Australian federal opposition proposes $1.9bn targeting multinational tax avoidance
CANBERRA: The federal opposition has proposed a $1.9bn package targeting multinational tax avoidance, with most of the savings slated to come from changes to the amount of debt for which companies can claim deductions in Australia.
Bowing to sustained government pressure to start spelling out alternative budget savings, Labor’s leader, Bill Shorten, said the measures were designed to ensure everyone paid “their fair share of tax”.
The opposition said the Parliamentary Budget Office had assessed the measures as bringing in $1.9bn in revenue over three years from July. They include $1.65bn from changing the current “thin capitalisation” rules to ensure companies could no longer claim up to a 60% debt-to-equity ratio for their Australian operations. The relevant test would instead be the ratio of the company’s entire global operations. The Labor policy brief said: “This means that if a company has an average 30% debt-to-equity ratio across its different subsidiaries, it will only be able to claim tax deductions up to that level.” The proposal goes beyond changes to thin capitalisation that passed the parliament in 2014. Shorten said Labor was determined to shut down loopholes that allowed big multinationals to send profits overseas.
Better aligning Australian rules on hybrid entities with tax laws in other countries, delivering $100m to the budget; Bringing forward by a year the July 2016 start date for third-party reporting and data matching, gaining $90m; Providing funding for increased compliance by the Australian Taxation Office to ultimately deliver a net saving of $67m over the budget cycle. Labor also is planning to set up a “multinational tax expert panel” to ensure the changes work as intended and to “assist with the implementation and refinement” of the measures.