The Australian Tax Office has investigated 25 international technology companies over the past 18 months for tax avoidance as part of its ongoing crackdown on elaborate cross-border tax structures and profit shifting.
The federal government late last year gave the ATO extra resources to embed auditors within the local offices of multinational companies in order to stamp out the use of legal loopholes which allow global enterprises such as Google and Apple to minimse the amount of tax they pay in Australia.
Treasurer Joe Hockey at the time said Australia was missing out on up to $3 billion as a result of these schemes. Corporate tax is the second largest source of federal government revenue in Australia behind income tax.
The Australian Government has also been working with other countries, through the G20 and the OECD, to address the loopholes allowing tax minimisation to occur.
In a speech to the Australasian Tax Teachers’ Association conference at the University of Adelaide yesterday, ATO second commissioner Andrew Mills said the agency had spent the past 18 months closely examining the tax arrangements of multinationals with the help of treaty and information sharing agreements.
He said the ATO has commenced more than 200 client risk reviews on multinational companies, of which 25 are technology or digital companies.
Half of the reviews have been completed, and the ATO has begun 20 audits on companies where it identified "significant concerns".
The ATO declined to name the 25 technology companies in question.
It did however confirm it had commenced audits of 12 tech companies.
Mills said risk identification was ongoing and the ATO expected to start testing some of its cases in court by the second half of the 2015.
"No doubt the world will be watching with interest to see the outcomes," he said.
"We also expect some companies will accept that they need to contribute more tax in Australia without the need for litigation."
Late last year the Parliament passed an internal tax agreement amendment which gave legal effect to a treaty Australia signed with Switzerland (a known tax haven) in 2013.
The treaty allows Australia and Switzerland to exchange information on taxpayers to catch those attempting to avoid paying their fair share.
"It’s now a question of when, not if, tax dodgers are caught," Mills said.
More recently, 17 tax commissioners from the Asia Pacific announced they would establish a taskforce to collaborate on tax issues, increase tax transparency and share compliance tactics.
It followed an agreement at the November G20 meeting to finalise work on the OECD’s action plan on base erosion and profit shifting this year.
The ATO will also this year begin publishing the data from tax filings of companies earning more than $100 million annually, thanks to the introduction of an amendment to tax law allowing the agency to make the information public.
The law is expected to impact up to 2000 companies operating in Australia. The data to be published includes the total income, the taxable income, and the income tax payable for the 2013-14 income year.