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07.07.2017 03:49 Age: 2 days

Multinational tax avoidance law passed in 2015 may need revising, says ATO chief


The head of the Australian Tax Office has hinted that a law passed in 2015 to combat multinational tax avoidance already needs strengthening. A corporate tax avoidance inquiry has heard claims that some multinationals had found a 'loophole' in Australian tax law, reports The Guardian.

A corporate tax avoidance inquiry has heard claims that some multinationals had found a 'loophole' in Australian tax law.

The head of the Australian Tax Office has hinted that a law passed in 2015 to combat multinational tax avoidance already needs strengthening.

ATO commissioner Chris Jordan says the tax office is trying to understand why an amendment to the Combating Multinational Tax Avoidance Act (2015), which requires the Australian operations of multinational corporations with global income above $1bn to file their own 'general purpose' financial statements in Australia, is not being fully adhered to.

Australian-specific general purpose financial statements are important because they allow the ATO and the Australian Securities and Investments Commission to see more clearly what economic activity each operation is generating.

Jordan told the National Press Club in Canberra on Wednesday that ATO officials were working with Treasury to understand how the legislation was being interpreted by some multinationals, and if it needed to be reconfigured.

Independent journalist Michael West told a corporate tax avoidance inquiry on Tuesday that an ATO source had told him some multinationals had found a "loophole" in the amendment.

He said some multinationals told the ATO they were not going to file general purpose financial statements for their entities in Australia, but would file general purpose reports for their head offices overseas instead, "mocking the intention of parliament, mocking the spirit of its lawmakers and mocking the laws of this country," West said.

Jordan said on Wednesday it would be a "lot more convenient" if the Australian operations of multinational corporations filed general purpose accounts to the ATO.

"What we want, is Australian operations general purpose accounts," he said. "Now we can get that . and we're working through that issue now to see how we can get to that point."

When asked whether it was a loophole or not, Jordan said: "Well, is it a loophole? That's what the law says. So the law says one thing, maybe that's not what was originally intended, so we're working through to see how we can have a sensible, meaningful resolution to it."

KPMG says on its website that the amendment "potentially has wide ramifications", but the meaning of the amendment is "not entirely clear".

It says the amendment is directed towards the financial reporting by entities of multinational corporations with global income above $1bn.

However, it then advises that there's considerable doubt as to whether the amendment means the Australian operations of large global entities need to prepare their own general purpose financial statements, or whether the legislation would be satisfied by a single general purpose statement being published by a global head office.

"It would appear the intention [of the amendment] is that only one set of consolidated general purpose financial statements need to be prepared if the above-mentioned company is a member of an Australian accounting consolidated group, thus reducing some of the compliance burden," KPMG has advised.

"We're working with Treasury through this issue about how it does work, because I think it was one of these late night Senate amendments the Greens and [others] passed.," said Jordan. The head of the Australian Tax Office has hinted that a law passed in 2015 to combat multinational tax avoidance already needs strengthening.

ATO commissioner Chris Jordan says the tax office is trying to understand why an amendment to the Combating Multinational Tax Avoidance Act (2015), which requires the Australian operations of multinational corporations with global income above $1bn to file their own 'general purpose' financial statements in Australia, is not being fully adhered to.

Australian-specific general purpose financial statements are important because they allow the ATO and the Australian Securities and Investments Commission to see more clearly what economic activity each operation is generating.

Jordan told the National Press Club in Canberra on Wednesday that ATO officials were working with Treasury to understand how the legislation was being interpreted by some multinationals, and if it needed to be reconfigured.

Independent journalist Michael West told a corporate tax avoidance inquiry on Tuesday that an ATO source had told him some multinationals had found a "loophole" in the amendment.

He said some multinationals told the ATO they were not going to file general purpose financial statements for their entities in Australia, but would file general purpose reports for their head offices overseas instead, "mocking the intention of parliament, mocking the spirit of its lawmakers and mocking the laws of this country," West said.

Jordan said on Wednesday it would be a "lot more convenient" if the Australian operations of multinational corporations filed general purpose accounts to the ATO.

"What we want, is Australian operations general purpose accounts," he said. "Now we can get that . and we're working through that issue now to see how we can get to that point."

When asked whether it was a loophole or not, Jordan said: "Well, is it a loophole? That's what the law says. So the law says one thing, maybe that's not what was originally intended, so we're working through to see how we can have a sensible, meaningful resolution to it."

KPMG says on its website that the amendment "potentially has wide ramifications", but the meaning of the amendment is "not entirely clear".

It says the amendment is directed towards the financial reporting by entities of multinational corporations with global income above $1bn.

However, it then advises that there's considerable doubt as to whether the amendment means the Australian operations of large global entities need to prepare their own general purpose financial statements, or whether the legislation would be satisfied by a single general purpose statement being published by a global head office.

"It would appear the intention [of the amendment] is that only one set of consolidated general purpose financial statements need to be prepared if the above-mentioned company is a member of an Australian accounting consolidated group, thus reducing some of the compliance burden," KPMG has advised.

"We're working with Treasury through this issue about how it does work, because I think it was one of these late night Senate amendments the Greens and [others] passed.," said Jordan.

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Multinational tax avoidance law passed in 2015 may need revising, says ATO chief