Several large consumer electronics companies who operate their Australian operations via a Singapore sales hub are facing a new ATO crackdown which could see them forced to pay millions in tax, if they do not comply with new Australian tax rulings.
Channelnews understands that several companies CE companies operate via Singapore into the Australian market.
Among the companies that operate via Singapore Apple, Toshiba, Hewlett-Packard, Sony, Microsoft and several large TV manufacturers.
In the past companies like Sony have been fined over $30 million in tax related crackdowns.
Later today the ATO is set to issue a new discussion paper.
The ATO claim that any multinational group claiming that its tax haven marketing subsidiary is making a profit of more than 100 per cent of costs runs an increased risk of a full-scale tax audit or legal action.
Deputy commissioner Jeremy Hirschhorn said the ATO’s proposed safe profit margin was “objectively generous” but he expected some in industry to be outraged. “If you would never outsource at that profit, it can’t be the right price,” he told The Australian.
“Doubling your money is very generous.
Deputy commissioner Jeremy Hirschhorn said the ATO’s proposed safe profit margin was “objectively generous” but he expected some in industry to be outraged. “If you would never outsource at that profit, it can’t be the right price,” he told The Australian.
“Doubling your money is very generous.
“I am expecting that from some of those people who are many times that … they will be saying that this is outrageous, that we have highly valuable functions that deserve these very high remunerations.”
Hubs will be graded from low-risk green for an operation that satisfies the profit limit rule through blue, yellow and amber to very high-risk red for companies that will not or cannot supply the ATO with all the information it demands. Those in the green zone are eligible for perks including simplified record keeping, but hubs in the red zone are “high priority” targets for action including immediate audit and litigation.
Mr Hirschhorn said of the 25-30 offshore sales hubs identified by the ATO, between a third and a half were in the green and blue zones, but targets at the top end of the risk spectrum had already been identified.
“The amber and red zones are not theoretical,” he said.
Clayton Utz tax partner Niv Tadmore told the Australian newspaper the ATO was trying to address the key issue of transfer pricing — the price at which goods change hands within a multinational — and the allocation of profits and risks between Australia and Singapore. He said transfer pricing disputes were set to become “more common and more comprehensive”.
“I believe the ATO has been reviewing over 20 Singapore structures in recent years, and it has done so in a very forensic and comprehensive manner,” Mr Tadmore said. “The overall upshot is that the ATO thinks that more, or much more, profits should be allocated to Australia.
