The high level of ATO activity in the multinational space is undoubtedly underpinned by the significantly increased funding it has received from the Australian Government since 2016.
In the last five months alone, the ATO has seen landmark wins in PepsiCo and SingTel, and revived and released key pieces of guidance on topics such as IP migration and payments under software arrangements which could be characterised a ‘royalty’. Not to mention the new thin capitalisation legislation that just passed parliament and the exposure draft legislation on public Country-by-Country Reporting.
The ATO’s Tax Avoidance Taskforce was established in 2016 to provide the Government and the community with confidence that multinational enterprises, Australia’s public and private businesses (and associated individuals), pay the right amount of tax in Australia.
The Australian Government funded the Tax Avoidance Taskforce with $679m over four years from 2016. In the 2019–20 Federal Budget, a further $1b extended the operation of the Tax Avoidance Taskforce to 2022–2023. The 2022 October Budget subsequently included an announcement the Government would further extend the Tax Avoidance Taskforce to 30 June 2026 and provide an additional $200m in funding each year.
When the Taskforce was first established in 2016, it was expected to recover $3.7b in tax liabilities over four years. With the increased funding, it was announced in November 2022 that the ATO’s focus on large public groups, multinationals and privately owned and wealthy groups had raised tax liabilities of $29b since 2016. Further, the activities of the Tax Avoidance Taskforce helped generate $17.2b of this amount (or almost 60 per cent).
Given the undisputable success of the ATO in targeting multinationals, the question around additional funding allocated for the ATO in the upcoming Federal Budget would not be a surprising outcome.
The more interesting question is what this additional funding will be put toward. For example, there are many possible focus areas for the ATO to utilise additional funding including:
- extension of its key assurance programs
- management of litigation efforts, particularly following the recent successes that the ATO has had in the Federal Court system
- improvement of data capabilities to profile taxpayers and identify risks
- funding for new initiatives, and
- review of lodged compliance statements.
Only time will tell whether additional funding is provided to the ATO and what this will be directed toward. Notwithstanding this, transparency, accountability, and integrity around the tax outcomes of multinationals are likely to continue to be heavily pursued by the Government through ATO initiatives.
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