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Thursday, 22 May 1980
Page: 3256

Mr Jacobi asked the Treasurer, upon notice, on 14 May 1980:

(1)   What success has the Commissioner of Taxation had in applying section 136 of the Income Tax Assessment Act (relating to business carried on in Australia but controlled by overseas interests) to the income of overseas owned oil companies.

(2)   Did the Taxation Board of Review some years ago consider the application of section 1 36 to an overseas-owned oil company in a case lasting nearly 2 years; if so, (a) what success did the Commissioner have in refuting the claims made by the company concerning the landed costs of oil, which were allegedly inflated and ( b ) was the decision of the Board substantially against the Commissioner.

(3)   Has the position on this matter improved in recent years, enabling the Commissioner to collect an amount of income tax from overseas-owned oil companies; if not, will he seek the amendment of section 136 to strengthen its provisions.

(4)   If he will seek the amendment of section 136, when will the necessary action commence.

Mr Howard -The answer to the honourable member's question is as follows:

(1)   The Commissioner of Taxation has advised that; because of the secrecy provisions contained in the Income Tax Assessment Act, he is unable to provide specific information.

(2)   The case referred to was set down for hearing on 17 October 1961 and occupied fifty-two sitting days. The hearing was completed on 27 February 1962 and decision handed down on 20 March 1963. In that case the Commissioner determined amounts of taxable income pursuant to section 136 ofthe Income Tax Assessment Act in excess of the amounts of taxable income disclosed in the company's income tax returns. The Taxation Board of Review did not uphold the major adjustments made by the Commissioner in respect of the landed costs of oil imported from one source affiliated with the company. Smaller adjustments were confirmed in respect of imports from other affiliated sources. Details are available in the published report of the Board's decision-Case N69 13 TBRD 270.

(3)   and (4) Amendments to the income tax law in 1977 have given the Commissioner specific power to limit deductions for the cost of trading stock to the amount for which the article could be purchased in an arm's length transaction. Other matters relevant to the effectiveness of section 136 are being examined, including a revision of section 260 of the Income Tax Assessment Act.

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