Multinationals face steeper penalties for avoiding tax, warns Tax Office

The Tax Office has warned it is prepared to ask the Federal Government for even steeper penalties as part of its crackdown on multinational tax avoidance.

Listen to then interview with the ATO's deputy commissioner Jeremy Hirschhorn broadcast on AM this morning

The new missive comes as the ATO (Australian Tax Office) has confirmed that some multinational companies have created complex schemes to dodge tough new laws in tax avoidance introduced at the beginning of the year.

Deputy Commissioner Jeremy Hirschhorn told the ABC's AM program the ATO reserved the option of recommending penalties beyond the current level of 120 percent of the tax avoided.

"Fines of 120 percent are pretty tough penalties. But of course if the law is not working we have no hesitation to ask the government for changes in the law," Mr Hirschhorn said.

"There is an attitude in some companies that if things are permitted by law, no matter how artificial they are, that that's okay.

"There has been a minority who did seem to take it as a bit of a challenge to come up with an even fancier picture on a white board."

Yesterday the ATO released a series of taxpayer alerts warning multinationals it was tightening the tax avoidance noose.

Mr Hirschhorn said that while the  "vast bulk" of multinationals pay the right amount of tax, the ATO is now reviewing new "profit shifting" and "thin capitalisation" arrangements designed to avoid paying tax on profits made in Australia.

He says the ATO is talking to around 170 companies about whether their tax strategies are in line with the new laws.

And he warned that law firms advising multinationals on schemes that flout the law could find themselves targeted by the tax man.

"We have rules called the promoter penalty rules and the promoter penalty rules say that if you promote a tax scheme which is not effective then you are potentially subject to very significant penalties in your own right."

Mr Hirschhorn also reminded multinational that the Tax Office is prepared to flex its substantial muscle if warranted.

"We're on to these things quickly. We're not some defenceless group just waiting for multinationals to avoid tax. We are taking very active steps," Mr Hirschhorn said.