Google Australia allegedly paid no tax on an estimated $940 million in web search advertising revenue. Taxpayers protested outside of the British branches of the coffee chain Starbucks after it was revealed the corporate giant was recording tax losses despite making billions of dollars of sales over a 14-year period. G20 leaders agreed to secure new global standards for tackling tax evasion and avoidance due to erosion of corporate tax and profit shifting.
Worldwide tax avoidance has never been bigger. But down at the Australian Taxation Office, as Fairfax reports today, some boffin wants to let big accounting firms sign off on tax returns without further investigation by the Tax Office. The accountants must be laughing. But will consolidated revenue be the big loser?
Crikey understands the idea was raised by “big four” accounting firm Ernst & Young around two years ago in secret negotiations with an assistant commissioner. This was before the new Tax Commissioner Chris Jordan was appointed from accounting giant KPMG. The concept is about the ATO reducing its costs and transferring the red tape, and inevitably the big bucks, into the blue-chip accounting firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers. Jordan made it clear when he started in the ATO he wanted more external experience in the agency and it was his intention to recruit audit managers from the big four.
Crikey has a copy of the draft discussion paper, entitled External Compliance Assurance Process (ECAP) — Discussion draft. It states:
“An External Compliance Assurance Process (ECAP) is an ‘assurance review’, conducted by an approved external party, that would verify to the ATO that a taxpayer is meeting their tax obligations in relation to an ATO identified matter. It is proposed that a favourable ECAP review would be accepted as a final position on taxpayer compliance in relation to the matter, in the absence of some other aspect, such as a conflict of interest or misconduct.”
The ECAP has not been formally approved at this stage and will be confined to taxpayers that have been categorised as “medium-risk” and have a turnover between $100 million and $5 billion. The ATO has researched what tax offices do in other countries, including Singapore and the Netherlands; the latter uses a shared payment system with the taxpayer and the revenue authority sharing the cost of the audit. This is restricted to the Netherlands’ equivalent of the GST.
The ATO would identify matters where it required assistance and focus on matters of fact. Using ECAP approaches, the taxpayer would be offered the choice of using an external auditor to carry out the fact-checking. If a taxpayer did not wish to use an existing external auditor to provide the assurance, the ATO would conduct the review in accordance with its current review process.
An ATO spokesperson told Crikey:
“The ATO is exploring the use of registered company auditors for assurance reviews on factual matters to reduce compliance cost and red tape for taxpayers. Using our existing resources more efficiently and with less impost on taxpayers is a priority for the ATO. Throughout January to early March 2014 we will interact with key stakeholders, ASIC and the Auditing and Assurance Standards Board with a view to refining the design further.
“Pending the outcome of consultation and design, we may commence a pilot to further test the concept. Recommendations on the concept are expected to be developed in May 2014.”
Old tax investigators must have choked on their Corn Flakes reading about this today. Big accounting firms were always seen as the enemy in the agency and behind many of the tax avoidance schemes the ATO was always trying to shut down. How times have changed. I just hope it works.
Remember how the GST was “going to eliminate the black economy” – one of Howard’s reasons it was going to be “so good”?
Besides, isn’t that why God created us plebs – to make up for these sort of shortfalls?
[Where were these “accounting” firms when the GFC took off?]
GS, don’t you know that corporations are all honest and forthright global citizens, just ask Exxon or BP.
This scheme sounds like a soft fall exercise for members of the ATO to take a redundancy from the ATO, then take up a position at the 4 nominated accountancy firms on a big fat pay packet doing audits that will find ways to avoid tax.
It opens possibilities for other departments also. How about the prisons being run by the inmates, thus saving the cost for warders?
Who cares if it works, as long as the LNP can look after the big end of town.
@Klewso:
I’m surprised that the Big Four have the spare resources to apply to this task.
Aren’t they already flat out with cost-shifting, profit-shifting executive remuneration work?
Just one of the big 4 banks has cost taxpayers more than all the welfare the government will give out this year, but I think I know which of these I will hear more about in the newspapers.
Congratulations to the LNP Government for yet another proposal to cut red tape for Big Business. One that will enshrine BB’s ability to avoid tax and thus place the burden for revenue firmly in the province of salaried employees and anyone else who lacks a good accountant.
No doubt the drop in revenue will lead to more hand wringing by Hockey and his disciples about the need to cut “unnecessary” social welfare, increase productivity (redundancies)in the Public Service and other like statements that result in the rich becoming richer and the poor paying for it.