IBM Australia says it pays below the 30 per cent company tax rate, but that the Tax Office is happy with the taxes it pays.
Despite previous ATO reviews into its tax affairs, its submission to the Senate inquiry into corporate tax avoidance,said it was now considered a “low risk taxpayer” and there have been “no adverse findings” by the agency against it.
Over the income years 2010 to 2014 IBM Australia has had an average effective tax rate of 27 per cent. In 2013 the company reported a profit of $233 million on revenue of $4.12 billion.

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It notes that during 2008 and 2011 the ATO conducted two reviews of IBM Australia’s income tax affairs. These were for income years between 2005 and 2011 and “involved detailed examinations of IBM Australia’s tax affairs including its related party dealings”.
The ATO concluded that IBM Australia was properly meeting its Australian tax obligations and the reviews did not result in any adjustments to IBM Australia’s tax liability,” it said.
IBM – like many other corporates have in their submissions to the inquiry – also raved about having “received favourable ‘key taxpayer’ risk rating” from the ATO.
The agency using a risk rating system to determine who it chases every year and as Fairfax Media recently reported, there’s just one taxpayer in the nation that is now labelled “higher risk”.
Some submissions to the inquiry have questioned the accuracy of this rating system in addressing tax avoidance.
Former ATO officer Martin Lock suggests in his submission that “contrary to ATO claims, a decline in the number of disputes with large companies and multinationals is unlikely to mean the tax law has been made any clearer through ATO publications or that more taxpayers are now doing the right thing. Rather, it is more likely to mean that the ATO is not identifying or challenging as many contentious claims as before.”
He says the model, which has been in operation since 2010, relies on tax disclosures, not non-disclosures, and “mostly ignores qualitative intelligence concerning the entity’s business affairs”.
“A tax return won’t for example, disclose whether the valuations the entity uses for its thin capitalisation, transfer pricing or capital gains tax calculations are contestable – and whether a greater amount of tax is therefore payable as a result,” Mr Lock said.
It also did not account for areas classified as “other” on tax returns, which Lock says are arguably interest or royalties by definition and potentially subject to withholding tax.
Mr Lock said even if tax return analysis discloses a potentially contentious grey law issue, the tight risk review timelines imposed on compliance staff, and the a fight by the company against their rating, will likely fend off further investigation.
A company’s risk rating is usually identified in a latter to company bosses. IBM divulges what Tax Office wrote to it, including that, ‘your commitment to a cooperative compliance relationship is one we seek to have with all large business. The cooperative nature of our relationship helps to limit the consequence and impact on your business and the tax system of any potential risks that may arise’.
The company has also entered into a tax deal with the ATO – known in tax circles as an Advanced Pricing Agreement (APA) – which is a deal on how much tax is paid in future years.
The Tax Office submission to the inquiry says the use of APAs and private rulings is on the rise.
The number of private ruling requests from companies has increased by 30 per cent since 2011 and the number of Advance Pricing Arrangements (APAs) in place has increased by 12 per cent over the past three years.
Last year the Tax Office rejected six APA applications from corporates. It comes as pressure mounts on the Abbott government to hunt down multinationals lowering their tax bills.
This news story is reprinted from www.smh.com.au
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UNIVERSITIES would have to pay a 20 per cent tax on fee increases above the current student price caps, rising to 60 per cent on fees more than $5,000 above the caps, and 80 per cent on fees more than $10,000 above the caps, according to an example put forward by HECS architect Bruce Chapman in his submission advocating a tax to discourage excessive price hikes in a deregulated market.
The example assumes that the government doesn’t cut teaching funding by 20 per cent. If the cut was left in place the initial threshold could be set at a lower level. Professor Chapman stressed that the scenario is for illustrative purposes only in showing how the tax could work.
Professor Chapman has worked up the idea in partnership with higher education expert David Phillips, who has said the government is seriously considering the idea. While the submission makes clear that it is Professor Chapman and Mr Phillips’ idea and not the government’s, they nevertheless developed it with the help of the department.
“Transparently, the policy proposal is not the Government’s position. It is a suggested change to it, aimed at correcting for what many believe to be a risk and concern in the Government’s suggested reform. But, with the agreement of senior officers and the Minister’s office, Departmental officers were of assistance in developing the proposal and the illustrative example,” Professor Chapman says in his submission.
Professor Chapman’s submission makes it clear that the Group of Eight universities would be hit the most by the tax, reflecting expectations that they will have the most pricing power under deregulation. Under the fees tax, the Go8 would be expected to contribute about 55 per cent of the revenue raised from the sector as a saving for government. In contrast under the government’s plan to cut funding to the sector by 20 per cent, the Go8 will be contributing about 30 per cent of the total savings.
Professor Chapman said the proposal for a fees tax was needed because of the risk of excessively high prices driven by cheap student loans and the propensity for price to be conflated with status and quality. The advantage of the tax was that it would still allow universities the freedom to set their own fees while discouraging them from taking advantage of HECS and subsidies by setting excessively high prices.
“It is difficult to believe…that fee deregulation in the form proposed in the Budget will result in moderate-only price increases overall, and in important parts of the higher education market the potential for very high price changes seems very real,” Professor Chapman said.
However Professor Chapman isn’t calling it a tax. Instead he has called it a “University Subsidy Contingent Scheme.”
“Policies such as UCCS, if designed well, have a real potential to limit price rises to socially reasonable and fair levels,” he said.
This news story is reprinted from www.theaustralian.com.au
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THE Australian economy is expected to grow at a below-trend pace of 2.75 per cent for most of 2015 because business investment is expected be weak throughout the year.

The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, only rose by 0.30 percentage points in January, and has been below trend for the 12th consecutive month.

“We still believe that an interest-rate cut in March is the best policy to support domestic demand and maintain downward pressure on the Australian dollar and this outcome remains our forecast,” Westpac chief economist Bill Evans said.
This news story is reprinted from www.theaustralian.com.au

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Tony Abbott declares that bad people should no longer get away with playing Australia for mugs, as they have been doing (“PM talks tough on security”, 16/2). Well said, sir. The 30 large multinationals that sent hundreds of billions of dollars offshore in 2012-13 to “related entities” in Singapore and Switzerland to avoid taxes play Australians for mugs, as do News Corp and Telstra, with their nice little lurk of lending money to related overseas businesses at inflated rates, claiming the interest as a tax deduction, then lending it back to themselves at zero interest rate (“News Corp, Telstra tax bills slashed by loans merry-go-round”, Business Day, 16/2).
Our Prime Minister is intent on making needy communities meet the shortfall, instead of taking on the big boys: all swagger and no guts. Very little indication so far that our shadowy Opposition Leader will do any better.
How is this “benefit of the doubt” thing the Prime Minister warns us against different from that fundamental principle of British justice: the “presumption of innocence until proven guilty”?
Living in a bubble?
In defending his sacking of Philip Ruddock, Mr Abbott claims he was not made aware enough of the level of backbench discontent with his performance. It seems the Prime Minister has also not read a single newspaper, watched any TV news or listened to the radio for the past 12 months. Tin ear? More like “the boy in the bubble”.
This news story is reprinted from http://www.theage.com.au
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Australia’s largest banking and finance institutions have defended their corporate tax affairs and have rejected claims the tax system is “fundamentally flawed”, in submissions to a Senate inquiry.

On Monday an international investigation exposed how the Swiss arm of the HSBC bank helped wealthy clients dodge taxes around the world. Leaked files revealed that hundreds of prominent Australians held HSBC Swiss accounts.
The Senate inquiry will examine the adequacy of corporate tax laws and the effectiveness of the Australian Tax Office (ATO). It was launched before the HSBC reports were published, in response to a report from the Tax Justice Network that said scores of Australian companies were minimising tax liabilities.

So far more than 70 organisations have lodged submissions, with many corporations defending their tax practices.

The ANZ bank disputed the findings of the Tax Justice Network report, and said it was “concerned by the current debate”.

“The report suggests ANZ, among others, has underpaid its Australian corporate tax liabilities. As this submission will demonstrate, ANZ has paid, and continues to pay, its Australian tax liabilities in full in accordance with the tax laws,” it said.

Macquarie Group, which includes Macquarie Bank, said: “With regard to Australia’s tax system, it should be noted that in addition to the taxation requirements of offshore countries, Macquarie also adheres to Australia’s controlled foreign company tax provisions so that income generated in countries regarded as not having a comparable corporate tax system is treated as Australian taxable income and is taxed at the Australian rate.”
AMP acknowledged that it used offshore entities, and chose locations based on a range of factors.

“The selection of a particular location requires balancing various commercial, legal, investor and cost (including tax) factors. Commonly used fund locations include Luxembourg, which is the second largest fund centre in the world (only the USA is larger),” its submission said.

The submission said the company “does not shift to, or accumulate profits in low/zero tax jurisdictions” and “does not use the secrecy rules of jurisdictions to hide income/assets”.

The Corporate Tax Association – which represents more than 100 companies, including the Commonwealth, ANZ, NAB and HSBC Australia banks – said it “objected to views that paint a picture that the Australian corporate tax system is fundamentally flawed and that corporate taxpayers in Australia are inappropriately minimising their tax bill”.

But it acknowledged the importance of transparency, and said it had been encouraging its members to “provide more useful and concise information about their own tax performance”.

Each banking body was asked to provide information on the effective tax rate it paid.

ANZ did not do so, saying the tax rate “was a result, not a target”. 

AMP said its rate was 23.3% in the year to 31 December 2013. It noted that was “lower than the general corporate tax rate of 30%”. 

“This results from intended government tax policy and/or accounting rules. All treatments and adjustments are perfectly legitimate and not as a result of aggressive tax planning.”

Macquarie Group said its effective tax rate was “has been 38% or higher for each of the last four reporting periods”.

Public hearings will be held in the next few months, with the committee due to report by June.

This news story is reprinted from www.theguardian.com

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National Australia Bank’s quarterly business survey reveals a two-speed “patchwork economy” where the construction and services industries benefit from low interest rates, while commodity dependent companies lag.
Business confidence also dropped below the long-run average of the bank’s business survey in the last quarter of 2014.
NAB said business conditions were broadly unchanged, remaining at positive 4 index points, while confidence fell 4 points to post a reading of positive 2 index points — well below the long-run average level of 5 points.
The results show sentiment and business conditions “are generally consistent with a patchwork economy,” NAB chief economist, Alan Oster, said.
Although confidence eased in the three months to December 31, business conditions held up during the quarter, thanks to a surprisingly strong October result which proved to be short lived.
While interest rate sensitive sectors such as construction and services are strong, conditions remained softer in all other industries, particularly mining, which has been hit by the downturn in commodity prices, Mr Oster said.
The depreciation in the Australian dollar, which has fallen to multi-year lows, was helping to cushion the impact of commodity price falls for the mining sector, while industries with high import costs saw a larger impact on their conditions from the currency’s decline.
On the outlook, companies’ expectations of business conditions in three and 12 months time both eased, and the bellwether wholesale industry conditions also deteriorated, suggesting business conditions were likely to remain mired, Mr Oster said.
Investment expectations for the next 12 months suggested some pick up in spending will come, with NAB saying the latest official capital expenditure survey suggested there will be an increase in non-mining investment — although not sufficient enough to offset the “unfolding cliff” in mining.
NAB said inflation was subdued in the quarter, rising only 0.1 per cent during the three months, as soft wage growth saw retail prices ease modestly in the group’s survey, contradicting the stronger core inflation figures reported by the Bureau of Statistics.
This news story is reprinted from www.businessspectator.com.au
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