Tax man wields axe on small business

Tax man wields axe on small business
by Adele Ferguson – 09/08/13

The Australian Taxation Office has become the grim reaper of small business after statistics reveal it is behind nearly half the 1365 companies that have been served with wind-up notices in the past three months.
It is a scary trend that is expected to accelerate, according to one of the country’s leading debt collection agencies, Prushka.

It comes as the federal government is cracking down on business and using the ATO as a weapon to claw back revenue to help plug the federal budget deficit.

Data crunched exclusively for Fairfax Media shows that in July 2008 there were 184 wind-up applications served on companies and the ATO was behind 27 per cent of them. Five years later, in July 2013, the ATO was behind 51 per cent of an estimated 613 wind-up notices. When state government entities are added to the mix, the percentages of government-initiated wind-up notices balloon to more than 65 per cent.

Given the rising unemployment, the decision by the RBA to cut official interest rates to record lows and the clunky transition of the economy as the mining boom bubble bursts, it is no surprise that more companies are going under.

The big surprise is the banks are small players in wind-ups, representing less than 5 per cent, and companies supplying services and products are also bit players.

Prushka said given the parlous state of the economy, all efforts should be made to work with struggling companies.

Prushka’s Roger Mendelson says once a company is liquidated, the business is finished. ”We have found that working with defaulting companies produces a far greater recovery than winding them up, provided that the business is viable and there is genuine goodwill shown by the directors to trade out of the situation,” he said.

The ATO sees it differently. The commissioner of taxation, Chris Jordan, said recently: ”We do cop a bit of flak about how we manage small business debt. But, again, it’s about fair play on a level playing field. If we don’t get the right balance, those who are not paying their tax may get an unfair advantage.”
An ATO spokesman said the ATO took legal action, including wind-up proceedings, to collect debts where taxpayers were unwilling to work with the ATO, continually defaulted on agreed arrangements, or did not have the capacity to pay and did not take steps to resolve their situation.

The spokesman also contested the figures and percentage of company wind-up notices initiated by the ATO. ”In 2008-09 (you quoted July 2008 figures of 27 per cent) we initiated 8 per cent of wind-ups and, based on preliminary figures, we are on track for a similar result in 2012-13 (you quoted February 2013 of 41 per cent and April 2013 figures of 47 per cent).”

Companies recently in the ATO’s firing line include NSW-based Lollita Corporation, which says on its website that a wind-up order was ”commenced by the plaintiff Deputy Commissioner of Taxation on 18/06/2013”. Others include Konnectv, which received a wind-up application from the ATO on June 17.

Other statistics reveal two companies a day in the construction and building-related sector are collapsing, as late payments from creditors worsen, activity dries up and banks put the squeeze on funding.

Behind the statistics and companies failing lies a fascinating story. The fact that the ATO is becoming more aggressive in issuing wind-up notices to companies – 593 in the months of May, June and July – is a reflection of underlying insolvency as some have probably not paid their BAS, many wouldn’t have paid their PAYG tax for their employees and it is likely they haven’t paid super on behalf of employees.

As Mendelson says, there is a long time lag between a company being insolvent and then facing liquidation, so it is reasonable to presume that this is the front-end of an underlying trend of increasing SME insolvency.

The figures from Prushka show that in April 2013 417 companies received wind-up notices, with the ATO representing 47 per cent, other government entities 30 per cent, the banks 4 per cent and other 27 per cent.
July was the worst month, with a whopping 613 applications, with the ATO responsible for 51 per cent, government agencies 18 per cent, banks 6 per cent and other 25 per cent.
What is chilling is most of the wind-up notices will be fruitless, with minimal recovery. The banks worked it out during the GFC by adopting careful lending policies to businesses. They also secure loans with mortgages on properties and personal guarantees – both of which are low-hanging fruit in terms of recoveries.

The figures show applications by businesses are low because the costs are too high to liquidate a company. According to Mendelson, most businesses are prepared to go to the statutory demand stage but few are prepared to fund a wind-up. ”This is because the official figures don’t represent the full scale of insolvency but are just the tip of the iceberg,” he said. Given the time lag involved, all will be revealed in the fullness of time.



2013-08-07 14:57:02


上海自贸区总体方案不久将公布 自贸区概念股一览

上海自贸区总体方案不久将公布 自贸区概念股一览

五大开放五大创新 上海自贸区政策猜想




















中概股私有化升温:市场交易寡淡 “逃避”抑或转型

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中概股私有化升温:市场交易寡淡 “逃避”抑或转型
2013-03-20 13:31:00 来源:第一财经日报 评论(0条)
  近日,柯莱特宣布收到董事长兼CEO马一鸣和董事周鹤发起的收购要约,将收购所有不属于买方集团及其附属机构和某些可以选择加入买方集团管理层的在外流通股,私有化价格为每ADS 1.85美元。














ATO has ramped up its scrutiny of people with offshore interests

Financial Review
The Australian Taxation Office has ramped up its scrutiny of people with offshore interests, in preparation for an avalanche of information and global assistance to make tax dodgers pay from January 1.
A multilateral convention on tax administration will come into force on that day, giving the ATO unprecedented access to help from more than 50 countries in catching tax evaders.
“We’ve been quite proactive in reviewing the cases on hand so we can be fully prepared when the convention comes into force,” said second commissioner Bruce Quigley at an Institute of Chartered Accountants tax conference in Sydney.
Mr Quigley said that the new convention, signed by the ATO this year, was important because it not only facilitated information exchanges and joint audits, but gave “most significantly assistance in collection”.
“Very very few of our treaties have collection articles in them,” he said.
The new convention will add to the 44 tax treaties and 33 tax information exchange agreements entered so far, many of the latter with traditional tax havens.
“In countries like Bermuda, the Cayman Islands, Jersey, Liechtenstein… if you go back a few years what chance do you think we’d ever have of sharing information with those tax havens, or low tax jurisdictions? It’s a great step in the context of transparency.”
Mr Quigley also spoke of the ATO’s use of new transfer pricing laws that tax experts fear will give the office unprecedented power to reframe cross border deals to extract more tax.
“I hear rumblings of concern that the ATO’s going to take advantage, to take a much more aggressive stance, but basically we won’t be changing our approach,” he said.
Mr Quigley said the new laws were “entirely consistent with the view we’ve always had”.
The ATO would continue to audit arrangements entered by companies in previous years, but it would not reopen cases closed under the old laws, he said.
Efforts to shut down tax havens have dramatically reduced the flow of funds to avoid tax, including a 79 per cent drop last year in funds siphoned to Liechtenstein.
Mr Quigley said technology was playing a vital role in the efforts.
“The more and more developments that come with technology the more and more we can close the gaps in the sea if you like.”
This week, the Organisation for Economic Co-operation and Development has urged all countries to agree on how to tax internet transactions to avoid losing billions of dollars in revenue during the online sales boom.
Multinationals that provide services or trade in intangible goods such as advertising and software downloads have come under increasing fire for paying little tax.
Amazon was hit with a tax bill of more than $US250 million ($241.2 million) in France this month. In the UK, its executives faced scrutiny from a parliamentary committee investigating concerns that global companies did not pay enough tax. Google also appeared.
Shadow communications minister Malcolm Turnbull said in July that Google’s low tax payment in Australia highlighted “a big issue relating to the erosion of the Australian tax base” that over time “will become material” as a result of the digital economy.
Google Australia’s financial accounts for the 2011 calendar year show the global search giant’s Australian subsidiary paid only $74,176 in tax on revenue of $201 million. However, industry sources estimate Google’s total revenue from online search advertising in Australia was about $1.1 billion last year.
It is believed about $900 million of its ad revenue generated in Australia last year was mostly billed by its Ireland division. Google said it “complies fully with all relevant tax rules”.
In July, Communications Minister Stephen Conroy responded by insisting that making changes to transfer pricing rules was the solution. Legislation introduced into Parliament at that time to change Australian transfer pricing rules would stop the erosion of the tax base from e-commerce, Mr Conroy said.
Transfer pricing relates to inter-company transactions within multinational companies. Tax authorities can make judgments on whether multinationals are paying the requisite amount of tax on revenue actually earned in the local jurisdiction, with the aim of preventing them shifting profits to lower-tax jurisdictions.
The authorities can try to estimate the local revenue by comparing so-called arm’s length prices.
But tax experts doubted whether transfer pricing rules could solve taxation issues with multinational internet and technology companies. There is also doubt as to whether transfer pricing is relevant in some instances, including Google.
It is believed that Australian advertisers booking ads with Google are mostly billed by its Irish subsidiary, making transfer pricing rules irrelevant.
As the final report of the business tax working group noted: “To the extent that a firm’s value is tied to the value of its intellectual property, a firm is able to minimise its overall tax liability by basing such intangible assets in a country with a low statutory tax rate.”