There are 33 islands in Kiribati, a small nation in the central Pacific Ocean. Only 20 of these are inhabited.
- Residents of several small, relatively poor nations have a large number of Australian bank accounts holding hundreds of millions of dollars
- The biggest foreign holdings in Australian financial institutions come from the United States and China
- The ATO says there are no more accounts linked to ‘residents’ of uninhabited places such as Antarctica
Yet data released by the Australian Taxation Office (ATO) and found that $682 million in Australian bank accounts belonged to foreign tax residents apparently from Kiribati, up from just $14 million in 2019.
Fewer than 120,000 people inhabit Kiribati and, according to Kiribati’s 2019-2020 Household Income and Expenditure Survey (HIES), the median household income was just $12,000 in 2020.
The nation’s residents are also quite young: the median age of the population is 23 and 35 per cent of the population is under 15 years old.
But the 876 Australian bank accounts apparently held by Kiribati residents had an average balance of almost $800,000.
Kiribati is not the only remote area where people, companies or trusts that hold Australian bank accounts apparently reside.
Tuvalu, with a population of 11,792 in 2020, had 212 accounts registered to “residents” holding $194 million in Australia.
That is an average of more than $900,000 per account, when the Gross Domestic Product (GDP) per person in Tuvalu is around $7,500 per person.
Equatorial Guinea, in central Africa, had 52 accounts registered’ to residents holding $4 million.
Individuals, trusts or companies from the eleven notorious secrecy jurisdictions of Bermuda, Cayman Islands, 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 of accounts held in Australia from offshore continue to present red flags for money laundering and tax evasion,” according to the Tax Justice Network’s Mark Zirnsak.
Jurisdictions like ‘Antarctica’ generally reported by mistake, says ATO
The data shows that holdings from uninhabited subantarctic Bouvet Island, Heard Island and McDonald Island have now disappeared, which means there are no Australian bank accounts linked to places with penguins but no people.
The previous year’s data for 2019 showed several million dollars held in uninhabited jurisdictions, such as Antarctica and Bouvet Island.
ATO deputy commissioner Hector Thompson said the information the agency received from Australia’s international exchange partners under the Common Reporting Standard (CRS) had assisted in better data matching that allowed them to catch out tax cheats.
The CRS is the single global standard for the collection, reporting and exchange of financial account information on foreign tax residents.
“[It] helps the Tax Avoidance Taskforce to identify, investigate and ensure that foreign-sourced income and assets held in foreign financial accounts by Australian residents are declared,” Mr Thompson said.
The ATO also uses data analytics to detect data anomalies in the CRS data, such as uninhabited jurisdictions.
“Our compliance activities have confirmed jurisdictions such as Antarctica are generally reported by mistake.
“For example, a customer or front-line employee from a financial institution might select Antarctica instead of Australia from a drop-down box when opening an account.”
He said the ATO requires that such mistakes are verified and corrected by the financial institution.
“Data verification steps taken mean that accounts incorrectly reported for Bouvet Island, Heard Island and McDonald Island have been eliminated in the most recent CRS reporting,” he said.
Labor promise to stop money flowing into tax havens
Labor has promised to introduce a “beneficial ownership register” that would make it harder for the people behind companies to hide who they are and what they get up to.
Since the Panama Papers and various other tax leaks there have been calls for governments around the world, including Australia’s, to introduce a register that gives the public free access to the names of people behind companies, trusts, assets and bank accounts.
Mr Zirnsak welcomed Labor’s commitment to a public beneficial ownership register, saying it may help expose who are the people behind companies holding accounts in Australia.
“The government should also strengthen unexplained wealth laws, to be able to seize money shifted into Australia where there is a high likelihood 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 shift profits from crime into Australia.”
Not all the financial flows are from tax havens
Not all the money flowing into Australian bank accounts was coming from small nations that have few inhabitants.
US resident companies and individuals held $33 billion across more than 588,000 accounts.
Residents of China held $30 billion across more than a million accounts. And another $15 billion across more than 341,000 accounts was held by people residing in Hong Kong.
Big amounts were also held by residents of the United Kingdom ($14 billion across almost 630,000 accounts), New Zealand ($13.7 billion across almost 511,000 accounts) and Singapore ($13.55 billion across nearly 233,000 accounts).
Overall, the 2020 data released under the common reporting standard (CRS) scheme — the single global standard for the collection, reporting and exchange of financial account information on foreign tax residents — revealed the amount held by foreign tax residents in Australia totaled $186 billion.
Global authorities’ greater exchange of information helps identify tax evaders
The OECD has recently bolstered efforts to track financial flows, with the automated exchange of information on cross-border financial activities.
Data shows that, in 2020, information on more than 75 million financial accounts worldwide covering total assets of around 9 trillion euros was exchanged automatically by 102 jurisdictions.
The data also shows the Automatic Exchange of Financial Account Information in Tax Matters has also helped identify 112 billion euros of additional revenues (including tax, interest and penalties), thanks to voluntary disclosure programs and similar initiatives, as well as offshore investigations.
At least 3 billion euros of these additional tax revenues have been linked directly 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 work with the Joint Chiefs of Global Tax Enforcement (J5) and the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC).”