10th May 2018

As the government announces its plan to cut taxes for companies and provide relief for lower and middle-income workers, Treasury Chief Scott Morrison also noted the need to put a stop to tax evasion. To that end, the Australian Taxation Office is notably ramping up its efforts to collect from companies with unpaid tax bills.

Among the companies targeted is Facebook, which settled an outstanding tax bill in October but has just been hit with an additional charge of $31.3 million for other instances of underpayment. Google also has been hit, with the ATO looking to collect on a numbers disparity in the search engine giant’s financial reporting. Google uses AASB 15 to report on its finances, allowing it to declare a revenue of $1.02 billion. Using AASB 118 would have required the company to report revenue of over $3.45 billion.

ResMed, a medical device manufacturer, also finds itself in the ATO’s crosshairs. An examination of the company’s finances led the ATO to conclude that the company underpaid its income taxes by $151.7 million during a 4-year period beginning in 2009. Added to that bill is an extra $38.4 million in interest that the ATO is set on taking from the company.

Other entities are very likely to find themselves as targets of ATO investigators as well. “Australian nursing home giants shifting millions in profits offshore,” reads a headline in the Guardian this month, naming Bupa and Opal as having allegedly constructed a complex series of legal tricks to avoid declaring significant amounts of their income, even as the companies collect massive subsidies from the government. These activities were highlighted in a report by the Tax Justice Network, which has been making waves in Australia.

Other reports highlight additional suspect behaviour. “Australia Chasing $675 Million [A$900 million] Evaded Through Swiss Accounts,” announces Bloomberg, with the ATO putting over 100 Australians and 5,000 separate transactions under high levels of scrutiny for suspicious deposits in Swiss banks as a means of avoiding the payment of taxes at home. One of these, according to Minister for Revenue Kelly O’Dwyer, “is under assessment by the Government’s cross-agency Serious Financial Crime Taskforce.”

In addition, much publicity continues to be devoted to the profitable loopholes exploited by multinational oil and natural gas companies operating in Australia, putting pressure on the government to amend the rules. Some estimates put the lost tax revenue as high as $20 billion, a number reached by comparing Australia’s small (<$1 billion) related tax revenue with the >$20 billion taken by the government of Qatar, a country whose exports of liquefied natural gas are on par with Australia’s.

In an era of increased media attention, big data, and automatic computerised financial analysis, it is easier than ever for investigators to flag potential abuses of the tax system.





         Chartered Accountants

Tax Institure