KPMG Isle of Man Tax Scheme - Legally Speaking

Victoria Lawyer Michael Mulligan on CFAX 1070 – Legally Speaking with Pamela McCall – discussing an offshore tax scheme setup by KPMG. It involved transferring millions of dollars to an offshore company in the Isle of Man that would then send “gifts” each year to family members that were not declared as income. A Victoria family is alleged to have put more than $25 million into one of these companies and then paid virtually no income tax for many years. The government alleges that the family received millions of dollars in “gifts” while living in expensive homes, filing tax returns claiming very small incomes, and failing to disclosure the foreign investment.

The government is working to obtain KPMG records to reveal how many other clients set up similar schemes. A 1999 internal KPMG memo encouraged KPMG employees to sell the scheme to clients, touting the substantial fees that KPMG would earn, including a percentage of tax avoided.

The case demonstrates the risk associated with complex income tax legislation that can facilitate schemes to avoid paying tax. A perception that wealthy people are failing to pay their fair share can undermine public confidence and make it more difficult to encourage people to honestly pay their taxes.