ATO committed to catching big tax dodgers

The ATO says it is doing what it can within current laws to ensure profits are taxed where the economic activity takes place and where value is created.

(AAP)

Tax Commissioner Chris Jordan says the ATO is doing everything it can within existing laws to ensure multinational companies pay tax in Australia.

In an opening statement before a Senate inquiry into corporate tax avoidance, Mr Jordan said the ATO was focused on investigating base erosion and profit shifting, off shore tax evasion and a much more collaboration across jurisdictions with other tax agencies.

"Firstly, we do what we can now with our current law ... to challenge the assertions, behaviour and operating principles of some individuals and multinational enterprises including ensuring that profits are taxed where the economic activity takes place and where value is created," Mr Jordan told the hearing, in Sydney on Wednesday.

Mr Jordan said there were currently 69 "higher consequence taxpayers" accounting for 42 per cent of the revenue of the entire corporate tax base.

Labor senator Sam Dastyari is hoping a consumer backlash against giant multinational companies will force them to pay more tax.

Mr Dastyari is chairing a Senate inquiry into the tax practices of the biggest firms doing business in Australia, including Google, Apple and Microsoft.

"The worst practitioners of profit shifting and tax minimisation should be named and shamed," he said ahead of a public hearing on Wednesday, citing consumer protests and boycotts against Starbucks in the UK, which led to to company paying an extra $38 million in taxes.

In a submission to the inquiry, the ATO said more than 850,000 companies lodged a tax return in 2012-13 and paid nearly $67 billion in income tax.

The vast majority were small, with a turnover under $2 million per annum, and paid 11.6 per cent of total corporate income tax.

But the submission also said that while the majority of corporate entities were Australian headquartered (98.5 per cent), more than 45.3 per cent of large corporate entities (turnover greater than $250m) were classified as foreign headquartered.

"Some multinational enterprises engage in complex profit shifting structures. These present tax avoidance risks that threaten the level playing field of business," the submission said.