Global companies like Google, Starbucks and IKEA are cashing in on cuts to the Australian Taxation Office's ability to make them pay their fair share of taxes here, an ATO insider has warned.
Despite growing pressure to crack down on multinationals reaping massive profits in Australia each year and paying little tax, the departing taxation official says the ATO has been scaling back its technical ability to force the "transnationals" to pay up.
The former international taxation specialist says private advisors hired by "transnationals" to minimise their tax payments know too much about internal workings of the ATO and are using their insider knowledge to profit their clients.
Public servants with hundreds of years of combined technical know-how have left the ATO's "Internationals' Group" in recent years, with the process accelerated by the present massive cuts to the agency, the insider has warned.
The trend has left younger and less experienced tax officials facing the might of the "big four" accounting firms, KPMG, PwC, Deloitte's and Ernst and Young, who advise the transnationals.
But the ATO has defended its record in Internationals saying it had recently gone on a recruitment drive to beef up its technical know-how.
The former taxation official says that case deadlines of 90 days imposed on audit teams by ATO bosses eager to increase the number of cases covered have allowed transnationals to simply "wait out" the Taxation Office or to have low-ball settlements accepted.
Fairfax revealed on Monday that Swedish furniture giant IKEA paid just $7.7 million in tax in Australia in 2013-2014, despite banking an operating profit of $92 million for its Australian activities that year.
The flatpack operation joins other global outfits like Google and Apple who remit minuscule percentages of vast Australian profits to the Commonwealth.
The ATO has joined tax authorities of other G20 nations in trying to tackle the movement of profits to tax havens, known as "base erosion", but the former ATO Internationals insider says the high-profile effort is a distraction from old-fashioned "bread-and-butter" tax enforcement.
The retiring mid-ranking executive, who has asked to have his identity protected, said the big threats to revenue came from changes made by the ATO itself with big four accounting firms emboldened by the loss of experienced ATO technical staff and trying ever more aggressive tax avoidance schemes.
"That's more likely to be the case in a climate of a loss of staff, it has progressively become that way during the past three years, Internationals has dramatically shrunk in its technical staff," the insider said.
"We lost the overwhelming majority of executive level one and two technical staff about three years ago."
He said that time restrictions imposed by ATO management were making "hard-nosed" audits, taking months or even years, more difficult to carry out.
"The idea that poring over published accounting reports of a transnational is going to disclose potential tax mischief, is pie-an-the sky," he said.
"But the Taxation Office is saying they want say, a 90-day turnaround, the office doesn't want a team to be bogged down in a case that might take months or years, unless they know there is going to be a revenue outcome.
"If you truncate cases you're sending a message to large taxpayers that if they drag the Taxation Office out long enough, then they will either back down or they will take pretty much anything you offer them,"
Taxation officials were often pitted against big four accountant who were armed with detailed and accurate knowledge of internal ATO workings.
"There's a bit of a revolving door between the big four and the ATO with staff moving in between, so word gets around very very quickly," the insider said.
"They know what our rate of coverage is, they know what our staff capability levels are, they've got their finger on the pulse.
"They're tough, they're hard work, you're not dealing with fools, the big four have done their homework very well."
An ATO spokeswoman said staffing levels in Internationals had remained steady during the past three years but internal Taxation Office documents show the profile of workers in the unit had shifted to a more junior cohort.
"Compliance teams carry out their review work according to project plans which allow sufficient time for them to properly complete it," the spokeswoman said.
"They are assisted by senior staff who advise them on technical and planning issues.
"International strategies and organisation has been and will continue to be reviewed to ensure it can find the right balance between service and advice and active compliance and audits to support voluntary compliance."
Sign up for our newsletter to stay up to date.