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Australian Taxation Office targets multinational tax avoidance

Australian Taxation Office targets multinational tax avoidance

CANBERRA: In July last year, ABC’s The Business and Michael West featured an extraordinary raft of allegations from a 32-year veteran industry insider turned whistleblower, George Rozvany, who claimed that multinational tax avoidance was “out of control” and cost the Budget up to $50 billion dollars a year in lost revenue. Rozvany claimed the Big Four accounting firms – PwC, Deloitte, KPMG and Ernst & Young – were the key masterminds behind the tax dodging. He also cited sham transfer pricing arrangements as a key avenue by which multinational tax avoidance takes place. Then in September, Michael West released another alarming report about multinational tax avoidance featuring Michael Hibbins – a former executive of a global oil major operating in Australia – who claimed that tax avoidance is “rife”, with tax avoidance taking place mostly via transferring profits offshore while accepting the transfer of group costs into Australia. And in November, an Auditor-General’s investigation found that fossil fuel giants are using questionable deductions to reduce their tax bills by billions of dollars.

In may this year, the Australian Taxation Office (ATO) issued new guidelines governing loans made by multinationals to their local units in the wake of the Chevron tax case. The guidelines set out what the ATO expects is reasonable in terms of the interest rate foreign companies charge their subsidiaries, which in turn decides the level of tax deductions that are then claimed. ATO Deputy Commissioner, Jeremy Hirschhorn, at the time said it was confident of raising a significant amount of extra tax in the wake of the new guidelines.