ATO sends shivers down spine of corporate Australia - tax rate revealed

Well the cat's out of the bag for the corporates in Australia. The Australian Tax Office has handed the senate inquiry into corporate tax evasion a 13 page document that contains a formula for figuring out the overall effective tax rate being paid by corporate Australia, taking into account all money's everywhere. Well something like that. I'm not very good at maths these days, so over to the number crunchers.

The Tax Commissioner seems to have adopted the attitude that, while he will go to the grave protecting confidential information, anyone deliberately attempting to mislead the government or the public has just opened the door to full disclosure. 

The 13 page document delivered to the Senate Committee is a ready reckoner on how to calculate the "effective tax rate" paid by multinationals. 

It follows a series of claims made by various multinationals on their "effective tax rates" and debunks the methodology many of them use to falsely claim they pay close to full freight on their tax obligations. 

It now seems likely many big corporations operating through tax havens pay an effective tax rate as little as 15 per cent. 

The formula attempts to identify total worldwide profit from a business's Australian operations. 

"Our development of this formula is continuing, but it is considered that the formula is at a stage of development that means it can provide useful information on effective tax borne on a 'like for like' basis," The ATO explains in a prelude. 

This will send a shiver through corporate Australia. 

More than $100 billion was shuffled through Singapore in 2013 with 1,470 companies involved - a 50 per cent lift on the previous year, according to Neil Chenoweth in the Australian Financial Review. 

Our two big miners earn $2.6 billion in profits in Singapore each year; not bad for an island that doesn't boast much in the way of natural resources or have facilities to load or store iron ore and coal. 

What Singapore does offer is a tax rate of 2.5 per cent and the new formula being developed by the ATO attempts to remedy this for the benefit of Australian taxpayers. 

If you're big enough, say the size of BHP, you can negotiate a tax rate in Singapore as low as 0.002 per cent, selling your iron ore cheaply to a virtual marketing company which then on-sells it to China for a big mark up. What a lurk! more