US authorities this month signed a country-by-country report exchange arrangement with Australia, which is aimed at giving tax authorities a more detailed picture of complex structures used by multinationals including their international related party dealings, revenues, profits, and taxes paid by jurisdiction.

Australia had signed up to the country-by-country reporting plan in January 2016, a measure designed by the OECD that has been described as a "game changer" in helping expose multinational tax avoiders, but the US took longer to come to the table.

Countries will start sharing data in 2018. But the reports, which are part of the OECD/G20 plan against tax avoidance known as Base Erosion and Profit Shifting (BEPS), are only for tax authorities to share, and will not be made public.

Better intelligence

An ATO spokesman told Fairfax Media the agreement "provides the Tax Avoidance Taskforce with additional intelligence to better target its compliance activities".

The taskforce, which was announced in the 2016 federal budget and began recruiting shortly after the Panama Papers revelations, will have a team of more than 1000 experts chasing more revenue from multinationals. "It will help us to build a better picture of the international tax affairs of significant global entities and assess their transfer pricing risk," the spokesman said.

Labor's Andrew Leigh said making the reports public would increase tax transparency and it was "disappointing that the Coalition wants to keep these reports secret". "Australia needs action now, but this is yet another issue that shows Malcolm Turnbull prefers to dither, not deliver," he said.

New Zealand is also taking action against multinationals that use artificial arrangements to avoid having a taxable presence in New Zealand.

Companies under audit

The Tax Office has in previous years cut deals with large companies, but ATO senior officials have said the agency now expects to recover most of the $4 billion of tax bills being issued to big companies. Already $2.9 billion of that $4 billion has been attributed to seven large companies, but not yet collected.

"We continue to have real-time engagement with all large taxpayers, including access to a wide range of data, including tax return and accounting records, and third party data," the ATO spokesman said. "We are also increasing the support and guidance available to these companies to ensure they don't inadvertently enter into arrangements in contravention of Australia's tax laws."

As well as greater information sharing, the ATO has been armed with greater powers under domestic laws designed to fight corporate tax avoidance, including the Multinational Anti-Avoidance Law (MAAL), which has seen companies including Google restructure its tax affairs, and the Diverted Profits Tax (DPT).

Treasurer Scott Morrison said over 30 corporate groups are currently restructuring in response to the government's laws, with more to follow. "Restructures completed so far have resulted in around $6.5 billion in income per annum now being included in our tax base," he said. "The ATO's Tax Avoidance Taskforce estimates this will lead to an additional $100 million in income tax being paid in the first year and over $300 million overall in the first four years after the MAAL came into effect."

More cross-border disputes

An OECD spokesman told Fairfax Media that the organisation "welcomes the active work of the United States to put in place the domestic and international legal and operational framework to start the exchange of country-by-country reports as of 2018."

He said the exchange also included the conclusion of the Competent Authority Agreement with Australia, as well as with 18 other jurisdictions. These agreements are used when cross border disputes over revenue arise.

Companies, including those headquartered overseas, that feel that they have been unfairly taxed by two different countries can appeal to tax administrators. The number of multinational companies appealing Australia's right to tax them has spiked in recent years.

There's concern this will create tax revenue wars. The US is fighting to protect its revenue base and has been critical of Australia's multinational tax avoidance legislation. Former US Treasury top official, Robert Stack, who now works for Deloitte, described the laws as evidence of "the degree to which political pressure can trump policy".

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