Australian companies across the mining, oil and gas, e-commerce and pharmaceutical industries are disputing billions of dollars in tax bills raised under tougher laws aimed at fighting multinational profit shifting, the Australian Taxation Office (ATO) says.

Key points: Multinationals disputing their tax bills still have to pay 50 per cent of the debt until the matter is finalised

Multinationals disputing their tax bills still have to pay 50 per cent of the debt until the matter is finalised The ATO says current laws in Australia are tough against multinationals but the OECD is looking at a digital tax plan

The ATO says current laws in Australia are tough against multinationals but the OECD is looking at a digital tax plan Many companies also have locked in three- to five-year deals with the ATO on future tax payments

The ATO said 142 companies had assessments raised against them during the 2019 financial year, to the value of $1.9 billion.

It said about $1.3 billion of the $1.9 billion was being disputed by 15 different taxpayers.

Some of the $1.3 billion had already been paid to the ATO under a so-called 50:50 arrangement.

When tax bills are in dispute, the ATO allows companies to pay at least 50 per cent of the disputed primary tax amount plus any other outstanding undisputed tax debts.

In addition to the $1.3 billion in dispute, there are also unresolved disputes relating to the 2018 financial year when the ATO had hit 152 companies with tax bills of $2.7 billion.

While most of these cases have been resolved, the ATO said there were still 25 companies they are in dispute with.

"As these cases involve complex tax disputes, they often take some time to resolve," an ATO spokesman said.

The ATO said its focus on multinationals and wealthy individuals had raised over $15.5 billion in tax liabilities, and the agency had collected almost $9 billion in cash since the commencement of the Tax Avoidance Taskforce in July 2016.

This includes one of the biggest disputes of the decade — the ATO's win in the Federal Court in 2015 over the Chevron transfer pricing dispute.

The tools at the ATO's disposal

ATO second commissioner Jeremy Hirschhorn said the tax bills issued followed tougher transfer pricing laws under previous governments as well as stronger anti-avoidance laws introduced under the Liberals in 2016.

He said the "the biggest issue is transfer mispricing", and the two key pillars in dealing with this were the transfer pricing provisions and the general anti-avoidance rule (Part IVA).

The other tool that the ATO has used to go after big companies is the Multinational Anti-Avoidance Law, introduced in Australia [MAAL] in 2016

The ATO said the MAAL had influenced "a number of very significant cases by encouraging settlement discussions to be brought forward in relation to past and future years".

"Forty-four taxpayers restructured their affairs as a direct result of this measure," the ATO said.

"This includes companies like Google who went on the record during the corporate tax avoidance inquiry to state this.

"These restructures have seen $7 billion in taxable sales being returned to Australia and have led to the resolution of cases worth over $1 billion in collected tax."

The ATO's other main tool is the Federal Government's Diverted Profits Tax (DPT), which allows the ATO to hit the company with a 40 per cent tax on all profits.

Known informally as the "Google Tax" the DPT law is aimed at multinationals with global revenue of more than $1 billion and Australian revenue greater than $25 million.

No liabilities have been as yet raised under the DPT, as it applies to income years commencing on or after July 1, 2017 for which tax returns are currently being filed.

"Complex and comprehensive investigations have to be conducted upon those returns before any potential DPT assessment is issued," the ATO said.

"These investigations are currently underway."

Mr Hirschhorn said the MAAL and DPT allow the ATO to address problems that "potentially fall between the cracks".

"[ATO] audit teams look at every provision [in terms of tools the ATO has at its disposal]," he said.

"They will not just look at one."

Other countries look to tax revenue over profit

Several countries are already taking tough measures to prevent multinationals from shifting profits into tax jurisdictions where they pay little or no tax.

Countries such as France and UK have already imposed taxes on revenue rather than profit, and there are worldwide discussions about a global minimum tax.

The Australian Government had considered a digital tax on tech giants' revenue but then opted to wait for the OECD to come up with a global solution to the problem early next year.

Mr Hirschhorn said that from the ATO's perspective "Australia is well placed" in fighting multinationals with current laws.

Last week tech giant Google announced it had settled its long-running tax dispute with the ATO with a payment of an extra $481.5 million on top of its previous tax payments. The payment covers the period from 2008 to 2018.

"We're very focused on continuing to hold multinationals to account, and we will continue to increase our efforts to do so," Mr Hirschhorn said.

He said when an internet company sells advertising in Australia, or a company sells low-value goods to Australians they are required to charge GST.

"In [some] other countries, they are not required to charge VAT, providing a significant commercial tax and pricing advantage over local companies," he said.

But asked why digital companies such as Facebook and Google did not declare all their lucrative advertising revenue, he said while the MAAL had brought Australian-sourced revenue onshore, there was "still a transfer pricing or mispricing question on their related party expenses".

"The big policy discussion currently playing out at the OECD is whether countries agree to change the international income tax consensus on a multilateral basis, or each unilaterally implements their own digital services tax," he said.

Companies opt to lock in deals with the ATO

The ATO and multinationals are also able to enter agreements aimed at giving companies certainty about their tax payment requirements in Australia in future years.

Taxpayers can lock in their tax payment for a period of about three or five years via an "advanced pricing agreement", or APA.

ATO data shows 116 companies with active APA's and 56 APA's are lodged or in progress.

About 85 per cent of APAs are with taxpayers with a turnover of more than $100 million.

The ATO said an APA generally covers a period of three to five years, but it may be reviewed if trading circumstances "materially change".

APAs are also subject to an annual reporting requirement.

The ATO said APAs a preferred outcome for the agency because they "eliminate transfer mispricing risk by providing business with a predetermined arm's length pricing of their international related party transactions".

"Eliminating transfer mispricing risk avoids long-running and costly disputes, and protects Australia's tax revenue," the ATO said.

"In the case of bilateral and multilateral APAs, the taxpayer obtains additional certainty that they will not be subject to double taxation."