Martin Lock was formerly the top withholding-tax specialist at the Tax
Office, a role that encompassed oversight of profit shifting by
multinationals.
He is one of many former officers who have voiced their concerns to Fairfax Media about the challenge of arresting the slide in tax receipts from multinational companies operating in Australia.
Like many of his colleagues, Lock took a voluntary redundancy in June this year. During the past three years, the number of those at the Australian Taxation Office supervising international activities has been gutted, with staffing levels about a quarter of what they were. That at a time when the scourge of tax avoidance, particularly by United States tech giants, has been more pronounced than ever.
Ongoing tax secrecy laws prevent former tax officers commenting on specific company tax affairs. All of Lock's observations are based on information in the public domain.
He pulls no punches describing the profound problems of large-scale tax avoidance, describing the Australian Tax Office as politicised under the spell of Treasury and unaccountable to the public.
Its top bureaucrats are reluctant, he says, to prosecute large companies and the Big Four global tax advisory firms, PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young – as evidenced by PwC's role in the recent LuxLeaks scandal – are intimately involved in facilitating tax avoidance.
What emerges is a picture of an agency that has become compromised by powerful vested interests, although it continues to pursue small taxpayers with vigour.
Profit shifting has become a monumental problem, not just for Australia but for all developed countries with relatively high corporate tax rates. Despite this, the Australian Tax Office, though required by legislation to act independently, is yet to report the scale of the problem to parliament through the Commissioner's annual reports, says Lock.
Instead, it has been politicised, he says, and is acting as an agent of Treasury while the parliament and the public are kept in the dark.
"Innumerable references, both in its annual reports and on its website to 'working with Treasury', and ... parroting Treasurer Joe Hockey's words, belie an unapologetically politicised ATO," Lock says.
"Responding to the recent Luxembourg revelations concerning corporate tax avoidance and PwC's complicity in it, [the ATO] uses the politically charged and hackneyed terms 'aggressive tax planning' and 'unfair tax competition' as if they had any meaning or consequence under Australia's tax laws."
Under the law, they don't.
Moreover, aggressiveness and unfairness in tax avoidance are not yardsticks of tax liability; what is relevant is whether the ATO can prove that a multinational's tax schemes do not carry the tax consequences the multinational claims.
"And that's the nub of the problem, a problem the ATO speaks little about, in particular to parliament to whom it is ultimately answerable."
To achieve "tax effective outcomes" and remain "tax competitive", multinationals usually engage the services of the global tax advisory firms KPMG, PwC, Deloitte and Ernst & Young, to tailor "tax planning solutions" (concoct tax avoidance schemes, that is).
"Almost effortlessly, a new subsidiary, partnership or trust can be established in any favourable tax jurisdiction, including in a tax-treaty country ('treaty shopping')," says the man whose role encompassed the purview of tax treaties and base-profit erosion.
With little more than book entries, the multinational can then convert billions in equity into billions in "loans" from a related-party, or sell its intellectual property to the related party and license it back, dramatically altering the multinational group's prospective tax bill.
This news story is reprinted fromwww.smh.com.au
Read more details on Taxation Accountants.
He is one of many former officers who have voiced their concerns to Fairfax Media about the challenge of arresting the slide in tax receipts from multinational companies operating in Australia.
Like many of his colleagues, Lock took a voluntary redundancy in June this year. During the past three years, the number of those at the Australian Taxation Office supervising international activities has been gutted, with staffing levels about a quarter of what they were. That at a time when the scourge of tax avoidance, particularly by United States tech giants, has been more pronounced than ever.
Ongoing tax secrecy laws prevent former tax officers commenting on specific company tax affairs. All of Lock's observations are based on information in the public domain.
He pulls no punches describing the profound problems of large-scale tax avoidance, describing the Australian Tax Office as politicised under the spell of Treasury and unaccountable to the public.
Its top bureaucrats are reluctant, he says, to prosecute large companies and the Big Four global tax advisory firms, PricewaterhouseCoopers, KPMG, Deloitte and Ernst & Young – as evidenced by PwC's role in the recent LuxLeaks scandal – are intimately involved in facilitating tax avoidance.
What emerges is a picture of an agency that has become compromised by powerful vested interests, although it continues to pursue small taxpayers with vigour.
Profit shifting has become a monumental problem, not just for Australia but for all developed countries with relatively high corporate tax rates. Despite this, the Australian Tax Office, though required by legislation to act independently, is yet to report the scale of the problem to parliament through the Commissioner's annual reports, says Lock.
Instead, it has been politicised, he says, and is acting as an agent of Treasury while the parliament and the public are kept in the dark.
"Innumerable references, both in its annual reports and on its website to 'working with Treasury', and ... parroting Treasurer Joe Hockey's words, belie an unapologetically politicised ATO," Lock says.
"Responding to the recent Luxembourg revelations concerning corporate tax avoidance and PwC's complicity in it, [the ATO] uses the politically charged and hackneyed terms 'aggressive tax planning' and 'unfair tax competition' as if they had any meaning or consequence under Australia's tax laws."
Under the law, they don't.
Moreover, aggressiveness and unfairness in tax avoidance are not yardsticks of tax liability; what is relevant is whether the ATO can prove that a multinational's tax schemes do not carry the tax consequences the multinational claims.
"And that's the nub of the problem, a problem the ATO speaks little about, in particular to parliament to whom it is ultimately answerable."
To achieve "tax effective outcomes" and remain "tax competitive", multinationals usually engage the services of the global tax advisory firms KPMG, PwC, Deloitte and Ernst & Young, to tailor "tax planning solutions" (concoct tax avoidance schemes, that is).
"Almost effortlessly, a new subsidiary, partnership or trust can be established in any favourable tax jurisdiction, including in a tax-treaty country ('treaty shopping')," says the man whose role encompassed the purview of tax treaties and base-profit erosion.
With little more than book entries, the multinational can then convert billions in equity into billions in "loans" from a related-party, or sell its intellectual property to the related party and license it back, dramatically altering the multinational group's prospective tax bill.
This news story is reprinted fromwww.smh.com.au
Read more details on Taxation Accountants.
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