ATO’s focus on international taxation University of NSW 12th International Conference of Tax Administration

Presented by Lyndall Crompton, Assistant Commissioner, Australian Taxation Office / 31 March 2016

Our international strategies

Fostering willing participation and enhancing the client experience

Working across government and internationally, with taxpayers advisors and the community

Contributing to law review and reform

Ensuring a level playing field

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Fostering willing participation and enhancing the client experience

We reviewed these products in 2014 to ensure they provide early

support and transparency Our message: we are ‘open for business’

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APA and MAP programs

Active APAs APAs under negotiation

APAs in early engagement stage

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Developing our approach to guidance

Taxpayer Alerts (hub structures)

Law Companion Guides (MAAL)

Industry guidance (internal derivatives)

Simplification of transfer pricing record keeping (PSLA 2014/3)

Taxation Rulings – new TP rules

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Working across government and internationally, with taxpayers, advisors and the community

Key partnerships

FTA - OECD Forum of Tax Administration JITSIC - Joint International Tax Shelter Information and

Collaboration SGATAR - Study Group on Asian Tax Administration and

Research

Building capability - Asia Pacific region Using ATO officers as advisors and mentors Medium-term secondments Visitors programs

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Contributing to law and reform

OECD Base Erosion and Profit Shifting Action Plan (BEPS)

Australian Government is committed to implementation of the BEPS recommendations ATO will: work with Treasury to provide Government with timely

advice on policy and implementation implement BEPS recommendations in an effective way collaborate internationally to help facilitate an effective

global implementation of BEPS

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OECD BEPS action plan

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Action 2: Hybrid mismatches Action 4: Excessive interest deductions

• What is a hybrid mismatch?

• Recommendation - introduction of new rules to neutralise hybrid mismatches

• Recommends domestic legislative change to eliminate a mismatch that is unintended and not in line with tax policy

• Defensive rules – available if another country fails to neutralise the mismatch

• BOT referral

• Government yet to announce its legislative approach to implementation

• Thin capitalisation rules - limit on deductions based on a debt safe harbour amount – balance sheet approach (assets less non-debt liabilities)

• Recommended OECD approach – limitation on interest deduction based on an EBITDA approach

• No announcement by Government to change our approach

• ATO working with Treasury to consider the OECD recommendations

OECD BEPS action plan

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Action 5: Harmful regimes Action 7: Permanent establishments • Recommendations around preferential

tax regimes (e.g. patent box regimes)

• Australia has no tax regimes that fall within scope

• Increased transparency through spontaneous exchange of private rulings and APAs

• Settlement deeds (future)

• Rulings on international arrangements

• Exchanges have commenced

• Recommends changes to concept of permanent establishment

• Deal with artificial arrangements to avoid creating a taxing presence

• Australian multinational anti-avoidance legislation – 1 January 2016

• Supports the OECD recommendations

• Deal with current and future arrangements to avoid a permanent establishment in Australia

Action 13: Country-by-country reporting

New Legislation Effect from 1 January 2016

Requires significant global entities (SGEs) to provide three statements, in an approved form, to the Commissioner

Country-by-Country report

Master file

Local file

Around 1,500 SGEs are impacted Less than 25% will be required to submit a full file

45% will be required to submit a simplified file

30% will be required to submit a short form 12

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Ensuring a level playing field

International structuring and profit shifting (ISAPS)

Over the last two years the ATO has recruited senior tax compliance experts through the ISAPS program, including people from external legal, accounting and corporate firms.

These people have extensive accounting, international tax and transfer pricing experience, which is vital in ensuring we have the skills required to meet our outcomes.

We currently have 12 audits underway on e-commerce entities examining the issues raised by the digital economy.

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Corporate tax transparency measure December 2015

Publication of data about public and foreign corporate entities

• reporting total income more than $100M

• those who paid MRRT or PRRT.

March 2016

Publication of data for private groups with revenue over $200M

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Why did some entities pay nil tax? Current / prior year losses Legitimate deductions and offsets to reduce tax payable.

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Questions