The Australian Tax Office (ATO) can do very little to stop companies using loopholes to pay little or not tax, according to an expert.
Antony Ting, Senior Lecturer in business law at University of Sydney Business School, was commenting on the report about the ASX 200 and how 29% these companies have an effective tax rate of 10% or less.
“As long as the law allows them to minimise tax, they will,” he says.
“Tax law is very complicated and if a company wants to avoid tax they need the expertise of a law firm or an accounting firm to devise a tax avoidance structure.”
He says the large multinationals are structured in such a way that the ATO can do little about them paying little or no tax here.
He gives the example of Apple Australia which buys iPads from another Apple subsidiary in Ireland.
“In the case of multinational they may be legally be composed of up of hundreds of subsidiaries but economically are just one business,” he says.
“For the ATO under the current tax law they have to respect the structure and the legal transactions and then try to impose the right amount of tax.
“The structure is legal in the sense that they are in full compliance of the tax law.
“If we want to minimise the opportunity for them to avoid tax then we need reform or an update of the tax law.”
According to the report, some companies such as the Westfield Trust and James Hardie have an effective zero tax rate.
The G20 meeting of leaders next month in Brisbane is expected to propose an action plan to ensure profits of multinationals are recognised in the countries where sales are made and not in the jurisdiction with the lowest tax rate.
Liberal Senator Bill Heffernan this week warned that corporate tax avoidance and the repatriation of profits overseas is “the greatest financial challenge” facing Australia.
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