Under the microscope: 86 multinationals are being investigated by the ATO. Photo: Andrew Quilty
A special unit within the Australian Taxation Office is looking into the affairs of 86 'high risk' multinationals with operations in Australia, as part of its efforts to stop companies shifting profits overseas to avoid tax.
ATO deputy commissioner Mark Konza told The Australian Financial Review that 233 companies initially flagged for review had been narrowed down to 86 "high-risk" cases, which may result in audits down the track.
"We have identified an initial 86 cases where we will review structures and arrangements to see if they represent an inappropriate shifting of profits outside of Australia," Mr Konza said.
The ATO program is believed to have a team of about 100 staff across the country.
The companies identified cannot be named but are operating in Australia, with significant cross-border transactions. The four-year program to address "international structuring and profit-shifting" comes amid the global fight to stop multinationals, such as Apple, Google and Amazon, shifting profits to avoid tax.
An investigation earlier this month found Apple shifted an estimated $8.9 billion in untaxed profits to Ireland over the past decade, despite earning $26.7 billion through sales of its products in Australia over the same period. Ireland is a low-tax jurisdiction but not a tax haven.
"We are focusing on a large number of companies that have undertaken international restructures," Mr Konza said. "This work is supported by additional funding from the government [in the May budget]." The then treasurer, Wayne Swan, had announced an extra $109.1 million for the ATO to look into areas such as marketing hubs that facilitate profit-shifting.
The ATO is concerned about companies using complex structures to shift profits through tax havens. It is also looking at multinationals using "thin capitalisation" – the loading debt into high-tax countries and profits to low-tax.
The Tax Office's focus on multinationals has increased the workload for big-four accounting firms. KPMG chief executive Gary Wingrove has made transfer pricing a priority recruitment area for the coming year.
G20 governments have instructed the Organisation for Economic Co-operation and Development to devise a change in international tax laws to stop companies from routing profits through tax havens.
The OECD will work with G20 governments over the coming months to implement specific parts of its plan, known as the Base Erosion and Profit Shifting action plan.
KPMG transfer pricing partner Anthony Seve said the ATO was seeking detailed information on sales and profits, and tax paid for each jurisdiction in which the group operates. He said that in some respects, the office was "well ahead of the curve" in terms of the global fight against profit-shifting.
"The ATO is taking its position in the G20 very seriously," he said.
The program was "controversial" and "there's a question of how far this should go", Mr Seve said. "But . . . where companies are not giving information, the Tax Office is determined to get information through statutory means.
The Australian Financial Review