ATO Aims At Big Pharmaceuticals

Deputy ATO commissioner Mark Konza told Parliament that ATO's ongoing corporate investigations are looking at companies in the pharmaceutical industry. ATO has already interviewed between 30 and 40 employees in one of the large pharmaceutical companies and has launched another 12 audits of big pharma companies.

Background: ATO Targeting Oil and Gas Companies

In recent months, ATO was targeting Oil and Gas companies including Chevron, which paid almost $2.2bn to its parent company in internal US tax haven Delaware in 2015. Another company was Shell, which paid $430 million to related companies in Bermuda and Luxembourg in 2014. The ATO had previously issued amended tax assessments for the calendar years 2010 to 2013 for Global miner Rio Tinto. The ATO required the company to pay A$447 million including interest.

Load Deals

As ATO has won a transfer pricing case against Chevron, the tax agency has informed that several other industry players had loan deals with overseas parents that “do not reflect commercially rational behavior”. "The Australian Tax Office is preparing to take several companies to court over abuse of thin capitalization rules and will start a wave of audits of large multinationals with complex cross-border loan. The ATO is mounting legal action against at least five companies for breaching thin capitalization rules," Macro Business reported. ATO has also issued draft guidance asking companies to self-assess their risk rating according to a series of loan features.

ATO Targets Pharma Companies

The Weekend Australian has revealed that the ATO has 12 audits of pharma companies under way. Another eight pharmaceutical companies are in voluntary discussions with the ATO about their pricing arrangements.

Sources: Macro Business  The Sydney Morning Herald

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