The Inspector-General of Taxation (IGT), Mr Ali Noroozi, today announced terms of reference for his review into the Australian Taxation Office's (ATO) management of transfer pricing matters and called for stakeholder submissions.
Transfer pricing relates to business transactions across international borders with related parties. Revenue authorities are concerned to ensure that these transactions are appropriately priced and taxed.
"Stakeholder concerns about ATO transfer pricing management are not new. During consultation on my new work program it has emerged that a broader range of taxpayers may be caught in the net," Mr Noroozi said.
The range of commercial transactions being undertaken by business across borders has increased. Small and medium businesses growing offshore are increasingly confronted by transfer pricing rules just like large business.
"International business dealings are complex and also give rise to significant competitiveness issues. It is an area that is fraught with difficulty for both the taxpayer and administrator. The ATO has significant administrative powers in this area and it is important to review their use," Mr Noroozi said.
Stakeholders' concerns may be summarised as follows:
- ATO advice and guidance – a need for clearer, more consistent and comprehensive ATO advice. An extensive review through an appropriate and transparent consultation process was also advocated;
- ATO compliance approach, processes and practices – risk reviews, audits, Advance Pricing Arrangements and Mutual Agreement Procedures have been claimed to be inefficient and very costly. Specific concerns included information requests, timeframes, lack of transparency and communication;
- ATO capability – ATO officers are believed to have varied levels of capability regarding knowledge of the transfer pricing regime, economics and business. Concerns were also raised with the ATO's organisational arrangements for dealing with transfer pricing matters in the large business segment.
"I want to better understand these concerns so we can improve the tax system. I have set out guidelines to help you prepare submissions. My aim is for balanced thinking on the issues and better outcomes for both taxpayers and the ATO," said Mr Noroozi.
Terms of reference and submission guidelines for the review are available on the IGT website. Submissions will be treated as confidential and due by 23 November 2012.
25 October 2012
Media contact: Ali Noroozi – (02) 8239 2107