Save
Aggressive tax advisers ‘believe their own fairy tales’: ATO
When it comes to the legitimacy of tax avoidance, some tax advisers “believe their own fairy tales”, the Australian Tax Office has said.
Aggressive tax advisers ‘believe their own fairy tales’: ATO
When it comes to the legitimacy of tax avoidance, some tax advisers “believe their own fairy tales”, the Australian Tax Office has said.
Reflecting on the International Consortium of Investigative Journalists (ICIJ) explosive tax avoidance leaks in 2016 and 2017, the ATO’s commissioner, Chris Jordan said the Paradise Papers and the Panama Papers highlighted the “story telling” role of companies’ tax advisers in aggressive tax planning.
He said the tax advisers, tasked with finding legal ways to avoid taxes “delivered the fairy tale” to companies.
“These experts have been writing stories for so long they are starting to believe their own fairy tales. Some of these emails give us some insights into that. They’re talking about putting the story together.”
Speaking to the ICIJ’s Will Fitzgibbon, Mr Jordan explained that the “fairy tales” are the result of companies’ quests to pay the lowest possible tax.
He gave the example of a hypothetical company which wants to pay 5 per cent tax on its revenue. The tax advisers are then effectively asked: “How can we work back from that to effectively create a story that justifies that [5 per cent] as an end result?’
“They’re starting with something they think is acceptable, then they get the transfer pricing experts in, and justify that.”
If multinational companies and their advisers are called into the ATO to explain their complex structures, they then present the tax office with a complicated “spaghetti diagram” and then ask the ATO: “Who are you to challenge these reports?” Mr Jordan said.
“Often it’s a mistake to get dragged into the spaghetti,” he continued.
“They want you to play on their turf. Often, what we do, is look at the economic outcome in Australia. What was the true profit earned here, and has the tax been paid on that? It’s better to stand back and say, ‘What are they really making in Australia?’”
The ATO’s international deputy commission and liaison with the Joint International Tax Shelter Information and Collaboration network, Mark Konza, added that the Paradise Papers, released in 2016 had more data on corporate tax evasion than individual tax evasion.
He said that data revealed that it was more than people simply hiding their money; “You [find] them engaging in arrangements that they think are within the law.”
Shareholders may be paying the price
Pilot research from QUT Business School Academics, Kerrie Sadiq and Bronwyn McCredie has revealed that companies which pay more tax tend to deliver better returns for their shareholders.
According to their unreleased study, a higher rate of tax paid correlated with higher returns on investment for their shareholders, while share prices also increased.
Writing for The Conversation, the academics said: “Clearly, factors besides tax may have influenced these results. However, the fact that shareholders appear to achieve greater returns from corporations which are less aggressive tax planners and pay a greater percentage of tax is reason to pause.”
They explained that this trend was most likely caused by Australia’s dividend imputation system. The system means that the company tax paid is eventually refunded to the shareholders, so shareholders only pay the difference between their individual rate of tax and the company’s tax rate.
“As such, the corporate tax rate has very little effect on Australian resident shareholders. The story is not the same for foreign investors as company tax is treated as a final tax.
“In this case, foreign investors do not get the benefit of Australia’s imputation system, effectively resulting in the corporate tax paid being the tax paid by the shareholder.”
RELATED ARTICLES
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- ACE25
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.