What we know will be in the Senate inquiry’s interim report on multinational tax avoidance

The Senate inquiry into multinational tax avoidance will table an interim report today detailing some of its findings after holding five public hearings and receiving more than 100 submissions from some of the world’s largest companies including Apple, Microsoft, BHP, Rio Tinto and Google.

The final report is due to be handed down on November 30. But the interim report will make 18 recommendations covering tax avoidance and “aggressive minimisation”, potential areas of unilateral action to protect Australia’s revenue base, and the capacity of Australian government agencies to collect corporate taxes.

Led by Labor senator Sam Dastyari, it’s expected the final report will focus on transfer pricing and profit shifting of multinational corporations. It’s understood the committee will look at the use of tax havens, the role of private accounting firms in tax avoidance and how foreign companies have avoided establishing themselves permanently in Australia.

A spokesperson for the committee said: “In the past, a multinational company with a branch in Australia had a local board that was tasked with maximizing profits. But increasingly, Australian operations of multinational companies are becoming agents, shifting revenue offshore specifically to minimize Australian profits. This was evident throughout the inquiry.”

Commenting on Google, Microsoft and Apple, the spokesperson said: “The American headquartered tech companies run their Australian companies as marketing and distribution companies, shifting revenue earned in Australia to other jurisdictions. The legitimacy of these transfers will continue to be a focus for the inquiry.”

In the interim report, the committee is likely to suggest that while Australia should work with other OECD countries to combat tax avoidance, it shouldn’t be dissuaded from taking unilateral action.

It is understood one of the 18 recommendations is to require big companies to publicly report financial information like revenue, expenses, tax paid, and tax benefits/deductions from specific government incentives such as fuel rebates and R&D offsets.

It will also suggest a public register of tax avoidance settlements reached with the ATO be established. The information is currently treated as “commercial in confidence”.

Over the weekend, there were reports the committee would ask the government to start naming and shaming companies which avoided paying their fair share of tax locally. However, assistant treasurer Josh Frydenberg today ruled out the idea.

“We’re not going to name and shame companies because we have better resourced the ATO, both financially and with new legislation, to go after these companies,” he said. “It doesn’t suit Australia’s purposes.

“The ATO is going after these companies, and we have more than 20 audits under way.”

It is also recommending that the Abbott government withdraws its attempts to change existing tax transparency laws which apply to both private and public companies. In March, Fairfax reported Prime Minister Tony Abbott told party room members that the government would dismantle tax disclosure laws after receiving complaints from private business owners that they were at risk of being kidnapped if people realised just how wealthy they were.

A senate committee spokesperson said the inquiry heard no evidence supporting the kidnapping argument.

The interim report will recommend the ATO will report at least annually to parliament on the number of audits or disputes launched involving multinational corporations, the number of cases settled with multinational corporations, the number of successful legal proceedings concluded against multinational corporations, and the staff resources allocated to tax compliance by multinational corporations.

It has also been reported the committee will recommend government departments reconsider buying tech products from companies that avoid paying their fair share of tax. According to the AFR, the committee will suggest companies state their home country for tax purposes during tendering processes.