Tax Office requests impromptu hearing of tax avoidance inquiry to tackle claims by former ATO executive
The Senate inquiry into corporate tax avoidance will unexpectedly return on Wednesday after the Australian Taxation Office requested a supplementary public hearing to refute allegations made in evidence by former ATO executive Martin Lock.
Mr Lock told the inquiry earlier this month that the Tax Office gives up “billions of dollars” in revenue each year by avoiding court stoushes with large corporations over unpaid tax.
Mr Lock quit the ATO last year, telling the inquiry that he believed a more “generous” approach was being taken to auditing the largest companies.
An example he gave was a dispute with one of the big-four banks that owed $100 million to the tax man. The ATO settled out of court and accepted just $30 million to draw a line under the matter.
According to the ATO’s 2013-14 annual report, it settled 34 cases during that year. Total claims involved in the case amounted to $2.7 billion, but the total value of settlements was only just over half that, at $1.5 billion.
Mr Lock’s evidence drew a picture of ATO staff being played by corporate Australia.
He said executives of the big four accounting firms, which provide the “tax planning” services to Australia’s largest and most profitable companies, routinely ring ATO staff to “test the waters” on tax arrangements.
He claimed a “climate of fear” and “internal fiefdoms” were part of the internal culture of the ATO.
Mr Lock’s evidence came two days after ATO Commissioner Chris Jordan appeared before the committee.
In his evidence, Mr Jordan said the ATO took cases to court to “signal to the market that particular behaviour is unacceptable” but he conceded that some cases were settled with an eye to the legal costs involved in getting a result.
Mr Jordan will appear on Wednesday in Sydney with deputy commissioners Mark Konza and Jeremy Hirschhorn.
The ATO is also expected to be grilled on the Abbott government’s proposal to introduce a diverted profits tax similar to Britain’s “Google Tax”.
Treasurer Joe Hockey said over the weekend that Australia and Great Britain had agreed to work together to combat multinational tax avoidance.
Mr Hockey said he and Chancellor of the Exchequer George Osborne had agreed to set up a working group to “address the diversion of profits by multinational enterprises away from their host countries”.
The inquiry heard that multinationals including Google, Apple and Microsoft pay virtually no tax in Australia on billions of dollars of sales. Most of their profits are exported to low-tax jurisdictions like Singapore, Ireland and the Netherlands.
