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Toyota tax investigation target

Factory fears: Toyota has played down claims of potential job losses at its Altona plant.

Toyota Australia's transfer pricing comes under scrutiny from the tax office

Toyota logo10 Mar 2004

TOYOTA Australia’s inability to make a consistent and significant profit despite automotive industry-leading sales revenues has been highlighted by an Australian Tax Office review.

The ATO action was revealed in spectacular fashion yesterday by the Herald Sun newspaper in Melbourne, which reported on its front page that Toyota had been served with a tax bill of between $400 million and $1 billion.

At the centre of the ATO’s review is transfer pricing, the process multi-national companies use to set prices for goods and services between its subsidiaries. The ATO is concerned it is being used to ship profits out of Australia to lower-taxing countries.

The ATO refused to confirm or deny the newspaper report, but a spokesman did say that transfer pricing by multi-nationals was currently a tax office focus.

"Basically, we want to ensure that companies that operate in Australia pay their fair tax obligations on revenue earned in the country," a spokesman told GoAuto.

"We are continuing to look at specific industries including motor vehicles, oil, pharmaceuticals, distributors, banking and insurance."Between 1994 and the end of the 2002-03 financial year, Toyota Australia earned more than $43 billion in sales revenue, and made $62.4 million in net profit.

The company is predicting a small profit for the 2003-04 financial year based on record sales of 186,370 vehicles in 2003 and industry-leading exports for Camry.

In comparison, Holden earned $35.672 billion in sales revenue and returned a net profit of $1.971 billion in the same period.

Toyota Australia has made no secret of the cost challenges it has had in recent years, going through a process of de-Yenning itself, trying to source alternate suppliers for vehicles and parts outside Japan in an attempt to drive down costs.

 center imageToyota Australia spokesman Peter Griffin confirmed the company had been under review for the years 1994-1999 by the ATO for the past two years, but would not reveal the amount of tax under scrutiny.

"Transfer pricing is a common practice for international companies such as car companies that have operations in one country and head office in another and the way that there are charges for the goods and services that operate between the two bodies," he said.

"Transfer pricing is an accepted part of the tax system and the tax office has rules and regulations to deal with it, and has no concern with it provided organisations follow the ATO rules.

"We believe we have been following all the rules and regulations, so it is something we need to work through with the ATO."Mr Griffin also played down the Herald Sun claim of potential job losses at the Altona plant and that a "bitter showdown" was shaping between Toyota and the ATO.

"We want to make it clear that issues that may be arising around the tax office and making cars and exporting cars at Altona are not related and our view is to be growing the business there and not to be scaling it back in any way."

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