There are 33 islands in Kiribati, a small nation in the center of the Pacific Ocean. Only 20 of them are inhabited.
- Residents of several small, relatively poor countries have large numbers of Australian bank accounts holding hundreds of millions of dollars
- The largest foreign holdings in Australian financial institutions are from the United States and China
- ATO says there are no longer accounts linked to ‘residents’ of uninhabited places like Antarctica
Yet data released by the Australian Taxation Office (ATO) revealed that $682 million in Australian bank accounts belonged to foreign tax residents apparently from Kiribati, up from just $14 million in 2019.
Less than 120,000 people call Kiribati home, and according to the Kiribati Household Income and Expenditure Survey (HIES) 2019-2020, the median household income was just $12,000 in 2020.
The inhabitants of the country are also quite young: the median age of the population is 23 years old and 35% of the population is under 15 years old.
But the 876 Australian bank accounts apparently held by Kiribati residents had an average balance of nearly $800,000.
Kiribati isn’t the only remote area where people, companies or trusts that hold Australian bank accounts apparently reside.
Tuvalu, with a 2020 population of 11,792, had 212 “resident” registered accounts holding $194 million in Australia.
This is an average of over $900,000 per account, while the Gross Domestic Product (GDP) per person in Tuvalu is around $7,500 per person.
Equatorial Guinea, in Central Africa, had 52 accounts registered with residents holding $4 million.
Individuals, trusts or companies in the once notorious secrecy jurisdictions of Bermuda, the Cayman Islands, the British Virgin Islands and Jersey hold $6.3 billion in accounts in Australia. On average, each of these accounts holds more than $1 million.
“The latest data on accounts held in Australia from overseas continue to raise red flags for money laundering and tax evasion,” according to Mark Zirnsak of the Tax Justice Network.
Jurisdictions like ‘Antarctica’ are usually flagged in error, ATO says
The data shows that assets from the uninhabited subantarctic Bouvet Island, Heard Island and McDonald Island are now gone, meaning there are no Australian bank accounts linked to places with penguins but no people.
Data from the previous year for 2019 showed several million dollars held in uninhabited jurisdictions, such as Antarctica and Bouvet Island.
ATO Deputy Commissioner Hector Thompson said information the agency had received from Australia’s international exchange partners under the Common Reporting Standard (CRS) had helped better data matching that had allowed them to catch the tax evaders.
The CRS is the single global standard for the collection, reporting and exchange of financial account information of foreign tax residents.
“[It] assists the Tax Evasion Task Force to identify, investigate and ensure that foreign source income and assets held in foreign financial accounts by Australian residents are reported,” Mr Thompson said.
The ATO also uses data analytics to detect data anomalies in CRS data, such as uninhabited jurisdictions.
“Our compliance activities have confirmed that jurisdictions such as Antarctica are commonly reported in error.
“For example, a customer or front-line employee of a financial institution can select Antarctica instead of Australia from a drop-down list when opening an account.”
He said the ATO requires these errors to be checked and corrected by the financial institution.
“Data verification measures taken mean that incorrectly reported accounts for Bouvet Island, Heard Island and McDonald Island have been eliminated in the latest CRS report,” he said.
Labor vows to stop money flowing to tax havens
Labor has promised to introduce a “beneficial ownership register” which would make it harder for the people behind the companies to hide who they are and what they do.
Since the Panama Papers and various other tax leaks, there have been calls for governments around the world, including Australia, to introduce a registry that gives the public free access to the names of the people behind companies. , trusts, assets and bank accounts.
Mr Zirnsak hailed Labor’s commitment to a public register of beneficial owners, saying it could help reveal who the people behind companies with accounts in Australia are.
“The government should also strengthen laws on unexplained wealth, so it can seize money transferred to Australia where there is a high likelihood that the money has an illicit source,” Mr Zirnsak said.
“The new government should also act on the recommendations made by the recent parliamentary inquiry into money laundering, to reduce the ability of criminals to transfer the proceeds of crime to Australia.”
Not all financial flows come from tax havens
Not all the money flowing into Australian bank accounts came from small, sparsely populated nations.
Businesses and individuals residing in the United States held $33 billion in more than 588,000 accounts.
Chinese residents held $30 billion in more than a million accounts. And another $15 billion of more than 341,000 accounts were held by people residing in Hong Kong.
Significant amounts were also held by residents of the United Kingdom ($14 billion in nearly 630,000 accounts), New Zealand ($13.7 billion in nearly 511,000 accounts) and Singapore (13. $55 billion across nearly 233,000 accounts).
Overall, the 2020 data released under the Common Reporting Standards (CRS) program – the single global standard for collecting, reporting and exchanging financial account information of foreign tax residents – revealed that the amount held by foreign tax residents in Australia was $186 billion.
Greater exchange of information between global authorities helps identify tax evaders
The OECD has recently strengthened its efforts to track financial flows, with the automated exchange of information on cross-border financial activities.
The data shows that in 2020, information on more than 75 million financial accounts worldwide covering total assets of approximately €9 trillion was exchanged automatically by 102 jurisdictions.
The data also shows that the automatic exchange of financial account information in tax matters has also identified €112 billion in additional revenue (including taxes, interest and penalties), thanks to programs voluntary disclosure and similar initiatives, as well as offshore investigations.
At least €3 billion of this additional tax revenue has been directly linked to the use of the information exchanged.
Mr Thompson said the ATO works closely with other international jurisdictions to catch tax evaders.
“CRS data is exchanged globally using exchange of information agreements with foreign tax authorities,” he said.
“This includes working with the Joint Heads of Global Tax Enforcement (J5) and the Joint International Task Force on Information Sharing and Collaboration (JITSIC).”