Windfalls lost to artful dodgers.
Australian companies sent almost $ 60 billion to related parties in tax havens in 2012, with payments to Singapore and Ireland featuring high on the list, according to new data.
The data, never before released by the Australian Tax Office, provides an insight into how multinational groups shuffle money between countries and comes amid an international push to halt the use of tax havens by major corporations.
Due to their low tax rates, Singapore and Ireland are used by multinationals, especially technology companies such as Google and Apple, as locations for sales hubs or corporate headquarters.
In 2012 almost $ 40 billion was sent to Singapore, which led the payments table despite being only Australia’s fourth-largest import market that year, according to Department of Foreign Affairs and Trade data.
At more than $ 7.5 billion, Ireland, which ranks 32nd among Australia’s trading partners, was sixth on the payments table.
Mark Zirnsak, a representative of the Tax Justice Network, said the data demonstrated the need for Australia to be aggressive in its pursuit of companies that shift profits offshore. He said it highlighted the need for greater transparency around corporate transactions to establish which transactions were legitimate and not simply tax dodging.
”There are some very concerning transfers here that need an explanation,” he said. ”If companies aren’t going to voluntarily disclose this information to the public, then there needs to be an explanation as to why money is ending up in these exotic places.”
The ATO data shows that Australia was also on the receiving end of flows from tax havens. Switzerland was the top source of revenue for Australian companies, at $ 35.6 billion in revenue, and Singapore came second at $ 12.3 billion.
However, a BusinessDay analysis of the ATO data shows Australian companies paid $ 1.22 billion more to 26 tax havens, including Singapore, Ireland and Luxembourg, than they received from the same countries.
Almost $ 60 billion was paid to the 26 havens, which also take in jurisdictions in the Channel Islands and the Caribbean, against about $ 57.8 million received.
The new data may understate the flows because the ATO only asks for each company’s biggest trades and does not require reports from companies with less than $ 2 million in overseas related party dealings.
Companies have had to provide the information since the end of 2012 as the ATO stepped up scrutiny of international tax risks.
In its 2012-13 compliance plan, the ATO said these risks ”relate mainly to dealings with related parties and capital transactions”.
”Growth in international related-party dealings exceeds the growth in the economy generally, and accounts for around 50 per cent of cross-border trade,” the ATO said. ”Multinational groups may attempt to structure their global operations to minimise tax costs by, for example, maximising the proportion of their profits recorded in low-tax jurisdictions such as Singapore and Hong Kong.
”Our concern is with related-party dealings that are contrived to avoid paying a fair share of tax on profits earned in Australia.”
The ATO’s latest compliance plan targets companies that ”over or underprice goods and services charged to related companies in other jurisdictions to achieve a tax benefit”.
International tax lawyer Tony Anamourlis, of Templeton Fox Rothschild, said there would be more to come from the ATO as it responded to the OECD, which is leading the push by governments to tighten the tax system.
”The OECD has brought out a draft paper now dealing with tax treaty shopping … that will impact significantly on tax havens and taxpayers.”