Welcome to Tax in the News – the irregular column published by ICGTAX that seeks to explain the news stories on tax that have hit the headlines. No political spin, just the facts, thank you.

     

    Tax avoidance crackdown nets $7.7b from foreign multinationals

    Australian Financial Review. 20 February 2019 – link to full article

     

    This story is based upon evidence provided by Chris Jordan (Commissioner of Taxation) and Jeremy Hirschhorn (Second Commissioner, Client Engagement Group) to the Senate Estimates Committee for Economics on 19 February 2019. (A link to the transcript is here and the relevant testimony starts at page 59)

     

    Evidence from Hirschhorn is that the ATO has raised liabilities against foreign multinationals and Australian public groups of $7.7b and raised liabilities of $4.7b against wealthy individuals and associated groups. Of this total of $12.4b in raised liabilities, $7.7 has actually been collected.

     

    Hirschhorn’s evidence is also that about $3.3b of that is from the activities of the Tax Avoidance Taskforce.

     

    When asked whether this was a legislative issue or an enforcement issue, Hirschhorn responded that the two elements were difficult to uncouple. The legislative package of the “upgraded” general anti- avoidance rule, the multinational anti-avoidance rule, the diverted profits tax, upgrading of transfer pricing rules and country-by-country reporting, along with boosted capability and activity by the Tax Avoidance Taskforce have worked in combination.

     

    Jordan gave evidence that 44 large international groups have changed their business model going forward, including creating a taxable presence in Australia and reducing interest rates on intra-group loans. $100b in debt has been restructured to fit within the ATO “green zone” for risk rating. This is likely to have a much greater impact going forward than the more visible $7b in recovered amounts.

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