ATO out of control

We all know from our resident expert, Sinclair, that the issue of base erosion and tax shifting is very complicated one.  It is absolutely clear that Australia is not going to sort this out on its own and, in any case, the US is unlikely to go along for the ride.

But there was this amazing ‘investigative’ piece in The Age and SMH today which tells us a lot about the mentality of some persons in the ATO.  Read it and weep.

And on the issue of ‘ if it looks wrong, it is wrong’, the figure of nearly $9 billion of profit arising from Apple’s operations in Australia looks out by a very large factor.  And given that it is Neil Chenoweth who concocted this figure, I would say it is almost certainly wrong.

I have highlighted the most egregious parts:

The investigation into corporate tax erosion by large foreign companies was already progressing well, Mr Konza (of the ATO)said. ”We do have several digital economy companies under audit at the moment and we are getting a much better understanding of how they operate and what the potential tax implications are.

”We are finding that there are elaborate structures being put in place and we are finding that we believe there is some profit shifting that is occurring out of Australia.”

The Tax Office is not allowed to name individual taxpayers but Mr Konza said all were based overseas with substantial presence in Australia.

Google Australia’s most recent accounts show its tax bill increased from $74,000 in 2011 to $4.2 million in 2012, an effective tax rate of 15.8 per cent, rather than the headline tax rate of 30 per cent.

Last month, Fairfax Media revealed that Apple had shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade.

Google and Apple representatives declined to comment.

Mr Konza stressed that the Tax Office was scrutinising companies over illegitimate profit shifting, not routine payments to parent companies.

”There will always be a lot of profit going back to the parent of these companies legitimately, but we are seeing that there is a margin of profit shifting that concerns us as well.”

He said the three companies would be receiving position papers from the Tax Office in the next few months, allowing them to dispute the claims.

The audits are part of multilateral efforts to uncover lost tax revenue through information exchanges with other jurisdictions, which begun when the taskforce was launched last July.

They come as the OECD warns that it is ”on track” with its plan to overhaul global tax rules to tackle corporate profit shifting.

The new operation into large-scale local tax avoiders will bring together three major Tax Office anti-evasion units: Serious Non-Compliance, Aggressive Tax Planning, and Private Groups and High-wealth Individuals – the outfit behind the Wickenby operation against actor Paul Hogan and other high-flyers.

Mr Williams, the Tax Office’s Serious-Non-Compliance head, said he now wanted his troops carrying out investigations “that people will pick up in the media, that from an industry point of view will touch a chord with people, that will have multiple agency tentacles so you can get a whole-of-Commonwealth approach”.

“It’s not rocket science. The more you work closely with other people on things that are joint, the opportunities just present themselves like you would never have seen them before,” he said.

Mr Williams said cases would not be high priority unless they were going to change behaviour in broad industry sectors or among wealthy individuals.

“It’s a whole raft of strategies, from marketing and communication, through to working with partner agencies [and] criminal investigations,” he said.

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29 Responses to ATO out of control

  1. stackja

    Liberty Quotes
    “The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty.” — Eugene McCarthy

    ATO wants more taxes! Then why cut spending with all that new tax money available?

  2. entropy

    All your money belonga us.

    reminds me of Packer:

    I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.

    I’ve already given you the answer on this subject, I have told you that I pay whatever tax I am required to pay under the law, not a penny more, not a penny less, and the suggestion that I am trying to evade tax, which is what you’re putting forward, I find highly offensive and I don’t intend to cooperate with you in the blackening of my character.

  3. Grigory M

    So, Judith – what is so egregious about a multi-faceted approach to investigating people and/or companies (overseas or otherwise) who may be using unlawful means to avoid the payment of tax?

  4. entropy

    Actually it is clearly lawful or these multinationals would already be in court.

  5. entropy

    Also Chenoweth can’t ell the difference between revenue and profit. what a numpty.

  6. Sinclair Davidson

    You’d think the ATO would have learned not to over-promise revenue collections and then fail to deliver.

  7. Notafan

    Budget crisis but only companies foolish enough to be based in Australia should pay company tax.
    Google provide advertising opportunities to Australian businesses targeting Australian clients on Australian websites to purchase goods and services within Australia, but when you get your invoice you send your money to google Ireland.
    The government needs to redefine connection with Australian in the GST legislation in line with the 21st century.

  8. .

    Last month, Fairfax Media revealed that Apple had shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade.

    Quelle horror. Tear down these tax rates, Mr Hockey.

  9. Andrew

    AAPL makes $50bn a year profit.

    It seems unlikely that half of it is coming from 1/300thof the worlds population where they have no manufacturing.

  10. Myrddin Seren

    “It’s a whole raft of strategies, ……………………., through to…………..criminal investigations”

    I’ll believe the ATO is serious when they go after people like Eddy Obeid, whose clan lives a millionaire lifestyle on a modest declared trust income. Or, I am betting, Michael Williamson’s tax returns for the last decade or so did not reflect $20 million walked out the door of the HSU.

    I suspect what he means is finding poor numbties who they think will wilt under the pressure and criminalise them – rather than actually targeting crims. I mean – you could get hurt going after those Underbelly types.

  11. Rococo Liberal

    I spend my days defeating these ATO people. All I can say about this latest hoo ha is “bring it on tax boy!”

  12. duncanm

    f’ they are stupid.

    Wot do they reckon the average income in google is? My bet is it is well North of $100k.

    That’s a whole lot of income tax and employment they’re looking to nobble.

    he now wanted his troops carrying out investigations “that people will pick up in the media, that from an industry point of view will touch a chord with people,

    Mr Williams is threatening these companies with media & social blackmail.

  13. Sir Fred Lenin

    When was the last time a government put a broom thru the public service? A thorough. Cost effective look at all aspects,,spending ,work practices etc, i bet millions could be saved,also the obscene pensions paid to retired pollies and public servants ,stop indexation for a first step,they were after all paid huge salaries for pretending to work,surely they saved enough To keep them.

  14. Token

    You’d think the ATO would have learned not to over-promise revenue collections and then fail to deliver.

    Now they are used to intervening in the political process, how long before the heavily unionised staff follow the example of the IRS & “expand their role” to assist csuses the staff are sympathetic to?

  15. Biota

    we are finding that we believe there is some profit shifting that is occurring out of Australia.”

    And they needed an inquiry to find that out! Wasn’t that their starting premise?

  16. Rob

    Apple is often singled out for tax avoidance yet it is a US company that paid 2.5% of the whole US corporate tax take last year. It’s pretty clear, they pay their tax.

  17. Des Deskperson

    A friend of mine – a middle manager – has recently transferred to ATO from Human Services (DRS). My friend is shocked by the basic unprofessionalism of ATO staff in their ongoing work – lazy, sloppy, lacking in analytical skills and frequently innumerate and illiterate. This from a former DHS employee, an agency not itself renown for its high administrative standards.

    My own experience of ATO employees, for what it is worth, is they are generally unintelligent, unprofessional and incurious about the world outside their agency. Maybe the people at the very top are different, but I doubt it..

  18. Token

    My own experience of ATO employees, for what it is worth, is they are generally unintelligent, unprofessional and incurious about the world outside their agency. Maybe the people at the very top are different, but I doubt it..

    The ones I’ve known know all the tax loop holes well and use them regularly. They also stay well briefed on the cases which define the boundaries.

    It makes the pontification about legal minimization equating to avoidance by the leaders of the ATO even more startling.

  19. Boambee John

    “Now they are used to intervening in the political process, how long before the heavily unionised staff follow the example of the IRS & “expand their role” to assist csuses the staff are sympathetic to?”

    Care to bet a few aren’t already doing so?

  20. Bill Thompson

    Judith,

    Speaking of the ATO dropping the ball in dealing with tax cheats, on 5/7/2012, I attended a meeting in Sydney between victims of the largest superannuation fraud in Australian history – the ‘Trio Capital’ heist – and then Assistant Treasurer, Bill Shorten, as well as reps from ASIC & APRA. I presented a 20 page submission, documenting agency failures to protect Australians from offshore scammers – the text is included among other submissions here (see Appendix E):

    VOFF Letter to the Minister APRA ASIC ATO – 5-7-2012-Rev2.pdf
    http://www.yourvotematters.com.au/…/VOFF%20Letter%20to%20the%20Mini…‎

    When neither I. nor VOFF, had received a response from Shorten/Treasury by May, 2013, I took the opportunity to question Bill at an informal function which he attended in Lygon Street, Melbourne. I videoed the exchange & posted it on YouTube.

    http://youtu.be/eur6pMRhh2w

    I didn’t get a meaningful response from that meeting, either & the folks at VOFF are still waiting… Incidentally, while I was sitting at the venue in Lygon Street, waiting for Shorten to arrive, a lady sat down next to me & we started to chat. She asked me what I thought of Shorten & I said I’d met him previously & formed the view that, in person, he tries to be all things to all people but the follow-up isn’t necessarily all it’s cracked up to be. The lady agreed & said she’d been a Labor voter all her life but she just hoped – and I kid you not – that Shorten “didn’t do the wrong thing by Quentin Bryce’s daughter”…

  21. Rabz

    Last month, Fairfax Media revealed that Apple had shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade.

    So f*cking what?

    Every time I read of instances such as the one above, it provides some measure of satisfaction.

    Why would anyone in their right mind willingly allow themselves to have their income or assets thieved by the likes of the Australian ‘Government’ and it’s dullard lackeys?

    How much taxpayers’ money did those f*cking morons Rudd, Lardarse and the Goose piss down the drain in a relatively short period of six years?

    Oh, that’s right – well over $300 billion.

    Give my hard earned money those obscenely arrogant and stupid nonces?

    You’ve got to be f*cking kidding.

  22. Rabz

    Arrrggghhh – apostrophe fail.

  23. Des Deskperson

    ‘how long before the heavily unionised staff follow the example of the IRS & “expand their role” to assist csuses the staff are sympathetic to?’

    ACT Trotskyite John Passant used to bombard the Canberra Times with letters and articles – the latter presumably paid for – denouncing capitalism and the wealthy while at the same time working as a senior legal adviser in the ATO.

    ATO clients would have been justified in perceiving a possible conflict of interest between Mr Passant’s political views and his ability to do his job impartially and apolitically as required by the Public Service Act 1999. Of course I have no evidence that Mr Passant’s political views influenced his professional advice but the Public Service Act 1999 regards an apparent conflict of interest as seriously as a real one (s 13(7)). , If I were a person of even moderate wealth under investigation by the ATO, I wouldn’t have wanted Mr Passant anywhere near my case.

    So far as I am aware, ATO took no steps to manage the issue. Perhaps it was convinced that Mr Passant’s duties were such that no conflict of interest could have occurred, or that the risks of a perceived conflict of interest were negligible; or perhaps it realized that no one actually read his stuff, let alone took it seriously.

  24. Ruth Anne

    Judith, Tou have ‘belled the cat’. This so-called public service monolith (in number of staff, second only to Centrelink is out of control, out of touch, out of morals, out of honesty, and it’s time it was outed!
    It needs more than a broom through it.
    I have personal knowledge of at least one instance of tax officers, who are also, as lawyers, officers of the court, deliberately misleading the court.
    Des Deskperson’s comments are on the mark – except that what was mentioned is just the tip of the iceberg. These people have demonstrated bias, prejudice, reckless, and to quote another government employee whose job includes knowing a bit about what is going on in the ATO, ‘malicious behaviour’.
    These people decide who they will target based on wildly exaggerated media reports. Without checking to see if any of these reports are based on facts, or evidence, they become judge and jury, destroying lives.
    No-one talks about the suicides caused by their bully boy tactics. And even worse, the law is on their side. It is not unusual for the ATO to bankrupt a person, effectively eliminating any chance they may have of objecting or even defending themselves against this monstrous monolith.
    Lawyers call this the ATO’s ‘pay now, fight later’ tactic – a bit hard to fight once they’ve stripped you bare?
    With the recently departed Labour govt’s wild spending, the ATO has become even more aggressive in their insatiable hunger for funds. With bias and prejudice rampant within it’s many walls, some ATO staff are running their own little wars against hardworking taxpayers who cannot fight back.
    I could go on, and on, but won’t! The main point is that the ATO is oppressing many ordinary Australians, and until people agitate about this, nothing will change.
    So, thank you Judith for your article, and please encourage other journalists to write on this vital subject.
    P.S. Any statement in the above comments can be substantiated – with hard evidence.

  25. Menai Pete

    The Canberra bureaucrats are busy organising things for the allocation of their annual performance (sic) bonuses. ATO people have a history of inventing stuff during this period of bureaucratic manipulation to impress their bosses so that they get fat cheques in July.

  26. Des Deskperson

    ‘The Canberra bureaucrats are busy organising things for the allocation of their annual performance (sic) bonuses’

    But ATO doesn’t have ‘performance bonuses’ as these are generally understood in remuneration policy and practice. The current ATO EBA ties overall wage increases to meeting productivity targets, but it doesn’t encompass the payment of bonuses to individuals on the basis of their particular performance, which is what performance bonuses do.

    I haven’t time to troll through all the hundred odd agency EBA s in the APS, but I believe that most have abandoned ‘performance bonuses’. They have come to be generally regarded as neither efficient, effective nor ethical!

  27. Snoopy

    Des, perhaps Pissant did no work? Ergo, no conflict of interest.

  28. Des Deskperson raises an interesting point about me. Having been granted ASIO clearance to secret (from memory, or whatever the level is for Cabinet documents) I guess the fact that I thought big business should pay tax disqualified me from working in the ATO. But it is OK. My evil work there has finished and now I am just perverting the minds of young people at University.

    I think this is a principle that could be applied across the board. Presumably someone who worked for an organisation that thinks that the Human Rights Commission should be abolished should immediately resign from their position as a Human Rights Commissioner.

    By the way the term Trotskyite is one of Stalinist abuse. In some ways it’s fitting that a commenter on this site follows in the grand tradition of their anti-hero since there is to my mind a homology between the dictatorship of the free market and Stalinism.

  29. I’m pretty non-discriminatory regards terms like Trotskyite or Lensist or anything else.

    All should be handled with Rule .303

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