The Australian Greens Leader, Senator Christine Milne, uses senate estimates to ask the Australian Tax Office (ATO) about multinational tax evasion.
Senator MILNE: In the Tax Justice Network report they suggest a number of things that could be followed up. One is to support the OECD's action plan on base erosion and profit shifting. Is that something that the ATO agrees with?
Mr Olesen : We are an active participant in helping the OECD working parties work through that action plan. What action Australia takes in that is a decision for the government at the end of the day.
Senator MILNE: Are you participating in that?
Mr Olesen : Yes, we are active participants.
Senator MILNE: Have you got anything to report on what you have been doing on that, in the working groups?
Mr Olesen : One thing to report is the fact that the commissioner is not here today because he is at the FTA helping other commissioners on a joint understanding about those action items and what they might mean from an administrator's point of view. We have been very active in pursuing cooperative arrangements between revenue authorities. In fact, work we have done, and which I referred to earlier tonight, with five other revenue authorities to help understand business models that are used by various e-commerce companies was a breakthrough approach to cooperation between revenue authorities. We will be looking to continue those approaches in respect of other aspects of international taxation where we could usefully cooperate more closely with our other authorities. We talked earlier tonight about the automatic exchange of information and certainly we have had a hand in helping to understand what the implications might be in a practical sense, moving forward with the adoption of the automatic exchange standard. We have been an active player in the working group looking at country by country reporting and transparency proposals around documentation for transfer-pricing. We cannot go through all of them because you will recall there are 15 action plans and if you break them all down there are a series of working parties, and we have been a participant in pretty much all those working parties, providing our contribution from the insights that we get from where we sit in the system.
Senator MILNE: Another one I would like to ask about is the feasibility of legislating to require Australian corporations to disclose all foreign subsidiaries in their financial statements.
Mr Olesen : That is not an issue that I have particularly turned my mind to. I am not even that close to what the current obligations are to report. In financials, ASIC would be closer to that at the moment than I would be.
Senator MILNE: So the tax office has not looked at the feasibility of that happening?
Mr Olesen : We have been working closely with ASIC in terms of the accounting reporting that they receive. That is a matter that we are interested in because we can see the benefit of there being financial reporting to the greatest extent possible. That is information that can be helpful from a broader perspective. Greater transparency is generally a good thing from our perspective. We will continue to have that dialogue with ASIC.
Senator MILNE: Is the tax office given free access as and when required to ASIC's database so that it can obtain the audited financial reports of Australian companies that are owned by multinationals?
Mr Olesen : Yes, Senator. That is my understanding, yes.
Senator MILNE: Are you aware of any systematic accounting irregularities in the audited financial reports of large Australian proprietary companies-for example, failure to comply with accounting standards, failure to lodge accounts on time and accounts that are missing altogether? I refer you to Glencore, Tom Waterhouse and Hancock Prospecting for example-all of those have been reported in some of those capacities.
Mr Olesen : I am not close enough to give a definitive answer on that. Perhaps it would be wisest to take that on notice.
Senator MILNE: If you would take that on notice, that would be good. In terms of these financial reporting practices of large proprietary companies, what work is the tax office doing to really crack down and clean up the regulatory activities and make sure they are actually complying?
Mr Olesen : Sorry, their obligations to report financial information which is part-
Senator MILNE: Yes, because at the moment there is a suggestion that they are pretty slaphappy in terms of their financial reporting practices.
Mr Mills : There is a distinction between the reporting that they are required to do in terms of financial disclosure for ASIC purposes and the amount of information that we are able to obtain under our powers, which is much greater. That will not be in the public domain necessarily, but we have great powers to be able to access all of that information anyway.
Senator MILNE: Yes. That is why I was asking if you have got those powers and are accessing that information about systematic accounting irregularities that are turning up-
Mr Mills : Sorry. I was talking about the information in relation to tax related things, such as subsidiaries overseas and so on. Financial accounting irregularities are a matter for ASIC rather than for the tax office.
Senator MILNE: And you have not had any engagement with them about noticing any of that, or that is up to their compliance procedures et cetera?
Mr Mills : We do have a good relationship with ASIC, but I would have to take that one on notice.
Mr Reardon : As Second Commissioner Mills said, that is something for ASIC. In terms of your earlier question, we are working closely with ASIC about access to financial accounts. They are useful for us to look at as part of our information gathering and as part of our understanding of the way large corporates report, structures et cetera. As Second Commissioner Mills said, we have got a good relationship and that work is progressing.
Senator MILNE: I talked to ASIC earlier today about the requirement of them to report on overseas. ASIC had basically been giving them a get out of jail free card.
Mr Reardon : As Second Commissioner Mills said, on an individual taxpayer basis we can ask for information, including access to their structures, their subsidiaries et cetera, and they are obliged to supply that to us and they do.
Senator MILNE: I want to go to facilitation payments. How much have Australian companies, as a big picture figure, claimed as tax deductions under sections 26.52(4) and 26.52(5) of the Income Tax Assessment Act during the last five years? Do you have that information? First of all, how do you define a facilitation payment?
Mr Mills : Facilitation payments are very broadly defined in those sections. In fact, the second one you referred to is disallowing it. It is not an entitlement to a claim; it actually prevents a claim. It is very broadly defined. It would catch almost any range of payments that are made to effectively get preferential treatment-what you would otherwise describe as a bribe, in colloquial terms, if I can put it like that. It is an extremely broad definition.
Senator MILNE: Are you capturing that in the records?
Mr Reardon : I would say we would have to take that on notice to see what the actual amounts are and whether we have captured that information.
Senator MILNE: Yes, because in other countries they have legislation to publish what you pay. They require that in their public reporting as opposed to their tax records et cetera. In the last five years, has the tax office audited any Australian company to verify facilitation payments claimed as a tax deduction?
Mr Olesen : We would have to take that on notice.
Senator MILNE: Does the tax office provide specific resources for scrutinising facilitation payments? If so, how many full-time equivalents do you have on that?
Mr Olesen : We would not allocate resources on such a specific basis. We allocate according to risk. If facilitation payments presented as a particular risk on an issue with a particular corporation or group, then we would look at that issue. Our officers are trained to look at a whole range of issues, and we would certainly be able to deal with the particular issue that we are talking about.
Senator MILNE: Is it common? Do many of them claim their facilitation fees?
Mr Olesen : Sorry, I do not have any information on the incidence of it here. I will have to take that on notice.
Senator MILNE: Has anyone had a look at the rate at which Australian companies-actually, the number of them? Is it systemic that they are paying facilitation fees? What is the kind of quantum?
Mr Olesen : I would love to be helpful. I just have not got anything that gives me an indication of what data we collect and what analysis we can do from that data. I am happy to take that on notice.
Mr Mills : Part of the problem will be that some companies do self-assess. If they are following the law in terms of making a self-assessment, when they lodge their tax return they are disallowing it themselves, in many cases. As long as they have treated it properly, they are already not claiming the deduction that they are not entitled to. As to whether any specific audit action or similar would pick up any further amounts, I would have to take that on notice, as my colleagues have said.
Senator MILNE: Has the tax office ever requested additional resources to scrutinise facilitation payments?
Mr Olesen : No.
Senator MILNE: Is there a reason for that?
Mr Olesen : I can recall pretty much most of the bits that we have done in the last little while, and we have not specifically targeted resources for facilitation payments.
Senator MILNE: Given the number of resource companies operating here and around the world, and facilitation fees are commonly paid, ought that not be something the tax office has a look at?
Mr Olesen : As I said before, it is something we may well look at. I am sorry, I do not have data here to give us that indication, but our teams would be well qualified to look at that as part of a whole range of things they might look at in a company audit.
Senator MILNE: I just want to go to the tax amnesty that you have offered. How many individuals have taken up the tax amnesty offered since it opened in March?
Mr Olesen : From memory, 840 individuals have taken it up now.
Senator MILNE: Have we got an aggregate sum of the revenue as a result?
Mr Olesen : I understand it is about $170 million.
Mr Reardon : There is $140 million in income and over $900 million in assets have been disclosed to us to date.
Senator MILNE: Can you tell me the lowest and the highest individual sums that were stored offshore?
Mr Reardon : Deputy Commissioner Cranston might have some information.
Mr Cranston : The actual largest disclosure has been about $50 million in income and about $150 million in assets.
Senator MILNE: And the lowest?
Mr Cranston : The lowest could potentially be $10.
Senator MILNE: Yes, all right. Obviously, that is a very substantial one. Have we got any notion of the average?
Mr Cranston : The greater majority probably could be at that smaller end. I can get you some figures. There is one thing I will say. When we have actually looked at some of the disclosures-and we classify taxpayers according to what we understand about their wealth-we would consider about 35 per cent of them to be wealthy Australians.
Senator MILNE: As high as 35 per cent? When you told me 840, were you referring to high-wealth individuals? I am coming to companies, and I have mixed it all up. Were you just referring to high-wealth individuals then?
Mr Cranston : I was talking about wealthy Australians, which are Australians with a net asset wealth of $5 million or more; high wealth is $30 million.
Senator MILNE: Can you go through the categories?
Mr Cranston : Of the disclosures there is 11 per cent of high-wealth individuals, 24 per cent of wealthy Australians and 65 per cent of other individuals.
Senator MILNE: In terms of companies and corporations that have taken up the tax amnesty, it is all just individuals?
Mr Cranston : Individuals. There may be some companies that are linked to individuals, but generally it is individuals.
Senator MILNE: The company tax cut: what is your net estimate of the impact on revenue in the forward estimates of a 1.5 per cent tax cut?
Senator Cormann: That is not for the tax office; that is or Mr Heferen.
Mr Heferen : The proposed 1.5 per cent tax cut has not yet been a measure included in the budget or in MYEFO.
Senator Cormann: It is a decision taken but not yet announced-it is not separately identified. We went over this ground when we last met in the budget estimates, when we had a discussion in the context of the Paid Parental Leave Scheme as well. The Paid Parental Leave Scheme expenses in the contingency reserve and the related revenue implications of dealing with the company tax cut and the temporary paid parental leave levy are essentially reflected in-
Mr Heferen : They are factored into the revenue estimates but the separate amount has not yet been identified and would not be in the budget papers until such time as the government makes the formal decision to proceed.
Senator MILNE: The same then applies to the impact on GDP et cetera?
Mr Heferen : Yes.