Daily Management Review

ATO Chief retorts to MNC tax evasion evidences


04/22/2015




Australian Tax Commissioner Chris Jordan has accused companies including Apple, Microsoft, Google, Rio Tinto and BHP Billiton for giving inaccurate evidence to the Senate inquiry into corporate tax avoidance. The ongoing tax evasion accusations on leading MNCs are not new with every country posting some resistance to their practices. But Australia has been at the disadvantageous side for long with companies showing Australian profits at the APAC's tax haven, Singapore.

The inquiry into tax avoidance had a second round of hearing where the commissioner went very close to saying that these companies have misled the parliament. Mr Jordan said that the evidence of these companies at earlier hearings was not accurately reflecting the reality that the level of taxes they pay locally was being contested by the ATO. He noted that had to correct the record. "We do take issue and dispute some of the comments that have been made," he said.
 
Mr Jordan specifically mentioned that the technology companies including Apple, Google and Microsoft have all admitted in earlier hearings that they send profits through "hubs" in Singapore. This system has helped them by legally paying lower tax in Australia. But the companies have also been internationally criticized for using no-tax jurisdictions such as Bermuda. Mr Jordan noted that these companies may be “paying a small amount of tax in Singapore at the margin, but at a high level, they are using no-tax nations as their tax haven.

He took aim at specific companies, starting with Apple, which had claimed it was paying an appropriate "arms length price" for its products.

In earlier hearings Apple Australia noted that it bought products such iPads and iPhones from overseas operations, and resold them and it then gets taxed on its local profit. Mr Jordan said the current ATO audit of Apple was contesting whether these affiliate sales were struck at the right price. He noted that the profit could be transferred to low-tax jurisdictions.

Microsoft's Bill Sample evidence at earlier hearings noted that there had been $2 billion in software product and service revenue booked in Singapore but only $100 million in Australia. Mr Jordan retorted that the ATO audit was trying to determine whether this was the appropriate split of revenue, which could thereby mean the company has to pay more tax in Australia.

 Google Australia managing director Maile Carnegie had admitted at earlier hearings that revenue gained by Google for advertising services from Australian customers was booked in Singapore. But the company could not divulge the sum because it was bound by its US disclosure charges. For this, Mr Jordan replied:  "Whilst it is true that some tax is paid in Singapore, we believe it's a very small amount as revenue booked in Singapore is moved to a tax haven, Bermuda, through a series of licensing fee payments. This means the majority of profits made in Australia end up in Bermuda where no tax is paid."
Mining giants such as Rio Tinto and BHP were also under the firing squad at the hearing. Rio Tinto in the earlier hearing had announced that its Singapore hub made a $719 million profit and paid a 5 per cent tax rate ($44 million) in 2014. Mr Jordan said Rio's claim that this was a result of an arms-length transaction was "the very question that we are robustly contesting".

At the hearings, BHP corporate affairs president Tony Cudmore quoted commercial sensitivity for not revealing figures for its Singapore operations - even though its own sustainability report states that the amount was $26 million in 2014. Mr Jordan said as well as auditing BHP on tax returns going five years back, the company was disputing amended assessments "in the order of multiple hundreds of millions of dollars arising from previous Singapore hub activity."
 
 






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