Google tax: Hockey top adviser attacked plan in former role
The man chosen by Treasurer Joe Hockey to lead the review of the nation’s tax system has publicly criticised the British government’s “Google tax”, the inspiration for the Coalition’s looming crackdown on multinational profit shifting.
Robert Jeremenko, who is running the tax white paper process in Mr Hockey’s office, described the British government’s “Google tax” late last year as a media-friendly “soundbite” that could undermine global efforts to tackle multinational tax avoidance.
On Sunday Mr Hockey said Australia “can learn a lot from what the British are doing with their so-called Google tax”, and announced that Australian officials would travel to Britain to work on the implementation of the 25 per cent tax on profits diverted out of the country.
Mr Hockey said Australia did not need to introduce a new tax and it is understood the government believes it can achieve similar results by broadening the existing tax base.
“We are going to the next stage, which is to go after those companies, particularly individual companies that are not paying the proper amount of tax where they earn the income,” he said.
When the British government announced the tax in December, Mr Jeremenko told Fairfax Media: “By going it alone, the government is pre-empting any global agreement on how to best tax multinationals, putting at risk the success of this important international initiative.”
At the time Mr Jeremenko was senior tax counsel at the Tax Institute.
In a separate interview he said it was “dangerous” for countries to take isolated action on the issue and questioned whether a diverted profits tax would be effective.
“How can this actually work?” Mr Jeremenko said on 2GB. “A 25 per cent tax on profits is perhaps a nice soundbite for media reporting and it might get some good political traction for the UK government, but it’s certainly not that easy.
“It’s so difficult, in fact, that we have the OECD and most of the major economies around the world working on a two-year program to try and work out how we better tax, in each respective company, the profits made by multinationals.”
Mr Jeremenko, a former adviser to treasurer Peter Costello, was appointed as the Treasurer’s chief of staff for the tax white paper in March.
Mr Jeremenko said his past statements were made when he was representing the Tax Institute, which favours the OECD’s proposed global plan to tackle “base erosion and profit shifting”. His statements reflected the position of the institute, not necessarily his personal views, he said.
The independent Parliamentary Budget Office has warned that the unilateral introduction of a diverted profits tax could breach Australia’s international treaty obligations and provoke revenge taxes being imposed on Australian businesses operating overseas.
“It is possible that the legal validity of imposing such a tax could be subject to challenge, under either Australian or international law, with potential financial implications for Australia,” the PBO said.
Tax Commissioner Chris Jordan has described such a tax as a “stopgap” measure and said that he would prefer an international agreement.