ATO digs for dirt on miners

The Australian Taxation Office has identified at least 36 Australian companies with related entities in Switzerland that may have engaged in tax evasion costing billions in possible tax revenue.

According to internal communications between the ATO and the Department of Treasury the bulk of companies under investigation are based in the resources sector.

On Monday the tax office revealed for the first time that, since 2010, it had been in possession of a list of 261 Australian taxpayers with HSBC Swiss bank accounts.

That list is understood to have been handed to the ATO by the French government, which obtained it in 2008 from former HSBC employee Herve Falciani.

On Sunday, the Washington-based International Consortium of Investigative Journalists released those files publicly and said those clients with links to Australia had combined holdings of $US959.2 million ($1.23 billion).

The previously confidential documents from February 2013 — advising on Australia’s treaty negotiations with Switzerland — states that a detailed analysis by the ATO identified 36 entities with related party dealings in Switzerland that are likely to have engaged in possible tax evasion.

“Thirty-six entities with Swiss IRPD (international related party dealings) which were thought to be of possible concern were subject to detailed analysis.â€

The briefing note found that 21 of the companies, or 58 per cent, had engaged in a “consolidation event†that included “top-hatting†— a process that imposes a holding company over the operating company in a foreign jurisdiction.

The other tax-reducing activities identified by the ATO were the sales and lease back of an intellectual property arrangement as well as the creation of an event that allowed the exemption of certain foreign dividends.

The documents emerged in Freedom of Information requests made available in submissions to the upcoming Senate inquiry into corporate tax avoidance.

The ATO found that while the total tax payable from the 36 companies was $9.2bn in 2011, the Swiss structures could be allowing the companies to save billions more, “with every 1 per cent of tax they are able to ‘save’ resulting in a revenue decrease of $92m†.

While names of individual companies had been redacted, the ATO said it was in negotiations with a “Swiss-based large corporate†but was being “frustrated and impeded in obtaining verifiable data†, with revenue at risk estimated to be $20m.

It also noted that Swiss authorities were less compliant in providing details than comparable jurisdictions that were also popular offshore tax havens for Australian corporations.

“It should be noted that requesting the same information from, for example, Singapore would now receive a positive response,†the document states.

Despite technology companies coming under increased scrutiny for offshore tax arrangements, the ATO said the bulk of the companies under investigation in Switzerland came from the resources sector.

“The amount of tax payable by entities with Swiss IRPD is largely attributable (to) the mining sector. The mining sector contributed 75.2 per cent of Swiss-related tax payable in 2000 and this had grown to 79.8 (per cent) by the end of the period. The mining sector has performed well over the period.â€

This article first appeared in The Australian Business Review.