The Senate Economics References Committee is conducting an inquiry into corporate tax avoidance. The Committee is looking at tax avoidance and aggressive minimisation by corporations registered in Australia and multinational corporations operating in Australia. It is due to report by the first sitting day in June 2015 ie 1 June 2015.
The Committee has received many submissions, including from the ATO. Some of the points the ATO made in its submission include:
- For public and foreign-owned companies, in 2014, the ATO only ranked 1 as “Higher risk” under its risk differentiation framework model (RDF). This number is down from 13 in 2011. Some 307 companies were rated as “medium risk”, down from 380 in 2011. The ATO says its RDF runs risk models over 100% of the population concerned.
- Of the ATO’s total higher consequence taxpayers (ie higher risk and key taxpayers), there are currently 24 foreign-owned taxpayers. The ATO says it continues to build a catalogue of base erosion and profit shifting structures and arrangements (ie BEPS typologies) used by multinationals. At present, there are 11 broad BEPS typologies and the ATO says it uses these in conjunction with other profit-shifting risk models to detect international risks and ensure that an adequate level of investigation is undertaken.
- The ATO conducts reviews to understand risk and also undertake audit work in relation to taxpayers where it considers there is a higher likelihood of non-compliance with tax obligations. Where corporates choose not to work with the ATO, the ATO says it uses its access and related powers to investigate potential or suspected non-compliance. For 2012-13, the ATO said it assured or is assuring 60% of all cross border related party dealings through various compliance activities.
- Current revenue risks the ATO says it is seeing include: transfer mis-pricing; thin capitalisation; complex financing arrangements, sometimes employing hybrid structures or instruments, that result in “stateless” or untaxed income; and digital business platforms that have a large economic presence in a jurisdiction relative to their tax contributions. The ATO says that more than 70% of risks currently being addressed in public groups and foreign-owned corporates are international.
LTN 22, 4/2/15]