David RichardsSony Appeals $53M ATO Hit, Questions Raised Over Their Transfer Pricing Practises
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Sony Australia has appealed a decision by the Australian Tax Office that resulted in the Company being hit with a $53 million bill – $32 million for back tax and $21 million in penalties and interest after an investigation into transfer pricing.
Shortly after the ruling CEO Carl Rose quit the Company along with the Chief Financial Officer and director Nicholas Foster.
Accountants to Sony Australia Price Waterhouse Coopers is also refusing to comment on the Sony matter but they have issued a statement on the issue of transfer pricing.
PWC management claim that in Australia global economy, transfer pricing has emerged as a key tax issue for multinational companies in particular Companies that manufacture technology and consumer electronics products.
The accounting firm claims that their clients can optimise the value of a business by effective tax rate and franking credit management.
In the latest Sony Australia filings Sony Australia reported that on May 29 Sony Australia paid a dividend of $119.98 million to its owners which appears to be Sony Overseas Holdings BV who are described the “immediate parent entity”. The “ultimate parent” of this company is the Sony Corporation.
ChannelNews understands that the value of Sony goods being shipped to Australia changed between the Singapore based office of Sony and Sony Australia.
ChannelNews can now confirm that several consumer electronics Companies operating in Australia are currently being investigated with particular attention being paid to how the Companies have in the treated transfer pricing issues.
PWC Australia claims that managing transfer pricing risk remains critical in an increasingly aggressive environment. The Australian Taxation Office (ATO) has continued to stress its focus on transfer pricing and is currently considering adjustments which, in aggregate, amount to billions of dollars. Taxpayers will continue to face regular investigations from the regulator as transfer pricing is included as an integral component of the risk reviews being rolled out under the ATO’s co-operative compliance program”.
The ATO investigation of Sony Australia covered tax returns for the years 2005, 2006, 2007, 2008 and 2010, Richards says. He adds that Channel News “understands that two other major consumer electronics companies are currently being investigated”
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Sony is appealing against the ATO decision. In June it made an interim payment of almost $27 million, pending resolution of the dispute.
A copy of Sony’s special-purposes financial report for the year ended March 31 2013, filed with the Australian Securities and Investments Commission (ASIC) reveal that “Notices of amended assessments were issued by the ATO in May 2013 in respect of these years for $32.7 million. In addition the ATO has imposed shortfall interest charge of $17.7 million and penalties of $3.3 million,” the documents reveal.
“SAL [Sony Australia Ltd] is satisfied that its calculation of taxable income is consistent with all relevant legislations and has commenced appeal processes to dispute the notice of amended assessments.
“In June 2013, SAL made payment of $26.8m to defer full recovery until resolution is achieved.”
For the year to March 2013, Sony Australia reported a before-tax profit of $12.5 million – double its 2012 profit of $6 million. This was despite a drop in sales of $153 million – from $666 million in 2012 to $513 million in 2013.
Sony Australia Communications Manager Grant Thomas is not returning calls on the matter and has issued no press statements.