Global tax schemes have once again come into the media spotlight after leaked tax information revealed Luxembourg as a tax haven for many large and high profile corporations. The leaked documents are now being reviewed by the Australian Taxation Office (ATO) to ensure the data is in compliance with Australian tax laws. The details will also be examined by the Senate Economics References Committee inquiry into corporate tax avoidance and aggressive minimisation by Australian corporations.

Large multinationals Apple, Amazon, Google and Ikea have all been mentioned in numerous news articles after reporting mega revenue yet paying minimal tax due to a web of complex tax structures.
It is becoming increasingly clear that governments around the world are focusing on Base Erosion and Profit Shifting (“BEPS”) being undertaken by large corporations. A global anti-avoidance campaign targeting multinational corporations that shift their profits to low tax jurisdictions was discussed at the recent G20 summit in Brisbane.

Deputy Commissioner of Taxation, Mr Mark Konza is also in the process of reviewing 80 high-risk multinationals with operations in Australia. We expect to see this type of activity by the ATO start to increase.

With the finalisation of Taxation Ruling TR 2014/6 in early November and the recently revised Transfer Pricing legislation, the Commissioner of Taxation is now empowered to re-price, reconstruct or disregard cross-border transactions, should they be considered non arm’s-length and generate a transfer pricing benefit in Australia. We note that these powers will be applied automatically without the need for the Commissioner’s discretion.

Next Steps

With increased scrutiny from governments around the world, the importance of maintaining adequate transfer pricing documentation is imperative. If you have undocumented inter-group dealings with international related parties or wish to discuss transfer pricing implications for your business, please contact Murray Howlett or Josh Meggs of the Taxation Services division on 07 3023 1300.