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.
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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