Tougher measures against tax dodgers

Published: 21 Feb 2017 at 04:00 / NEWSPAPER
SECTION: BUSINESS

Tougher measures against tax
dodgers

The world is entering a new era in which national tax
authorities are joining hands to set up a system to hound those who dodge
paying their fair share of tax by applying unacceptable tax-planning schemes.

Last year Thailand entered into an agreement with the US
government to implement the Foreign Account Tax Compliance Act (Fatca), and
this is only the beginning of tougher measures. In fact, Fatca does not benefit
Thailand very much, as the United States is not a favourable jurisdiction for
high-end tax planning for most Thais. However, supplemental legislation to
support other international commitments made by Thailand is expected soon.

Earlier this year, Thailand became the 139th member of the
Global Forum on Transparency and Exchange of Information for Tax Purposes,
which was initiated by OECD member countries in the early 2000s. Its original
aim was to deal with non-cooperative jurisdictions, but now it's a key device
to deal with "base erosion and profit shifting (Beps)."

Under the Beps action plan, some aggressive tax-planning
schemes, which are not necessarily illegal or sham transactions, could be the
target of tax authorities from two or more jurisdictions. An example could be a
transfer of shares from a Thai holding company to a first-level foreign buyer
in a low-tax (or no-tax) jurisdiction, followed immediately by the resale of
those shares for a much higher premium.

Also covered would be a "tax-treaty shopping"
transaction that results in no taxation in two jurisdictions and reduces the
tax base of the business considered as having a permanent establishment in
Thailand.

As a member of the Global Forum, Thailand needs to implement
the Automatic Exchange of Information protocol with other member countries
based on the common reporting standard approved by the OECD. This will require
changes in the law to authorise revenue officials and financial institutions to
reveal and exchange taxpayers' and account holders' transactions and business
information.

As Beps and Fatca enforcement begin to take full effect, it
is expected that most of the shallow tax-planning schemes widely employed in
Thailand will draw local tax authorities' attention or get caught in the global
network.

Domestically, authorities are moving to crack down on
transactions that go beyond the level of acceptable tax planning and amount to
outright evasion or crime. The National Legislative Assembly just approved an
amendment to the Revenue Code known as Section 37 ter. This provision treats
certain tax offences as predicate offences under the Anti-Money Laundering Act.
They include tax evasion or obtaining a tax refund by providing false
information, evidence or statements to a revenue official, and tax evasion or
attempted tax evasion by refraining from filing a tax return. Certain
conditions apply:

The amount of tax evaded is at least 10 million baht during
a given tax year.

The tax refund obtained by means of false information is at
least 2 million baht in a tax year.

The tax evasion scheme involves transactions set up among
syndicates or networks, or concealment of assessable incomes or revenues, with
an intention to evade tax, and there is a behaviour to hide assets.

The director-general of the Revenue Department, along with a
committee formed to screen tax offences, will consider if such crimes
constitute a predicate offence. If so, they will submit relevant information
and evidence to the Anti-Money Laundering Office (Amlo) for further processing.
As a consequence, Amlo may seize or freeze the assets of the accused.

The government says this legislation is necessary because
Thailand, a co-founder of the Asia Pacific Group on Money Laundering (APG), is
required to implement the recommendations of the Financial Action Task Force
(FATF) to treat certain tax crimes as offences under anti-money-laundering
laws.

This raises a big concern, however. From now on, how far can
a business go with tax planning without the risk of falling under the ambit of
Section 37 ter? Will being caught for Beps constitute a tax crime that is a
predicate offence under the Anti-Money Laundering Act? What will be the
direction of Thai tax policy once the government implements Beps?

Whenever a tax dispute arises, taxpayers often face high
penalties unless they simply give up and pay the tax in dispute, with reduced
penalties.

With Section 37 ter in force, how much leverage will a
taxpayer have left to fight a tax assessment with government auditors,
especially if there is a risk of assets being seized and the business being
closed down by Amlo?

The legislation is very new and taxpayers have a lot of
questions. If you'd like to know more, an event is planned on March 3 at which
senior authorities involved with tax audit and enforcement will discuss tax
investigation policy under the legislation and the potential linking of bank
accounts.

For more details, contact the organisers: 063-176-5117,
081-445-5796 or 081-821-8368, or nattaweem01@gmail.com

By Rachanee Prasongprasit and Professor Piphob Veraphong.
They can be reached at admin@lawalliance.co.th.