Hefty fines and stiff gaol sentences are not stopping the tax cheats

While the Australian Taxation Office (ATO) and the courts are successfully prosecuting hundreds of tax dodgers, the cheats keep trying, as Alan Austin reports.

THREE WEEKS AGO, a handyman from Melton, Victoria, was sentenced to 18 months in prison for lodging fake business activity statements for non-existent work, which defrauded the ATO of $176,365 in goods and services tax (GST) refunds.

Mining company director Adam Waterman was recently sentenced to seven years and ten months gaol for grifting more than one million dollars in fraudulent GST refunds through false business activity statements. He repaid $1,130,645.

Earlier this year, Paolo Esmaquel was gaoled for 18 months for claiming $51,464 from the tax man with false documents and stolen identities.

Last year, Li Zhang was sentenced to ten years for claiming false GST refunds for fictitious goods and services. Michael Issakidis copped ten years imprisonment for defrauding the ATO of more than $135 million dollars.

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These are just some of hundreds of successful prosecutions by Australia’s tax office and law enforcement agencies, resulting in what seem pretty stiff prison sentences for non-violent offences.

The extraordinary thing here is that details of all these crimes are readily available online and now very easy to access with artificial intelligence search sites. The ATO publishes detailed information about its detection and investigative methods, which are sophisticated and extensive.

Reading through these cases over a cup of coffee and learning the severe penalties along with details of how the crimes were uncovered, the question arises: Why risk financial ruin and imprisonment and the associated humiliation when the chances of discovery and incarceration are so high?

Overall statistics

In the 2024-25 financial year, the ATO launched 369 prosecutions, achieved 343 convictions and saw the courts impose $5.18 million in fines. That’s up from 225 prosecutions, 210 convictions and $2.87 million in fines the year before. That was a substantial advance on the outcomes in 2022-23, which in turn were almost double the successes of 2021-22, the Coalition’s last year.

The latest numbers are still well below the stats for the Rudd/Gillard period and the following early Coalition years, but the trend is now back in the right direction.

Companies now paying a fairer share

This is important for several reasons. The first is that fairness is essential for a functioning democracy and social harmony — as we are seeing in the USA today, where the Government is manifestly corrupt, tax paid by the rich is increasingly optional and the community is suffering badly.

The second is that greater compliance with the tax code ensures the Treasury has the revenue to provide government services, repay historic debt and achieve economic progress.

In this, the Albanese Government is succeeding after nine years of Coalition corruption, incompetence and failure.

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Company tax collections are now much higher than during the Coalition period, both in dollar amounts and relative to corporate profits. If we add company income tax, fringe benefits taxes and the petroleum resource rent tax, we can measure the contribution from corporations to total tax revenue over time.

Unlike the GST and personal income taxes, which should rise steadily every year with population and economic production increases, company tax is susceptible to the swings in the global economic cycle and local booms and busts, particularly in the mining sector.

Hence, company taxes surged in 2021-22 and 2022-23 as commodity prices and unprecedented demand for mined exports drove a huge increase in profits by mining and associated companies.

Tragically for all Australians, the Coalition governments allowed widespread tax evasion, which cost the nation dearly.

Total profits in 2021-22 rose to an all-time high of $539.4 billion, a thumping 43% higher than the level just three years earlier. That’s according to table 11 company gross operating profits in the ABS business indicators file.

The Morrison Government could have applied a fair share of those windfall gains to social housing or urban infrastructure, or it might have raised pensions. It declined these opportunities. Over those three years, the percentage of total operating profits collected tumbled from 26.1% to a puny 23.8%. See blue chart below.

This chart shows the restoration of fairness, with corporations now contributing 28.5% of their profits to the nation’s coffers, the highest since the last of the Gillard/Rudd years.

Global collaboration

As IA has long argued, tax evasion is an international enterprise requiring global cooperation. To its credit, Australia has recently joined Canada, the Netherlands, the United Kingdom and the United States in a concerted effort to combat the ever-changing underworld of transnational tax crime and money laundering.

Called the Joint Chiefs of Global Tax Enforcement, or J5 for short, this collaboration is making steady progress against offshore tax evasion, cryptocurrency and cybercrime. It has conducted more than 50 investigations and seized millions in assets so far. It is just getting started.

Role of the anti-Labor media

Australia’s daily newspapers regarded as covering national economics most seriously are Nine Entertainment’s Australian Financial Review (AFR) and News Corp’s The Australian.

Both have a track record of distorting economic news to denigrate Labor and spruik the Coalition. So, naturally, they have not reported accurately the ATO’s successes since 2022. In fact, of the five major court victories itemised here, above, the AFR appears to have reported just one and made a passing reference to another. The Australian has covered none.

A case can be made that if the mainstream newsrooms reported the crimes, their easy detection and the stiff penalties imposed, there would be more awareness of the stupidity of taking such risks — and far less crime.