Showdown between ATO and big business looms as list of company tax paid is revealed

A showdown between the Australian Taxation Office and the nation’s largest companies including Chevron, Crown and BHP Billiton is looming as the tax man hits seven large companies with tax bills amounting to $2 billion.

On Friday, the ATO released its corporate tax transparency report for 2014-15, which includes limited tax information for 1904 companies.

The report includes 1579 Australian public and foreign-owned companies with an income of $100 million or more, and 325 Australian-owned resident private companies with an income of $200 million or more. It accounts for $42 billion, or 53 per cent, of tax payable.

But it is hard to extrapolate which taxpayers did not pay their fair share of tax, as the data reports company losses as “nil tax payable”. More than a third of large public and private companies paid no tax in 2014-15, with 36 per cent of large firms reporting zero tax payable.

Tax Commissioner Chris Jordan said: “No tax paid does not necessarily mean tax avoidance, and assumptions about an entity’s compliance with their tax obligations, or those of their associated groups, cannot be made solely on the basis of this data.”

He said in order to support company tax compliance, the ATO continued to have “real-time engagement with large taxpayers”, including access to a wide range of data.

Mr Jordan said Qantas was one example of a company with a very high total income in 2014-15 that paid no tax because it made a loss.

The published figures also do not relate to those resulting from ATO initiated assurance and risk assessment activities. But the ATO’s Jeremy Hirschhorn confirmed that companies were currently being reviewed and audited under the federal government’s recently boosted laws aimed at multinationals.

The Multinational Anti-Avoidance Law (MAAL) aims to address the problem of multinational companies using loopholes to minimise tax paid in Australia.

The ATO has said that of 175 companies, which are believed to include household names in the technology, mining and energy sectors, 70 have been deemed to have “fallen outside the scope” of MAAL. But 24 had already “fundamentally restructured their Australian operations”.

“We expect more, if not all, to restructure,” he said in response to question from Fairfax Media, adding that following that, there would be a discussion “to ensure they pay appropriate tax”.

Treasurer Scott Morrison said so far, “70 taxpayers have provided information satisfying the Mr Jordan that the MAAL wouldn’t apply to their arrangements, [and] 48 multinationals are being audited”.

“By the end of review of all multinationals in scope, the Commissioner [Mr Jordan] expects that up to 80 will be audited,” Mr Morrison said.

Mr Hirschhorn said more companies were now approaching the ATO to lock in secret tax deals – known as Advanced Pricing Agreements (APAs) – which allow corporates to lock in taxes for years ahead.

As of 31 October 2016 the ATO had 127 active APAs. It also has 112 APAs in progress, which means they may or may not be rolled over depending on whether companies play ball with the ATO.

Mr Hirschhorn said that in the year to June 2017 there would be seven amended assessments which, should they not be disputed, would result in an extra $2 billon of revenue.

However, he said, there was no doubt that some corporates would be disputing their tax bills. He said some of these bills had been issued already and some would be issued in the first half of next year.

He said the ATO was expecting companies to dispute the bills, meaning some cases could end up in court, or some could be settled privately with the ATO.

While in recent years most companies have opted to settle, “we would expect that some will got to litigation”, he said.

He said the most public case was the ATO’s recent win against Chevron in the Federal Court, which the company is now appealing, and will continue to unravel in February and March next year. The ATO has spent $10 million on legal costs to date in that case.

Therefore the $2 billion in revenue could take some time to flow through, if at all. “The court process, you will appreciate, is a slow one,” he said.

He said the MAAL legislation would make it easier to ensure that companies were paying their fair share of tax locally by ensuring they restructured their affairs so that local sales and profits were accounted for.

Up until now, companies have opted to shift profits to no-tax or low-tax jurisdictions overseas.

The new laws mean “they [multinationals] book all sales here”, he said.

Many of the companies impacted by the laws were in the e-commerce area. As Fairfax Media has previously reported, a number of e-commerce companies are under review or audit for routing income through low-tax nations such as Singapore to avoid paying tax locally.

Mr Hirschhorn said another issue with multinationals was complex transfer pricing structures, as the Chevron case had shown.

“Transfer pricing is an area of grey, it’s fair to say,” he said, adding that pricing that was “disproportionate” to actual profits would be challenged.

“It can be an expensive process for the taxpayer and the tax office to have a transfer pricing dispute.”

GetUp Economic Fairness Campaigner Daney Faddoul said Australians were sick and tired of “swiss cheese” tax laws with loopholes that allow massive corporations to pay no tax on billions in revenue.

Business Council of Australia chief executive Jennifer Westacott said: “Companies should pay every single dollar of tax that is required of them”.

Shadow assistant treasurer Andrew Leigh said “despite the figures showing more than one in three large firms pay no tax, the Turnbull Government still believes that cutting company tax rates should be Australia’s top economic priority”.

On Monday the Bermuda Development Agency (BDA) released a statement rejecting Oxfam’s assertion that Bermuda is a tax haven. BDA chief executive Ross Webber said Oxfam’s labelling of Bermuda as a tax haven contradicts the Organisation for Economic Cooperation and Development’s definition of a tax haven.

“We consider it an inaccurate, ill-informed and disturbingly prejudiced attack on a small north-Atlantic archipelago that exerts an enormously positive impact globally—including on the very regions and populations Oxfam wrongly accuses us of threatening,” he said.