An Australian Taxation Office document, seen by the ABC, is dynamite and is likely to prove many of our biggest companies pay nowhere near the level of tax they claim, writes Ian Verrender.

It began with a misstatement, an act of obfuscation.

And while it may end up saving Joe Hockey's budget bacon, the political fallout could likely alter the Coalition's relationship with the business community and almost certainly strain the already brittle unity that ties our peak business lobby group together.

Last week, the Tax Office big kahuna, Chris Jordan, quietly handed the Senate committee delving into corporate tax evasion a blueprint on exactly how to calculate the amounts multinationals should provide the government each year on their Australian operations.

The 13 page document, seen by the ABC, is dynamite and is likely to prove many of our biggest companies pay nowhere near the level of tax they claim.

While most of us would imagine that the Australian Tax Office is an arm of the federal government, and this kind of information is regularly shared, that's not the case.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 3 minutes 53 seconds 3 m 53 s ABC business editor Peter Ryan discusses the ATO's Senate submission on tax avoidance Download 7.1 MB

The ATO, in fact, is prohibited by law from divulging the affairs of individuals or companies to the Treasurer, the government or anyone else.

Jordan, the recently appointed head of the tax office, clearly is a man not to be messed with.

The first outsider to be appointed to head the body, many doubted the former KPMG partner would rock the boat when it came to policing the tax affairs of mahogany row.

Those fears appeared to be confirmed by the man himself early last month when the Senate Committee asked him a series of specific questions on corporate tax avoidance, having heard that 10 unnamed companies had transferred $31.4 billion of income to Singapore in 2011-12 alone.

Jordan refused to comply.

"All taxpayers need to have confidence that confidentiality will be maintained over their taxation and commercial information," he told the hearing, a stance he said had been endorsed by the Treasurer.

Within a fortnight, that all changed. Jordan was back at the hearing openly disputing evidence given not just by the easy foreign targets the committee had been set up to savage - Google, Microsoft and Apple - but our very own homegrown multinationals, BHP Billiton and Rio Tinto.

Both miners are under audits from the ATO.

The Tax Commissioner seems to have adopted the attitude that, while he will go to the grave protecting confidential information, anyone deliberately attempting to mislead the government or the public has just opened the door to full disclosure.

The 13 page document delivered to the Senate Committee is a ready reckoner on how to calculate the "effective tax rate" paid by multinationals.

It follows a series of claims made by various multinationals on their "effective tax rates" and debunks the methodology many of them use to falsely claim they pay close to full freight on their tax obligations.

It now seems likely many big corporations operating through tax havens pay an effective tax rate as little as 15 per cent.

The formula attempts to identify total worldwide profit from a business's Australian operations.

"Our development of this formula is continuing, but it is considered that the formula is at a stage of development that means it can provide useful information on effective tax borne on a 'like for like' basis," The ATO explains in a prelude.

This will send a shiver through corporate Australia.

More than $100 billion was shuffled through Singapore in 2013 with 1,470 companies involved - a 50 per cent lift on the previous year, according to Neil Chenoweth in the Australian Financial Review.

Our two big miners earn $2.6 billion in profits in Singapore each year; not bad for an island that doesn't boast much in the way of natural resources or have facilities to load or store iron ore and coal.

What Singapore does offer is a tax rate of 2.5 per cent and the new formula being developed by the ATO attempts to remedy this for the benefit of Australian taxpayers.

If you're big enough, say the size of BHP, you can negotiate a tax rate in Singapore as low as 0.002 per cent, selling your iron ore cheaply to a virtual marketing company which then on-sells it to China for a big mark up. What a lurk!

The revelations about BHP and Rio Tinto's Singapore adventures have left the business world dumbfounded, or just plain dumb.

Not a word has emanated from the Business Council of Australia on the issue. While for years it has been trumpeting tax reform - a euphemism for paying less tax - it has been strangely silent on the issue that some big corporations are leaners on the tax front, leaving the heavy lifting to its other members.

It also is likely to leave a bitter aftertaste for senior management of non-resource companies, many of whom stayed silent when the Rudd government attempted to introduce a Resources Rent Tax in 2010.

If you recall, Ken Henry's tax review advocated the introduction of a mining tax that would then pay for a general cut in corporate tax.

Not only did non-miners forego a corporate tax cut to ensure the big resource houses paid less, they've now learned BHP and Rio Tinto were surreptitiously shuffling vast swathes of cash through tax havens even as they were being cajoled to keep quiet.

As for the federal government, the revelations are bittersweet. Any clampdown on multinational tax evasion will certainly help fill the gaping hole in the budget left by the sudden decline in resource prices.

But given this is the government that claims as one of its main policy victories, the elimination of the mining tax, it would be difficult to not feel at least a tinge of betrayal.

For BHP and Rio Tinto, the revelations are a public relations disaster, particularly for the so-called Big Australian which could find itself the subject of court action, after revelations it may have misled the Australian Electoral Commission.

As the leader of the anti-mining tax campaign, BHP declared that it spent $4.2 million directly to fund a 2010 media blitz. Last week, however, it admitted to the Senate hearing that it doled out a further $4.25 million to the Minerals Council of Australia for the campaign, a donation the council failed to detail.

For Fortescue boss Andrew Forrest, this is manna from heaven.

Forrest and sidekick Alan Jones are ramping up a campaign against the majors, portraying them as "bully boys", in a thinly veiled attempt to have them curb production.

The Twiggster is flying the national interest flag, claiming the majors are deliberately depressing prices, thereby denuding the country of much needed tax revenue. But the main aim is to ensure Fortescue Metals stays in business and Forrest keeps his fortune.

Still, don't be surprised if the Treasurer is kindly disposed towards Forrest's persuasive arguments. Who could blame him? Especially now that he is armed with Jordan's corporate tax calculator.

Ian Verrender is the ABC's business editor.