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Review into the Australian Taxation Office’s management of transfer pricing matters

A report to the Assistant Treasurer

December 2013

Table of Contents


Telephone: (02) 8239 2111
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Australian Government - Inspector-General of Taxation crest

Level 19, 50 Bridge Street
Sydney NSW 2000
GPO Box 551
Sydney NSW 2001

16 December 2013

Senator the Hon Arthur Sinodinos AO
Assistant Treasurer
Parliament House
Canberra ACT 2600

Dear Minister,

Review into the Australian Taxation Office’s management of transfer pricing matters

I am pleased to present you with my report of the above review which was prompted by concerns raised by taxpayers, tax professionals and their representative bodies regarding the ATO’s management of transfer pricing matters.

Internationally, there are government and community concerns regarding risks to revenue arising from transfer pricing, base erosion and profit shifting as evidenced in the OECD and G20 forums. This was also an important consideration in undertaking this review.

The review has found that key causes of the concerns were inadequate succession planning and resource management. Experienced specialist officers had left the ATO’s transfer pricing area and their knowledge was not effectively disseminated across the organisation. Another significant cause was the complex interactions between the ATO’s internal functions and a lack of clarity with respect to the decision-making process.

I have recommended a suite of measures aimed at developing sufficient organisational capability to address transfer pricing risks, including giving priority to measures that target the highest risks to tax revenue. There are 18 recommendations, 17 of which the ATO has agreed with in whole, part or principle. The recommendations are an integrated package where each builds upon the other. As the ATO has disagreed with certain recommendations or aspects thereof, the full benefit of the intended integrated outcome may not be realised.

Whilst the ATO has provided reasoning where they have disagreed, I remain concerned, particularly where I have sought to avoid lengthy disputes by allowing ATO specialists or taxpayers to challenge generalist case officer decisions earlier in the compliance cycle. Furthermore, the ATO’s recent decision to limit consultation on transfer pricing matters may impede its awareness of emerging arrangements and potential risks.

I am grateful for the support, contribution and willingness of many who provided their time, expertise and experience in the conduct of the review.

Yours faithfully,

SIGNED

Ali Noroozi
Inspector-General of Taxation


© Commonwealth of Australia 2013

ISBN 978-0-642-74949-9

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