ATO widens its multinational tax avoidance net to 80 companies

The Australian Tax Office will open negotiations with 80 multinational companies to encourage them to “restructure” in order to pay more tax on profits generated in Australia.

The move represents a near tripling of the ATO’s multinational watch list after it embedded staff inside 30 companies to learn more about their business and where their profits end up.

Wednesday’s announcement came after the completion of a landmark global plan, led by the OECD, to end the scourge of “profit shifting” to low-tax countries and the use of tax havens.

The OECD estimates between $US100 billion ($141.5 billion) and $US240 billion is lost every year to an array of tax avoidance schemes by multinationals.

Tech giants Apple, Google and Microsoft sparked outrage this year after a Senate inquiry heard details about how the profit on the bulk of their local sales are booked in lower tax jurisdictions like Ireland and the Netherlands. Apple, for example, had turnover of $6 billion in Australia in 2014 but paid just $80 million in tax.

At a press conference with Treasurer Scott Morrison, Tax Commissioner Chris Jordan used the example of online giant Amazon which restructured it business in Europe, partly as a response to the introduction of Britain’s diverted-profits tax – widely known as the “Google tax”.

Former Treasurer Joe Hockey threatened to implement a Google tax but backed off in favour of the government’s “anti-avoidance bill” that will amend current tax laws.

Mr Jordan said: “I would suspect that you would start to find [restructures like Amazon’s] happening here, we have already been approached by some of the large companies that this will directly impact and [we are] commencing discussions right now as to how some of these structures may be unwound without in itself triggering some sort of tax liability.

“So we’re very happy to work with companies, to get the outcome that sits behind this legislation and that outcome is to ensure that the profits generated from sales where the economic activity that causes those sales to occur, the profit is left here in Australia if that economic activity [which gave] rise to that profit did occur here in Australia.”

Fairfax Media revealed in August that the Senate tax avoidance inquiry had recommended a “name and shame register” for companies that dodge their tax obligations but Mr Morrison said on Wednesday that the Coalition’s preference was to work with companies first.

“What we’re doing here is working with companies, working with companies who are investing in Australia, who are employing people in Australia and we want to see, do more investing and employing in Australia to give job security and create more jobs and the best way do that is to work through these issues and the legislation provides new opportunities for the Tax Office to do that and we need to keep this on a very positive footing,” he said.

According to some estimates around the OECD process, up to 10 per cent of the value of sales by multinationals operating in countries like Australia could be being lost to tax avoidance. That would mean a hole in ATO’s pocket of up to $7 billion.

But Mr Jordan cautioned against thinking Australia could claw back that much, saying the ATO was relatively more advanced than other developed countries in ensuring the integrity of its tax base.

Some measures under the OECD plan on “base erosion and profit shifting” will be implemented during the next year but the whole plan could take up to five years for 90 governments to implement.

The Business Council of Australia, which warned against unilateral action by Australia on tax avoidance, welcomed the OECD plan.

BCA chief executive Jennifer Westacott said: “The 21st century world economy, with its increasing globalisation and digitisation, has challenged long-standing international tax conventions. These global issues require a global solution, which is why the success of the BEPS process is important.”