In an article commissioned by Bloomberg Law, tax partner Shaun Cartoon explores the decision by the Full Federal court to hand Oracle a “big win” against the Australian Tax Office.
By staying its domestic tax proceedings against the ATO until the completion of a mutual agreement procedure (MAP) and arbitration with Ireland under the Australia-Ireland double tax treaty, Shaun writes that the unanimous ruling underscores that the ATO can’t compel taxpayers to choose between treaty-based dispute resolution and their domestic legal rights.
“The ATO had hoped for a favourable domestic royalties precedent it could use against large corporations and wave before the US Treasury Department in support of its view on royalties. That strategy is now in tatters.”
The decision affirms that the MAP procedure - a mechanism under the Australia–Ireland treaty including arbitration to provide double taxation resolution between revenue authorities - is intended to operate alongside, and not be displaced by, court processes.
Shaun reflects on the recent High Court decision in Commissioner of Taxation v. PepsiCo, Inc, which demonstrated that the ATO can’t wish a royalty into being where none exists.
“The Oracle decision is another setback for the ATO, proving that it can’t trample on treaty obligations in its quest for domestic case law precedents to resolve royalties disputes.”
To read the full article, click here.
