Zapper attack: ATO and AFP raids over software that slashes tax by hiding sales

ATO officials and Federal Police officers have swooped on 35 businesses in search of software that falsifies sales data to avoid tax. See how it works.

Exclusive: Tax officials and federal police have raided 35 businesses across Australia as part of a global assault on the illegal use of software that fiddles sales figures in order to reduce tax.

The software, dubbed an “electronic sales suppression tool” by the Tax Office is either built into hardware attached to sales terminals, provided as a service over the internet or supplied on a USB stick known as a “zapper”.

It is most often seen in the hospitality industry and can be used to reduce the value of individual sales or delete them altogether.

“So what might happen is that the customer orders a $60 steak and a $100 bottle of wine and the ESS tool then puts it through the point-of-sale system as a $10 bowl of chips and a $4 bottle of soft drink,” ATO deputy commissioner John Ford said in New York overnight.

Assistant Treasurer Stephen Jones said the tools were a “direct assault” on the government’s ability to collect GST, which funds the states to provide schools, hospitals, roads, police and other essential services.

ATO Deputy Commissioner John Ford. Picture: LinkedIn

Assistant Treasurer Stephen Jones. Picture: Gary Ramage

“Anybody who’s actually going to try and access and install this software will find the full force of the law will apply because they’re getting an unfair advantage over every other business in the country,” he said.

“It’s not going to be tolerated. It is a huge risk, obviously, to our revenue base, but also there are links between these operators and international crime syndicates and we obviously cannot let that rest.”

Raids on properties in Victoria, New South Wales, Queensland, Western Australia, and Tasmania on Friday were coordinated with similar action in the UK and USA as part of Operation Flutter.

The operation was organised by the J5 joint chiefs of global tax enforcement, an international alliance between tax authorities in Australia, the UK, USA, Canada and the Netherlands.

“These dodgy sales suppression tools allow retailers to keep a separate set of books and launder the money in one transaction,” Mr Ford said.

“They conceal and transfer this income anonymously, sometimes offshore.”

Hezbollah supporters at an event in Beirut in 2018. Picture: AFP

In one case in the US in the mid-2000s, authorities alleged the owners of a restaurant chain both evaded taxes and skimmed off $US20m ($A29.45m), some of which was sent to Lebanese militant group Hezbollah.

Since 2018 producing or supplying ESS tools has been a criminal offence in Australia, punishable by a fine of up to $1.1m. Using the software is also a crime, attracting a fine of up to $111,000.

Originally published as Zapper attack: ATO and AFP raids over software that slashes tax by hiding sales