Monday, April 17, 2006

BVI IBCs in Australian Tax avoidance scheme

Australian Federal Police investigators allege the Gold Coast scheme was controlled by local tax agent Ewan Alisdair Stoddart. According to documents filed in the Supreme Court in Brisbane, commonwealth prosecutors allege Mr Stoddart ran a tax avoidance scheme for his clients through a series of companies on the British Virgin Islands, Hong Kong and the Gold Coast.

In documents filed in court, three men, including a tax agent and a Japanese mining entrepreneur, are alleged to have used the scheme to avoid paying at least $5 million due in income and business taxes.

Again millions of unpaid tax dollars and BVI IBCs among other offshore jurisdiction companies. So can we not mention once again the popularity of BVI IBC as an offshore vehicle.

In order to secure claim the Australian prosecutors have filed an application in Brisbane's Supreme Court to freeze 12 properties worth almost $6 million under the commonwealth Proceeds of Crime Act 2002. The documents connected with the Australian Federal Police inquiry were kept sealed until this week to enable investigators to conduct raids and secure the assets.

The part Queensland properties which is worth millions of dollars will be seized as part of an investigation into an alleged Gold Coast tax avoidance scheme.

One of the companies alleged to be the central party of the tax scam was the now-insolvent Creditlink Finance, of which Mr Stoddart was a director with notorious property marketeer Dudley Quinlivan. Creditlink provided last-resort mortgages and property marketeering services around Queensland, but went into liquidation shortly after Quinlivan's activities were publicly exposed.

It is alleged that the scheme involved BVI and HK offshore companies, charging participants for services not actually performed. Funds for the service would be sent offshore and then later returned to the scheme's participant as a loan.

Investigators told the court that "The purpose of participating in the scheme was to stop paying tax on profits from the business." Australian Police allege Mr Stoddart's firms charged a 10 per cent fee for this service. Australian Federal police have told the court that Mr Stoddart, an undischarged bankrupt, is facing charges of defrauding the Australian Tax Office, dishonestly obtaining a financial advantage from the commonwealth and aiding and abetting the commission of the offence.

The scheme is estimated to have cost the Australian Government at least $300 million of lost revenues. It should be noted that the scheme is separate to the alleged nationwide tax avoidance scam.

E.A. Stoddart was declared a bankrupt with almost $40 million in debts two years ago when he disclosed his problems to liquidators in 2004 as his web of international business interests began to unravel. A report by Ann Fordyce, of Pilot Partners, who acts as trustee of Mr Stoddart's estate, revealed he had disclosed outstanding debts of $36.8 million.

Mr Stoddart is registered as a chartered accountant in Britain. Short time ago he reapplied for registration as a tax agent after losing his licence when he was declared a bankrupt.
It is understood the investigation is still in its initial stages, and more participants of the six-year-old scheme are expected to be identified and prosecuted in the coming months. Nobody should be named guilty before the court has made the final verdict.

Mr. Stoddart said the following words: "This wasn't a scam - it was simply my clients' investing money in these companies, and in some cases they failed … Now the police and tax office are trying to destroy me and freeze my assets so I can't fight them."

The bad part of this story is that if Australian authorities admit wrongdoing, this could bring losses to many clients who trusted the advice provided by professional - chartered accountant. Yesterday we get to the conclusion that one who would like to set up offshore business in British Virgin Islands or any other offshore jurisdiction should get professional advice. To continue with, this professional should be trusted. Offshore law firms with tens or even hundreds of partners working there could be the choice.

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