Grant Wardell-Johnson and Liam Delahunty discuss the recent public hearing of the Senate Inquiry into Corporate Tax Avoidance.
The transcript from last week’s hearing of the Senate Corporate Tax Avoidance Inquiry provided interesting insight on the last couple of years of interaction between the Australian Taxation Office (ATO) and major companies including Apple, Microsoft, Facebook and Google.
The thrust of the Senate Committee’s questioning reflects the Parliament’s interest in the impact and enforcement of Australia’s new multinational anti-avoidance law (MAAL) and transfer pricing rules, as well as the newly-introduced Diverted Profits Tax (DPT).
The Commissioner of Taxation appeared before the Inquiry noting that since the ATO initiated its focus on multinational companies, the ATO has completed over 1000 reviews and audits in a range of sectors. This presents clear evidence of the additional level of resourcing that the Commissioner has been able to apply in this field. Their work has raised over $4 billion in total assessments against large public groups and multinationals in the last financial year alone, with almost $2.9 billion raised from seven very large multinationals.
In addition to those audits, the ATO has also reviewed a further 221 companies, with at least 32 seeking to restructure their operations as a result of the ATO’s enforcement of the MAAL and 75 companies remain under review. The ATO indicated that it anticipates sales returned in Australia (with profit therefrom being taxed for the first time in Australia) as a result of MAAL will amount to $7 billion each year.
The Commissioner, in response to a question about whether the ATO needed any more from government in terms of legislation to ensure tax could be more effectively collected from multinationals, replied “I think we’ve got it about right.”
When interviewing the companies who appeared before the Inquiry, the Committee was also keen to understand the rationale behind the companies’ global corporate structures, even to a number of levels removed from the Australian operations. All of the companies appearing last week indicated that their operations in Australia now operate on a buy-sell basis, with some having restructured as a consequence of the introduction of MAAL.
Furthermore, following the Chevron decision, the ATO confirmed it is reviewing the pricing of a significant quantum of foreign-held debt. Thus far, the ATO has seen taxpayers with higher-priced intra-group debt seeking to de-risk those borrowings, in line with its Practical Compliance Guide, but the ATO's review activities will continue and expand.
The Senate Economics Reference Committee is expected to report on the Corporate Tax Inquiry by 30 September 2017.