5th April 2017
Competing political incentives colour every government’s tax collection aims, and for the moment it seems like the trend in Australia is to keep close watch on international business and investing in the hopes of closing loopholes and boosting government revenue.
One field attracting extra scrutiny lately is that of international IT-based products and services. Much attention has been paid to the surprising revelation that Apple has paid most of its New Zealand taxes instead to Australia, and the region has seen a subsequent resurgence of interest in the unorthodox tax arrangements of Apple and other companies like it.
Apple itself was subject to an audit of its previous tax reports in Australia, and the resulting “tax adjustments” making up for previous underpayment erased nearly all of its profits in the country last year. Similar corrections have taken place in the EU, where the company was ordered to pay $19 billion in back taxes after a thorough review.
Europe’s bold decision has led other countries, notably Australia, to focus on similar recuperation and reform efforts. In recent weeks, the Turnbull government passed a Diverted Profits Tax (a.k.a. “Google tax”) law with the hope of ultimately recovering up to $2 billion in revenue from companies like Google and Apple – as well as others, such as BHP Billiton, Chevron and Crown. The law significantly increases the tax rate for giant multinational companies with sizeable (>$25 million) annual revenue in Australia.
Whether these laws will be tightly enforced is a question that only time can answer, but it is worth noting that dozens of audits of large multinationals are already underway. Meanwhile, the ATO is also paying special attention to potential tax avoidance offenders in other sectors of the economy.
The gold-trading industry in Australia is undergoing a change in its GST payment obligations, thanks to a recent change in the law. Previously a voluntary commitment, entities in gold (and other precious metals) will soon need to pay GST when purchasing the metals – and can no longer categorise such purchases as second-hand goods. The new legislation is a response to a previous loophole allowing tax payments to be avoided by melting the metal down to scrap to avoid tax payments, before re-molding it into bullion.
Australian citizens are also being monitored for potential offshoring of undeclared assets. The Serious Financial Crime Taskforce recently announced that 346 Australians are under investigation for holding unnamed Swiss bank accounts for the purpose of evading tax payments.
The end result of these investigations – as well as the legislation and enforcement actions summarised above – is as yet unknown, but some lessons are already clearly in view. One of these is the importance of being prepared for an audit or investigation, particularly for those accountants whose clients have unusual or complex financial arrangements.
Another lesson is that the evolving laws and political winds – both international and domestic – must be watched closely and continuously. Long-available loopholes are being closed, new industries are being identified and monitored, and the government is losing its fear of going after large and powerful targets in its quest for tax enforcement.
(primary source: https://www.businessinsider.com.au/apple-paid-36-million-in-new-zealand-taxes-to-the-australian-taxation-office-2017-3)