Home > Latest News > ATO Win, Puts Tax Focus On CE & Appliance Brands Millions More Could Flow Into OZ

ATO Win, Puts Tax Focus On CE & Appliance Brands Millions More Could Flow Into OZ

Overseas consumer electronics Companies and big appliance brands as well as global tech Companies who shuffle tens of millions in profits to offshore tax havens are facing new investigations after the Australian tax office had a landmark win in the Federal Court this week.

The Australian Taxation Office is celebrating its win over drinks giant PepsiCo in a tax battle over diverted profits, with the focus now on Companies such as Apple in the CE market who use Ireland to shuffle money out of Australia. While nothing is illegal about their actions to date the win by the tax office in the latest case could see them taking a look at the CE and appliance industry.

The ATO has mobilised to take on several multinationals through its Tax Avoidance Taskforce, with a number of companies in the technology arena now facing its ire “because payments have been mischaracterised, particularly payments for the use of intangible assets, such as trademarks”.

Apple has been fighting tax offices and various Governments over tax issues for decades.

In July 2020, the European General Court struck down EU tax decision as illegal, ruling in favor of Apple.

The issue was Apple’s variation of the Double Irish tax system, which, from 2004 to 2014, Apple used to shield €110.8 billion of non–US profits from being paid to local tax jurisdictions.

This year Apple suffered a setback in its battle against the order to pay an alleged €13bn (£11.3bn) tax bill in Ireland, after one of the top advisers to the European court of justice (ECJ) said a ruling in the tech company’s favour should be set side.

It is the latest twist in a near 10-year saga over allegations that Apple received favourable tax status in Ireland which resulted in a €13bn benefit, in which the tech company sided with the Irish government in battling an order to pay up issued by Europe’s competition watchdog.

This year Taiwanese Company MSI has been telling media Companies, that they (MSI) don’t have to even pay GST in Australia, a move which has been disputed despite some major tech media Companies bowing to their demands for fear of losing them as an advertiser.

ChannelNews sought advice from the tax office while insisting on the payment of GST on payments.

The latest ATO win in the taxman’s battle with multinationals over royalty withholding tax is set to rattle several big overseas tech Companies.

The Federal Court ruled in the ATO’s favour yesterday claiming PepsiCo was liable for royalty withholding tax and in the alternative diverted profits tax.

A penalty hearing will be decided at a later date.

The case marks the first time the Federal Court has ruled on a diverted profits tax matter, a power handed to the ATO in 2017 as part of its toolkit to force multinational companies to “pay the right amount of tax”.

ATO deputy commissioner Rebecca Saint said the decision against PepsiCo, by Justice Mark Moshinski, confirmed the tax office’s powers to tackle tax avoidance.

“The Pepsi matter is a lead case for our strategy to target arrangements where royalty withholding tax should have been paid,” she said.

The Australian reports that the PepsiCo matter may be subject to an appeal and Justice Moshinski has given its local bottler Asahi Beverages time to consider the judgement if the Japanese drinks giant seeks confidentiality orders.

The tax office issued alerts over the mischaracterisation of payments in 2018, laying down the law to companies and warning it was “reviewing international arrangements”.

Ms Saint said the Pepsi matter was a “lead case” for the ATO’s strategy to target arrangements where tax should have been paid.

“While there may still be more to play out in this matter, it sends strong signals to

other businesses that have similar arrangements to review and consider their tax outcomes,” she said.

The diverted profits tax is aimed at ensuring companies do not send profits offshore, subjecting funds to an upfront 40 per cent tax rate.

If the ATO are successful in the case brands such as Apple, Google, HP, Amazon and Apple as well as LG Electronics, Samsung and several big Chinese appliance brands who at this stage are abiding by current laws could end up paying millions more in taxes in Australia.

The ATO said its Tax Avoidance Taskforce has secured more than $27.7bn in additional revenue from multinationals since 2016.

The tax office also noted its efforts had resulted in changes around “the governance and culture around corporate tax”.



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