ECONOMYAustralia to crack down on corporate tax avoidance
Australia may follow the UK in implementing a “diverted profits” tax on multinationals to crack down on tax avoidance.
Joe Hockey, Australia’s treasurer, said on Tuesday that his office is exchanging information with London on its “Google tax”, which was announced last week, writes Jamie Smyth in Sydney.
I am absolutely determined to ensure that everything is done to make sure that people or companies who earn money in Australia pay tax in Australia. We are contemplating additional legislative action.
Last week George Osborne, UK chancellor of the exchequer, announced a 25 per cent levy on companies that artificially divert profits generated in Britain to lower tax regimes.
Details of the scheme remain scanty, although the UK is expecting to raise an extra £1bn in tax revenue over five years through the levy.
During its G20 presidency this year, Australia was at the forefront of global efforts to tackle tax avoidance by supporting the OECD’s base erosion and profit shifting plan.
It has also taken domestic action with the Australian Taxation Office ordering reviews of 86 multinational companies’ tax affairs to assess if they are paying sufficient tax on their activities within Australia.
“We expect to raise over A$1bn in additional revenue through this program over the next three years, and have already raised an additional $204m in liabilities,” said Chris Jordan, Australia’s tax commissioner.
Mr Hockey said $1bn to $3bn in taxes are estimated to be lost every year due to multinational tax avoidance. Canberra is eager to collect additional taxes as it struggles to contain a $48.5bn budget deficit in 2014 amid a slump in the price of key exports such as iron ore and coal. But there are concerns that pressing ahead with a UK style “Google tax” on a unilateral basis may prove ineffectual or could even be counterproductive.
“There is a risk for Australia in pursuing unilateral action,” said Frank Drenth, executive director of the Corporate Tax Association, which represents 110 of the biggest companies in Australia.
Politicians need to be careful that in trying to chase a little bit of tax from multinational technology companies they don’t end up losing a lot of tax revenue from Australian companies operating abroad by prompting retaliatory tax actions by other countries.
