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ATO Still Lacks Teeth To Close Tax Avoidance Loophole

The Australian Taxation Office said it is “testing where companies have gone too far” in taking advantage of the existing international tax framework model but regulations made its work difficult.

During a Senate Committee hearing on corporate tax avoidance, Jeremy Hirschhorn, deputy commissioner of public groups at the ATO, said that under existing international framework model Australia does not have the right to tax the entire profit of an international organisation.

“We can only apply the transfer pricing rules that we have, which says Australia doesn’t get to tax the entire supply chain, we only get to tax the bits that are due to function, assets, and risks in Australia,” he said.

The ATO’s comments were provided in response to a report released by GetUp last week that detailed how foreign multinational technology companies and large private Australian technology companies were getting away with paying minimal tax.

The report, written by University of Technology Sydney academics Ross McClure, Roman Lanis, and Brett Govendir, said in 2013 and 2014, Australia lost $5.36 billion in corporate tax revenue from just 76 multinational corporations.

Technology companies were the second-worst offenders, paying an effective tax rate of 7.6 percent, following pharmaceutical firms that paid only 5.7 percent.

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