International tax cheats in ATO’s sights

The Government may have retreated on its promises to crack down on multinational IT companies avoiding tax, but the Australian Tax Office says it’s on the case.

Less than a year ago the ATO appointed Andrew Mills, a tax lawyer from outside the government bureaucracy, to the important role of second commissioner.

Mills had previously won actions for companies against the ATO – he knows how corporates play the rules. No he has moved from rat to rat catcher, he is vowing to go after the big boys of international tax evasion.

‘Evasion’ is legal and ‘avoidance’ is not. Many multinational IT companies employ profit shifting tactics that are – to put it mildly – on the borderline. Mills wants to change that.

In a wide ranging speech to the annual conference of the Australasian Tax Teachers’ Association at the University of Adelaide, he said the ATO had identified 25 tech multinationals it was investigating.

“Perhaps for the first time in history, there is powerful and unprecedented international collaboration on tax matters, and Australia is at the forefront of efforts to reform the century-old tax system,” he said.

Mills said international tax reform is now front and centre of public debate on tax. “As chair of the G20 last year, Australia led global efforts against tax minimisation, avoidance and tax havens.

“The G20 leaders agreed at their meeting in Brisbane in November that profits should be taxed where economic activities deriving the profits are performed and where value is created. They also committed to finalising work on the OECD’s Action Plan on Base Erosion and Profit Shifting or BEPS this year.”

He mentioned that Treasurer Joe Hockey had indicated late last year that the Government was contemplating additional legislative action.” (Hockey got some headlines on this, but subsequently said the Government would not proceed).

Parliament did pass an International Tax Agreements Amendment Bill in August 2014, but that was mainly targeted at individuals with money in tax havens. But Mills said that any suggestion Australia was going soft on large corporates avoiding their tax obligations was not true.

“For the past 18 months, the ATO has been closely examining the tax arrangements of multinational companies. We are using our treaty and information sharing agreements to check the assertions they make to the ATO against what they are declaring in other jurisdictions.

“We have commenced more than 200 client risk reviews on multinational companies, including 25 tech companies or companies that conduct a significant portion of their business digitally.” He did not name the companies, but those that have often been mentioned as major users of profit and proving transfers have included Apple and Google,

“We have completed half the reviews and have commenced 20 audits where we have identified significant concerns. Our risk identification program is ongoing and we expect to commence further risk reviews and audits in the future.

“By the second half of this year, we are expecting to see some of these cases tested in court. No doubt the world will be watching with interest to see the outcomes. We also expect some companies will accept that they need to contribute more tax in Australia without the need for litigation.”

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