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ATO Investigating Consumer Electronics Companies, Millions Set To Be Collected

ATO Investigating Consumer Electronics Companies, Millions Set To Be Collected

Several of these Companies that include the likes of Google, eBay, Apple, Microsoft, are facing the potential of extensive audits going back several years. 

Under investigation are key mass consumer electronics retailers who have been invoiced by these Companies for products. ATO auditors are investigating how products have been sold to retailers and wether sales teams in Australia were involved in the process.  
The ATO do not believe that the retailers have been complicit in any of the tax minimisation schemes run by e-commerce vendors and consumer electronics Companies. 

The ATO is expected to issue new assessments for several technology companies by early 2015, covering the past four tax years. The assessments for tax owing, which potentially could be huge.

Last year Sony was hit $32M in fines and payments to the ATO following an extensive investigation. 

This year Acer accounted for a $15.7m dollar payment to the Australian Tax Office for past royalty withholding taxes over a 10 year period, due primarily to the non-declaration of taxes relating to the installing of Windows OS software on PC’s sold in Australia.

The Australian Taxation Office is also investigating several major e-commerce companies who use offshore Companies to sell products direct in Australia, these include, Japanese, US and European vendors. 

Tax Commissioner Chris Jordan, is spearheading the investigation. He is working with taxation teams from five other countries to pool knowledge of how consumer electronics Companies avoid paying tax in Australia. 

ChannelNews understands that the ATO is also looking at current transfer pricing agreements in place between the ATO and consumer electronics Companies. 

An investigation by The Australian Financial Review revealed Apple has shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the past decade.

Treasurer Joe Hockey has been pressing for tax treaty reform by the G20, supporting OECD initiatives released on Monday on so-called Base Erosion Profit Shifting.

Mr Hockey said this month he had asked the commissioner “to double his efforts in this area by undertaking more extensive enquiries and audits of multinational companies considered a risk to Australian tax collections”.

The AFR said recently that as part of the investigation the ATO has approached major clients of the e-commerce companies, including banks, retailers and telecommunication carriers, to test their claims that all of the tech company profits are generated by computer servers, intellectual property and management located in offshore tax havens.

The ATO has also asked the tech companies’ which employees were involved in the process of achieving a sale in Australia or whether the employees were employed by tax haven holding companies.

In another first, the ATO has scrutinised internal documents, including bonus requests by sales staff, which detail what they have done to win and to retain clients, undercutting the argument that the value and profits are generated almost entirely offshore.

Many tech companies say that they have no permanent establishment in Australia beyond a sales force (and in the case of Google a research division) which adds no real value. This allows them to say only 5 to 10 per cent of their Australian revenue is taxable.

Chris Jordan has suspended roll-overs of all advanced pricing agreements of these overseas tech companies – arrangements which determine the transfer prices the companies use when calculating their taxable income here – while the investigation continues.

Mr Jordan has been an outspoken critic of the elaborate structures used by the major technology companies.

“Now if you have the ownership of the intellectual property or a server sitting in Bermuda, and there might be one person who comes out and polishes a brass plate every so often, are you telling me that billions of dollars of value each year is attributed to that? Really?” Mr Jordan said in a May interview.