ATO takes tighter approach to deals with multinationals on future taxes
Tax Commissioner Chris Jordan has become more picky about entering agreements with multinationals aimed at giving companies certainty about their tax payment requirements in Australia in future years.
Taxpayers can lock in their tax payment for a period of about three years via an “advanced pricing agreement”, or APA.
Technology giants like Apple and Google have used such agreements with governments all over the world for decades.
New Australian Taxation Office figures show that in 2014-15, there were 148 active APAs compared with 175 the previous year. Most were taxpayer initiated.
Last week, several oil and gas giants such as Chevron and technology companies Uber and Airbnb were hauled before the Senate inquiry into corporate tax avoidance.
Uber admitted to the inquiry that about 25 per cent of each transaction in Australia was routed to its head company in the Netherlands, while Airbnb said 3 per cent of each transaction went via Ireland.
In this environment, the ATO has become more careful about deals on future taxes. For example, the ATO had delayed renewing an APA with Apple (which the company confirmed in its submission to the corporate tax inquiry).
The ATO data shows APA renewals have increased from 10 to 15, but new APAs have dipped from 25 to 16.
It also shows that in 2014-15, more than 5600 businesses reported international related party dealings. They collectively paid about $35 billion in company income tax.
However, these figures may change once more businesses lodge tax returns in the new year.
As Fairfax Media reported last year, based on the Tax Office’s 2013-14 annual report, multinationals operating in Australia paid almost $40 billion in company income tax and transacted $400 billion worth of related party deals.
An ATO spokeswoman said: “We have not reported a total value of international related party dealings for 2014-15 as a meaningful comparison cannot be made between the two years.”
Despite being more discerning on APAs, the Tax Office was not litigating in the top end of town as much as it once did.
Mr Jordan settled on $3 billion worth of assessments with large businesses last financial year, instead of heading to court.
More settlements could happen.
Mr Jordan has said multinationals are approaching the ATO to negotiate before the Turnbull government’s tougher anti-avoidance laws take effect in January.