
Greece’ Tax Identification Number and Australia’ Tax File Number and Exchange of Information Requests between Australia and Greece.
Come post COVID-19 to the road of recovery, revenues authorities will be implementing some serious strategies to recover for its revenue losses. For example, let’ zero in on our respective countries, Australia and Greece. For example, under the Greek Tax Procedure Code (L. 4174/2013), Greece’s Tax Administration allocates a unique Taxpayer Identification Number to every taxpayer in Greece and from an Australian perspective, Greek nationals who take up residency in Australia and work in Australia must also obtain an Australian Tax File Number (TFN) for Australian tax purposes. In these circumstances, all Greek residents living overseas are taxed on their worldwide income notwithstanding whether they reside in Greece or Australia or other parts of globe and the same can be said in respect to non-resident Greek Australian residing in Greece.
In this regard, Greek nationals or Greek/Australians who reside in either country who have property in Australia or Greece that produces investment income, Greek tax authorities are now calling for all Greek nationals and Greek Australians who reside in Australia and who have been generating investment income and or employment income to provide their Australian Tax File number to Greece’ Tax Authority or provide a copy of their Australian residency documents for Greek tax and lodgement purposes. Clearly they are looking at various ways in recovering fiscal leakages.
Having said that, it is important to also note that the Greek Ministry for Tax affairs is taking a tough stance against Greek nationals living abroad who do not disclose their overseas income and or investments and likewise the Australian Taxation Office (ATO)is in the same position. Notwithstanding that a taxpayer, whether he/she may be reluctant in disclosing the information or he/she is reluctant in providing their respective Tax Identification or Tax File Number to their respective tax authorities, such requests can be easily be retrieved by an exchange of information process between the respective tax authorities.
Furthermore, Greece and Australia have advanced their tax protocols with the assistance of the OECD (Organisation for Economic Co-operation and Development ) who have entered into a Multilateral Competent Authority Agreement on the automatic exchange of financial account information to enable both Greece and Australia and other tax jurisdictions to combat tax evasion and or tax avoidance.
The point to note is that the agreement is between the respective tax authorities to exchange tax information and not between the taxpayer and tax authorities. In this respect taxpayers who are investigated by either revenue authority will have absolutely no idea what is being discussed “behind closed doors” about a person of interest and their tax affairs.
In these circumstances, a wealth of work has been advanced by the Organisation for Economic Co-operation and Development (OECD) and its member states. In the context of Greece, a treaty has been signed which includes the signatories of Greece and Australia relating to the Mutual Administrative Assistance program in Tax Matters, which enables both of these countries to work more closely together to combat tax evasion and or tax avoidance.
As part of the ATO review processes and its risk compliance programme, both for individual and business taxpayers, the ATO will continue to conduct such reviews and it’s a timely reminder that if Australian/Greek residents residing in Australia have not disclosed all of their income and / or have not disclosed their assets overseas whilst residence has been taken up for Australian tax purposes, they should make a voluntary disclosure of their circumstances directly to the ATO. Failure to disclose can result in very heavy penalties and may attract imprisonment.
The 2020-2021 Tax Compliance Program – COVID19
From an Australian viewpoint the ATO has released its current compliance program for the current financial year 2020-2021, supplementing the detailed large business compliance plan released in June of 2020. The new compliance program highlights the ATO’s overtly aggressive audit strategy. This is coupled with an increase in the resources allocated to compliance, including 850 more audit staff and the increasing use of data analysis to identify taxpayers that the ATO considers to be “high risk”.
The brief look at the program reveals that few taxpayers will not be targeted by the wide-ranging program. In particular:
♦ The number of individuals, including high-wealth individuals, labelled as “high risk” has doubled from last year, with emphasis on property and other investments. Over 23,000 refunds are to be reviewed, with data matching of 8,000 returns against property and share sale data;
♦ Small-to-medium businesses will be subject to over 820 risk reviews, with emphasis on shareholder loans, non-lodgement of returns, fringe benefits tax reporting, compliance with mandatory superannuation payments and general tax compliance;
♦ Large businesses will be subject 320 field risk reviews and 160 audits, in addition to 1,500 larger and high-risk refunds being reviewed. The largest businesses, with a turnover of $100 million or more, would be specifically targeted;
♦ Over 8,000 GST audits will be conducted, with half of all large businesses being subject to review;
♦ The cash economy will be specifically targeted, with greater scrutiny in high risk industries such as construction, hotels, restaurants, clothing and textiles, fishing, business services and motor vehicle and computer retailers; and
♦ International tax avoidance will also be targeted by reviewing high risk tax haven cases, whilst transfer pricing compliance will be targeted by way of 200 transfer pricing risk assessments and 20 large business audits.
The latest compliance program is part of a two-split approach by the ATO to increase voluntarily compliance by taxpayers whilst preventing non-compliance. This means that the ATO is likely to apply the stiffest possible enforcement actions to what it sees as premeditated avoidance of tax obligations.
The fact that last year’s program resulted in an additional $3 billion of cash collections emphasizes the achievement of such enforcement action and strengthens the importance of sound tax advice and proper management of ATO audits. As a result of this hostile audit strategy, conflict is expected in relation to which side of the fine line between legitimate tax planning and tax avoidance transactions or arrangements fall. In addition, the ATO will expect directors of medium and large businesses to have made reasonable inquiries into tax issues related to significant transactions and compliance systems.
Double Taxing Agreements between Australia and Greece
One worthy note that should be addressed by both the Australian and Greek governments is the facilitation of entering into a Double Tax Agreement between Australia and Greece. This is would obviously eliminate any double taxing issues because as it currently stands, there is no Double Tax Treaty in place which painfully causes issues for taxpayers residing in Australia.
For example and by way of an illustration, if a Greek-Australian earns investment income from Greece, the taxpayer in Australia is obligated to lodge a tax return in Australia for income earned in Greece and is also obligated to lodge a tax return in Greece. In effect, the taxpayer is paying twice the tax, (ionce in Australia and the other in Greece) on the same income derived without obtaining a foreign tax credit/offset in Australia for the taxes paid in Greece.
However, if there were a Double Tax Agreement in place between Australia and Greece, the taxpayer would only be taxed once on the same income earned and would also take advantage of obtaining a foreign tax offset in Australia, indeed depending on the exchange of currency, it may either result in a refund or a payment for a small of amount tax, depending of course of the level of income earned in Greece.
Having said that it remains to be seen whether Australia and Greece will entertain such discussions as one of the issues in entering into such a treaty will be from an Australian viewpoint; Why should Australia enter into a treaty with Greece and what would be the benefits in entering into such an agreement with Greece? We know for now that Australia is not a major trading and or investing partner with Greece, perhaps it may be in the future. We may see some developments in the future relating to these issues.
♦ Tony Anamourlis is an international tax lawyer and academic