Paul McIntyre: Harvest of wealthy tax cheats begins

Little surprise that Queensland's shiny Gold Coast became the epicentre on Thursday of the biggest Australian investigation into tax fraud and money laundering by Australia's wealthiest individuals.

Three unlucky chaps running a regional phone directories business from the Gold Coast were the first individuals charged with tax fraud under the Federal Government's A$300 million ($362 million) project, codenamed Operation Wickenby, designed to catch those involved in elaborate tax avoidance structures and schemes.

Although the men nailed this week were the first, the real action and the big names are still to come. The arrests appear to be leading investigators to a much bigger fishing hole.

Last June, the Australian Crime Commission issued a summons seeking information about involvement in tax fraud by the three Queensland men and their related trusts and companies. The ACC alleged profits from Phone Directories Co were diverted to overseas trusts as expenses and then repatriated through overseas-issued credit cards.

The real interest in this case is that the ACC's summons of June 17 last year also sought information about Swiss accountant Philip Egglishaw and his firm, Strachans. Egglishaw is suspected of promoting overseas trusts to wealthy Australians.

Operation Wickenby surfaced last June, when 85 search warrants were executed across the country on what are said to be high-profile but yet unnamed identities.

Up to 500 Australians are involved in the investigation, and authorities predict the project's harvest will be bountiful, as it involves an unparalleled collaborative effort by commonwealth agencies, including the ACC, the Australian Federal Police, the director of Public Prosecutions and the Australian Securities and Investments Commission.

Treasurer Peter Costello was certainly talking up Wickenby's punch on Thursday.

"The project has been set up with considerable funding," he said. "These are the first arrests. It is expected there will be further people charged.

"If you think you've been put into one of these schemes, don't wait for someone to find you. It's in your interest to make disclosure to the tax office."

To make the wealthy even more uncomfortable, the Australian Taxation Office turned up the heat on another front this week, flagging its intention to broaden investigations into the tax affairs of "wealthy individuals" - those people and their associated entities which have assets of more than A$30 million.

That is more than 800 people and nearly 20,000 entities to unravel, and the tax office is preparing for the purge. Private companies will be unzipped by the ATO and the lifestyles of business owners and their spending will be scrutinised.

To the tax office, the continuing sharemarket boom is increasing the numbers of super wealthy.

Last year 161 private companies went public, raising A$13 billion, and the ATO received an extra A$82 million in the federal budget to broaden its blitz on the wealthy.

The Treasury is banking on the it collecting an extra A$615 million from this lot over the next four years.

"The finance and mining sectors have been booming so that means people are on much greater incomes," said ATO second commissioner Jennie Granger. "We look at how they're using that money and its appropriation, because there's a temptation not to declare it."

Funny that.