The Australian Tax Office (ATO), in conjunction with the Australian Federal Police (AFP), has raided 35 business premises in Tasmania, New South Wales, Queensland, Victoria, and Western Australia that have allegedly supplied and utilised electronic sales suppression tools (ESST). The raids, dubbed Operation Flutter, were part of a global effort undertaken by the Joint Chiefs of Global Tax Enforcement (J5). Under this partnership, similar raids were also carried out in the UK by His Majesty’s Revenue and Customs (HMRC) and in the US by the Internal Revenue Service (IRS).
The raids are estimated to have stopped about $33 million being lost in tax avoidance. According to John Ford, an ATO deputy commissioner and the J5 chief, the ESST enabled businesses to keep separate books and thus launder money within a single transaction.
He described how businesses would take expensive orders from clients but input them into their point-of-sale systems as cheaper transactions, pocketing the difference and reporting lower incomes at tax time. The concealed money would then be transferred anonymously, at times to an offshore account. Other forms of ESST misdeeds included permanently deleting transactions, misrepresentation of transactions, re-sequencing of transactions and generating fake records.
Ford said that incorporating ESST in point-of-sale systems was a “deliberate and underhanded act” that was intended to under-report incomes and avoid taxes. He added that businesses carrying out such acts were effectively stealing from the community and that international cooperation would ensure they did not evade detection.
The ATO has confirmed having gathered a considerable amount of data on these transactions, however, no charges have been laid as investigations are still ongoing. While Ford confirmed that the majority of businesses did not use these tools, they had seen situations where ESSTs were connected to the hardware of point-of-sales systems and had their capability built into some software.
He urged those using ESST to voluntarily turn themselves in so they may be given a chance to receive possibly fewer penalties. The businesses will also be required to refile tax returns and business activity statements. This impact will likely be less severe than if an ATO investigator uncovers the misdeeds and subjects the business to the full force of the law.
The news of the successful raids comes shortly after the government confirmed plans to further boost the ATO’s resources in ensuring tax compliance. This includes an allocation of $1.1 billion to the ATO’s Tax Avoidance Taskforce, whose mandate will be extended to 2025.
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