Australian Tax Office Considers Outsourcing IT Work To BPO Accenture’s Philippine Delivery Centre

The Australian Tax Office (ATO) is open to the invitation by global business process outsourcing (BPO) giant Accenture to offshore IT work to the company's offices in the Philippines. However, ATO assured Australians that the deal, if it would push through, would exclude sending of personal tax information to Manila.

It would be similar to Accenture's agreement with the Health Department which outsources IT work to India, but no patient data or medical records leave Australia.

Although Accenture has extensive workforce in Asian nations where IT workers with English-speaking skills are abundant, its corporate headquarters is in Dublin, Ireland, due to the country's low corporate tax rates. Accenture holds several contracts with the federal government worth $380 million as well as deals with state governments in Australia.

There could be a potential problem with the ATO deal due to an order by Treasurer Joe Hockey for federal government agencies not to engage the services of global firms that profit in Australia but send their earnings overseas to avoid local taxes.

According to the Sydney Morning Herald, in 2004, ATO and Accenture entered into a $230 million deal, but despite the initial fixed price provision of the contract for the tax agency's change programme, the total cost ballooned to $756 million when the deal ended in 2010.

As part of assessing the capability of ATO for the new deal, senior representatives of the agency recently visited Accenture's Philippine Delivery Centre, but ATO insisted the deal is still in the proposal stage. The ATO spokeswoman said the proposal is part of ATO's current contract with the BPO to use its Global Delivery Network for IT application development and test services.

She added that the proposal would not result in axing of posts in ATO or replacement of any ATO employee. If the ATO would accept the proposal, it would be because of its value-for-money offer.

Despite Hockey's order for a crackdown on multinationals, cuts to ATO's budget and the exit of more experienced tax experts places the federal government on the losing end it its battle with the global firms. The multinationals have tax advisers from the big four accounting firms of KPMG, PwC, Deloitte and Ernst and Young, while the ATO I left with junior tax officials.

Fairfax cited as an example of multinationals paying only miniscule taxes to Australia IKEA, the furniture giant from Sweden, which paid only $7.7 million tax or 2013-14 while it earned operating profit of $92 million for its Australian operations.

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