ATO approved tech companies' tax avoidance tactics

The Australian Tax Office looked into the "double Irish Dutch sandwich" tax-dodging techniques last year and deemed them "commercially realistic," according to FOI documents.
Written by Spandas Lui, Contributor

The Australian government might be going after big tech multinationals for using complex tax avoidance methods, but the Australian Taxation Office (ATO) actually gave those companies its blessing to do so, according to documents released under the Freedom of Information (FOI) Act.

The revelation, first reported by the Australian Financial Review, came in the form of an ATO briefing paper given to a Senate Estimates committee. This was done prior to Assistant Treasurer David Bradbury declaring war against "double Irish Dutch sandwich" tax schemes in which companies shift profits to countries with lower tax rates and announced changes to transfer pricing rules.

Companies such as Google, Apple, and Microsoft have all been accused of employing such tactics.

In the briefing paper, sighted by ZDNet, the ATO said that it is aware of the double Irish Dutch sandwich methods used by technology companies to avoid paying taxes in Australia, and said that the department has been looking at the issue extensively.

The Organisation for Economic Co-operation and Development (OECD) currently does not view a website as a permanent establishment (PE), so profits made on Australian websites are only taxable in the country where the business is based.

"Given the PE threshold for taxation, many significant businesses undertaking e-commerce across borders have structured their affairs ... so that any sales they make are not effectively connected or attributed to any PE that might exist in Australia for other purposes, such as support services," the document said. "The ATO has 'risk reviewed' several of these structures over the years.

"The tax outcomes in these entities were found to be 'commercially realistic' in light of the current law and policy settings."

Bradbury has assembled a taskforce against tax dodging by multinationals, headed by Treasury executive Rob Hefern, which will meet in late February.

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