The taxpayer has a debt from participating in a previous tax planning scheme.
An entity associated with promotion of the previous tax planning scheme (the other entity) approaches the taxpayer with an offer to settle the outstanding debt on that scheme, on the basis of generating further tax deductions above the [net] amount repaid.
The other entity proposes an arrangement whereby the taxpayer pays either: (a) an amount less than the full amount of the outstanding debt and the other entity offers to provide documents that incorrectly evidence the payment of the full amount. This may involve the fabrication of documents that purport to show the payment of the full amount by the taxpayer; or (b) the full amount of the outstanding debt and the other entity offers to provide supporting documentation to substantiate this payment, but also to arrange a covert refund of the majority of the amount paid to the taxpayer or their associates. This may involve the use of a round robin payment arrangement to return the majority of the amount paid by the taxpayer back to the taxpayer or their associates.
The basic features of this arrangement can be summarised diagrammatically as follows: Alternatively, the arrangement may constitute a round robin, such as: