Tax fraud may not only incur penalty and interests for certain conduct or omissions under the relevant legislations, it may also amount to criminal liabilities under the Criminal Code Act 1995 (Cth). If there is a breach of a tax law, the Australian Tax Office, also known as the ATO, has the discretion to impose a monetary penalty or refer the matter to prosecution to pursue the matter as a criminal matter. This is dependent on the severity of the matter and the surrounding circumstances.
To pursue a criminal offence, the ATO will consider the following:
- Whether it is sufficient to impose a monetary penalty;
- Whether it would be in the public’s interest to pursue criminal prosecution;
- The history of the taxpayer and the seriousness of the conduct; and
- Whether there are good prospects and evidence to secure a criminal conviction.
Violation of a tax law
The following circumstances may constitute a violation of law tax:
- Failure to produce returns to the ATO (which may include income tax returns);
- Failure to comply with a requirement under the tax law;
- Failure to answer questions asked by an ATO officer or the production of documents;
- Failure to take an oath or affirmation when required; or
- Failure to comply with a Court order.
Directors of companies
Directors of companies may be considered to have committed the same offences as the company itself. The directors, however, may be afforded with a defence whereby they did not know about the offence or did not aid the commission of that offence. However, this defence cannot be pleading if the ATO refers the violation to criminal prosecution.
Tax practitioners, including tax accountants and financial advisers, may also be prosecuted if they have been engaged in tax evasion either on the behalf of their clients or personally. Courts have traditionally imposed harsh penalties on such professionals for the commission of such crimes.
The Taxation Administration Act 1953 (Cth) stipulates a variety of offences, including:
- Making false of misleading statements, or keeping incorrect records;
- Recklessly making false or misleading statement, or recklessly keeping incorrect records;
- Deliberately intending to mislead or keep incorrect records;
- Accessing tax record or divulging tax information without authority or consent.
Such violations may be converted to criminal offences whereby:
- Engaging in fraudulent conduct and:
- Obtaining a financial advantage by that deception; or
- Obtaining a gain or causing a loss by dishonesty.
Being an accessory by:
- Attempting to commit an offence;
- Aiding, abetting, counselling or procuring the execution of an offence;
- Conspiracy to commit an offence.
Administrative Penalty of Criminal Prosecution?
Whether to pursue a criminal charge or impose a penalty, this is a discretionary power which the ATO exercises at its will.