Corporate tax avoidance: Tax Office data gives Senate ammunition

The Australian Taxation Office (ATO) has given the Senate inquiry into tax avoidance a blueprint on how to properly calculate the amount of tax multinationals should be paying each year on their Australian operations.

A critical new methodology provided to the inquiry by the ATO, and seen by the ABC, could prove that many big Australian and foreign companies pay nowhere near the level of tax they claim to.

The formula if implemented would send shudders through corporate boardrooms across Australia.

In particular, the ATO has been under immense pressure after revelations that some companies transferred billions of dollars to the low tax haven of Singapore rather than pay tax on it here.

The heat has been on US-based Google, Apple and Microsoft, but also on the two big home-grown miners, BHP Billiton and Rio Tinto.

In the 13-page document, issued in response to questions on notice from the Senate inquiry, the ATO has provided the a ready reckoner on how to calculate the effective tax paid by multinationals – not what they say they pay.

It is a powerful tool for the Senate committee’s chairman, Labor Senator Sam Dastyari, who told AM that some companies could find themselves in contempt of Parliament if they have given misleading evidence.

“This is an extraordinary development. It’s a wake-up call for the biggest tax minimisers and tax dodgers that we will get to the bottom of this and we won’t let you off the hook,” he said.

Senator Dastyari argued that it is clear that some companies have given the inquiry incorrect evidence.

“Companies have been very clever in how they’ve provided us with information,” he explained.

“The Tax Office’s own language has been that the information we’ve been provided has been factually incorrect. We haven’t been comparing apples with apples and this methodology will allow us to do it.”

The Labor senator said that many multinational corporations had structured themselves to make their tax affairs as complex as possible, but this information from the ATO will help cut through that complexity.

“The committee has the power to compel information and to compel documents, but what this does now is gives us the opportunity to be able to go back to a lot of these companies,” he said.

“We started by writing to the 40 largest companies who are identified as being potential tax minimisers to get information from them.

“This, if the committee chose to do so, would give us the opportunity to go back to them and ask them to recalculate based on this new formula.”